The £12,000 Cash ISA Limit: What Will Actually Change in 2027?
There has been quite a lot of discussion about the Government’s decision to reduce the annual Cash ISA allowance from £20,000 to £12,000 from April 2027. If you have money in Cash ISAs, you may therefore be wondering whether you should be doing anything differently before then.
There is, however, an important point that is sometimes missed in reports about the change:
The new £12,000 Cash ISA limit will only apply to people under the age of 65.
If you are aged 65 or over, you will continue to be able to put up to £20,000 a year into a Cash ISA.
Here’s what we know so far…
Table of Contents
What Is Changing?
At present, the overall annual ISA allowance is £20,000. You can put this into a Cash ISA, a Stocks and Shares ISA, an Innovative Finance ISA (IFISA) or a combination of these, subject to the rules applying to each type.
For the 2026/27 tax year, the maximum you can subscribe to ISAs remains £20,000.
From 6 April 2027, however, the rules will change.
For people under 65, the annual Cash ISA subscription limit will become: £12,000
The overall ISA allowance will nevertheless remain at: £20,000
This means that the Government is not reducing the overall amount you can put into ISAs. Instead, it is restricting how much of that £20,000 can be put into a Cash ISA.
The remaining £8,000 could, for example, be put into a Stocks and Shares ISA, assuming you are happy to invest it and the relevant ISA rules are met.
The Important Exception for People Aged 65 and Over
This is particularly relevant to many Pounds and Sense readers. The £12,000 restriction does not apply to people aged 65 or over.
From April 2027, people aged 65 and over will continue to have a Cash ISA limit of £20,000 a year. There is also an interesting wrinkle here.
The Government says that entitlement to the higher £20,000 Cash ISA limit will apply from the start of the tax year in which you turn 65.
So, for example, if you turn 65 at some point during the 2027/28 tax year, you will qualify for the £20,000 Cash ISA limit for that whole tax year rather than having to wait until your 65th birthday.
This makes the age cut-off rather more generous than simply saying, “You can use £20,000 once you reach 65.”
What About Your Existing Cash ISAs?
The new £12,000 figure is an annual subscription limit. It does not mean that anyone with more than £12,000 already saved in Cash ISAs will have to withdraw the excess.
If you already have, say, £50,000 in one or more Cash ISAs, that money can remain there.
The new rules concern how much new money you can subscribe to Cash ISAs from 6 April 2027.
This is an important distinction.
Someone under 65 could therefore have considerably more than £12,000 in Cash ISAs after April 2027. They simply won’t be able to add more than £12,000 of new subscriptions to Cash ISAs during that tax year.
Can I Still Use the Full £20,000 ISA Allowance?
Yes.
For someone under 65, the overall annual ISA allowance will remain £20,000. The difference is that no more than £12,000 of this can normally be subscribed to Cash ISAs.
For example, someone could potentially put:
- £12,000 into a Cash ISA
- £8,000 into a Stocks and Shares ISA
That would use their full £20,000 annual ISA allowance.
Alternatively, they could put less than £12,000 into a Cash ISA and use the remainder for another type of ISA.
The Government says that the annual subscription limits for Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs are not being reduced as part of this change.
Why Is the Government Doing This?
The stated aim is to encourage people to invest more of their savings rather than keeping everything in cash. The Government argues that some people hold substantial sums in Cash ISAs for many years when they might achieve better long-term returns through investments.
There is certainly a debate to be had about this. Cash has an important role in financial planning, particularly for people approaching or in retirement. It provides security and avoids the risk of investment losses.
On the other hand, money that is needed for the long term can potentially lose purchasing power if inflation is higher than the interest rate being earned. The Government’s policy is therefore intended, at least in part, to encourage more people to consider investing.
Whether that is appropriate for you is a separate question, of course.
What if I Don’t Want to Invest?
This is probably the biggest concern for many savers. Suppose you are aged 55, have £20,000 to save and don’t want to take investment risk.
From April 2027, you won’t be able simply to put the whole £20,000 into a Cash ISA. You could put £12,000 into a Cash ISA, but you would then need to decide what to do with the other £8,000.
One possibility would be an ordinary savings account. However, interest outside an ISA can be taxable, depending on your circumstances.
The Personal Savings Allowance means that many people can receive some interest tax-free, but the amount depends on your tax position.
Another possibility is to invest the remaining money through a Stocks and Shares ISA, but this is only appropriate if you are comfortable with investment risk and have a sufficiently long time horizon.
There is certainly no requirement to invest simply because the Government has made Cash ISAs less generous for under-65s.
Can I Put £20,000 Into a Stocks and Shares ISA and Then Move it Into a Cash ISA?
