ISA changes incoming – what they mean for your savings

Changes are on the horizon. The biggest overhaul of the ISA (Individual Savings Account) regime in several years is coming into effect on 6 April 2027, with new rules designed to encourage more people to invest rather than hold cash. While the overall annual ISA allowance remains unchanged, there are several important changes savers should be aware of.

Cash ISA allowance reduced for under-65s

From April 2027, the Cash ISA allowance for anyone under 65 will fall from £20,000 to £12,000. However, the overall ISA allowance will remain £20,000, meaning the remaining £8,000 can still be invested into a Stocks & Shares ISA or another eligible ISA product. Savers aged 65 and over will continue to have the full £20,000 Cash ISA allowance available, including anyone who turns 65 during the 2027/28 tax year.

The government is also introducing measures to discourage investors from using Stocks & Shares ISAs simply as cash savings accounts. Interest earned on uninvested cash within these ISAs will be subject to a 22% charge, collected by the ISA provider. Importantly, this does not apply to returns from investments such as shares, funds, bonds or ETFs, or to returns from Money Market Funds held as part of a diversified portfolio. Only the return on cash itself is in scope. The charge will be collected by the ISA manager.

In addition, from 6 April 2027, under-65s will no longer be able to transfer from a Stocks & Shares ISA into a Cash ISA, although transfers in the opposite direction will still be allowed. Transfers from a Cash ISA into a Stocks & Shares ISA will still be permitted without restriction. Individuals aged 65 and over are exempt from the transfer restriction, from the start of the tax year in which they turn 65.

Note – ISA transfers do not count against the annual subscription limit, so a client could transfer their entire Stocks &Shares ISA cash balance into a Cash ISA before the deadline, avoiding the charge that would otherwise apply to the interest on uninvested cash from April 2027.

The government has also announced plans to phase out Lifetime ISAs (LISAs), although existing account holders can continue contributing under the current rules while a new First Time Buyer ISA is being considered (consultation closed August 2026) – we’ll keep you posted on developments.

With significant changes ahead, now is a good time to review your ISA strategy and ensure your savings remain as tax efficient as possible.

Tax treatment depends on individual circumstances and may change in future. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.