This is where the new rules become more complicated. Under the existing system, ISA transfers allow money to be moved between different types of ISA without losing its tax-free status, subject to the rules.
From April 2027, people under 65 will not be allowed to transfer money from a Stocks and Shares ISA or Innovative Finance ISA into a Cash ISA.
This is intended to stop people getting around the £12,000 Cash ISA limit by putting £20,000 into another type of ISA and subsequently moving the money into a Cash ISA.
Transfers in the other direction — from a Cash ISA to a non-Cash ISA — will remain possible.
What About Keeping Cash Inside a Stocks and Shares ISA?
The Government has also anticipated this potential workaround. From April 2027, people will still be able to hold some cash within a Stocks and Shares ISA.
However, there will be a 22% charge on interest paid on cash held in a non-Cash ISA. ISA managers will deal with this charge rather than the individual having to declare the interest to HMRC.
There will also be restrictions on using a Stocks and Shares ISA simply as a substitute Cash ISA. For example, an ISA portfolio consisting entirely of certain “cash-like” investments will not qualify in the same way.
The rules do, however, allow diversified Stocks and Shares ISA portfolios to contain some cash-like investments.
What Should You Do Before April 2027?
For most people, there is no need to panic.
If you are under 65 and have money that you were planning to put into a Cash ISA, however, it may be worth thinking about your plans before the new rules arrive.
For example, if you have £20,000 available and were intending to put the whole amount into a Cash ISA, you could potentially use the full £20,000 Cash ISA allowance during the 2026/27 tax year.
You should not, of course, put money into an ISA simply to beat a deadline if you don’t actually need or want the product. But if you already intended to save the money in a Cash ISA, the April 2027 change is worth bearing in mind.
What if I’m Already 65?
If you are 65 or over, the change is much less dramatic. You will continue to be able to subscribe up to £20,000 a year to a Cash ISA.
And, as mentioned earlier, if you turn 65 during a tax year, the Government says the £20,000 entitlement applies from the start of that tax year.
This means that the headline “£12,000 Cash ISA limit” is potentially rather misleading when talking to older savers.
For many Pounds and Sense readers, nothing will actually change regarding the amount they can put into a Cash ISA each year.
What About Existing ISA Savings?
Another important point is that the £20,000 annual ISA allowance is not a limit on the total amount you can have in ISAs. There is no £20,000 cap on your lifetime ISA holdings.
You could, for example, have £20,000 in an ISA from one year, another £20,000 from the following year, and so on, with the accumulated savings remaining tax-free.
The £20,000 figure is an annual subscription allowance, not a maximum ISA balance.
The new £12,000 figure works in the same way: it limits new Cash ISA subscriptions for under-65s from April 2027; it does not cap the amount you can have accumulated in Cash ISAs.
So, Is the New £12,000 Limit a Big Deal?
For some people, yes. For others, not at all.
If you are under 65 and normally put £20,000 a year into a Cash ISA, you will need to rethink what you do with the other £8,000.
If you normally save £5,000 or £10,000 a year in a Cash ISA, nothing changes.
And if you are aged 65 or over, your annual Cash ISA limit will remain £20,000.
For someone approaching 65, the rules may therefore be particularly worth understanding.
The key dates and limits
| From 6 April 2027 | Cash ISA limit | Overall ISA limit |
|---|---|---|
| Under 65 | £12,000 | £20,000 |
| Aged 65 or over | £20,000 | £20,000 |
The Government currently intends these changes to take effect on 6 April 2027. The detailed legislation is still going through the process, so some technical details could change before implementation. If that happens I will update this post accordingly and/or add a new post about it.
The Bottom Line
The most important thing to remember is that the Government is not abolishing Cash ISAs and it is not reducing the overall ISA allowance to £12,000.
From 6 April 2027:
Under 65: maximum £12,000 a year into a Cash ISA, within the overall £20,000 ISA allowance.
65 or over: maximum £20,000 a year into a Cash ISA, within the overall £20,000 ISA allowance.
Existing Cash ISA savings are not being capped at £12,000.
For many older savers, therefore, the change may have little or no direct impact. But for younger savers who prefer the safety of cash, it will mean making a decision about what to do with any amount between £12,000 and £20,000 that they would previously have put into a Cash ISA.
And that, rather than the headline figure of £12,000, is probably the most important point to understand.
- As always, if you have any comments or questions about this post, please do leave them below. But note that I am not a professional financial adviser and cannot give personal financial advice. You should always do your own “due diligence” before investing and seek appropriate professional advice if in any doubt how best to proceed. All investing carries a risk of loss.