From April 2027, the rules on cash ISAs are changing.
If you save into a cash ISA, or hold cash inside a stocks and shares ISA, this affects you.
Here’s the mainstream reading first, then the detail that most explainers skip.
The short version: the government has confirmed changes to ISA rules from the 2027/28 tax year.
The headline is a cut to how much you can put into a cash ISA each year, plus a new charge on cash sitting inside non-cash ISAs.
Your overall £20,000 ISA allowance isn’t changing.
What is the 2027 cash ISA allowance change?
From 6 April 2027, the amount you can pay into a cash ISA each tax year falls from £20,000 to £12,000 for savers under 65, the first cut to the cash ISA limit since 2017.
It’s a sub-limit within your total ISA allowance, not a cut to the whole allowance.
You can still shelter £20,000 a year across all your ISAs combined, you just can’t put more than £12,000 into cash specifically.
The rest has to go into a stocks and shares ISA, innovative finance ISA, or Lifetime ISA to stay tax-free.
Is the cash ISA allowance cut confirmed?
Yes. This is confirmed government policy, first set out in a factsheet published in June 2026 and since carried into draft Finance Bill legislation published on 13 July 2026.
A technical consultation on the draft ISA regulations closed on 2 August 2026, and the regulations are expected to be laid in autumn 2026 for implementation in April 2027.
Small technical details could still shift before then, but the core numbers (£12,000 cash limit for under-65s, £20,000 overall allowance unchanged) are the government’s settled position, and nothing so far points to a delay.
What is the 22% charge on cash interest in non-cash ISAs?
This is the part most people miss.
From April 2027, a 22% charge applies to interest earned on uninvested cash held inside a stocks and shares ISA, a Lifetime ISA, or an innovative finance ISA.
It also covers equivalent “alternative finance returns” on Sharia-compliant products.
In plain English: if you’re sitting on cash within an investment ISA, waiting to invest it or just parking it there, the interest stops being fully tax-free and is taxed at 22%, whatever your normal income tax band.
This applies to the cash portion only.
Actual investments, shares, funds, ETFs, investment trusts, and bonds, stay completely tax-free.
One exception: Money Market Funds are the only “cash-like” asset exempt from the 22% charge, as long as they’re not the only thing in the account.
If Money Market Funds make up 100% of the portfolio, the ISA is treated as non-qualifying rather than simply losing the exemption, so don’t use an all-MMF stocks and shares ISA as a workaround for the cash ISA limit.
The same charge applies to cash parked in a Lifetime ISA, so if you are using one for a house deposit it is worth running the numbers with our Lifetime ISA calculator.
Does the 2027 reform affect stocks and shares ISAs?
Only the cash sitting inside them.
If your stocks and shares ISA is fully invested, shares, funds, ETFs, investment trusts, or bonds (including UK gilts), none of this touches you, and the £20,000 allowance is unchanged.
Where it bites is uninvested cash: money paid in but not yet put to work, or a deliberate cash buffer.
From April 2027, interest on that cash gets the 22% charge instead of being tax-free.
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How does the reform affect under-65s vs over-65s?
This is the split that matters most for who should act now.
- Under 65: your cash ISA limit drops to £12,000 from April 2027. You also lose the ability to transfer money from a non-cash ISA into a cash ISA (cash to stocks and shares is still allowed).
- 65 and over: you keep the full £20,000 cash ISA allowance, from the start of the tax year you turn 65, not your exact birthday.
The 22% charge on cash interest inside non-cash ISAs applies to everyone, regardless of age.
When exactly do the 2027 ISA changes start?
6 April 2027, the start of the 2027/28 tax year.
Nothing changes before then, your 2026/27 ISA allowance (£20,000, all of which can still go into cash) works exactly as today.
Are existing ISA savings protected from the reform?
Yes. This is a change to what you can pay in and how new interest is taxed going forward, not a retrospective raid on money already in your ISAs.
Cash already sitting in a cash ISA before April 2027 stays tax-free and isn’t forced out or reclassified.
The changes apply to contributions and interest from April 2027 onwards.
What it means in £ terms: the 22% charge worked example
Say you’ve got £5,000 sitting as cash inside your stocks and shares ISA, waiting to be invested, earning 4% interest over a year, that’s £200.
Before April 2027, the full £200 is tax-free.
From April 2027, the 22% charge takes £44 of it, leaving £156 net.
Scale up to £15,000 in uninvested cash at 4% (£600 interest) and the charge takes £132, leaving £468.
The bigger the uninvested cash balance and the longer it sits there, the more this costs.
This is specifically about interest on cash within an investment ISA.
If that same £5,000 was actually invested rather than held as cash, none of this applies, growth and dividend income inside the ISA remain tax-free as normal.
How does the 2027 reform change the cash vs stocks and shares decision?
It nudges the maths slightly in favour of investing.
Cash ISA capacity is shrinking for under-65s, so there’s less room to shelter large cash balances tax-free, and holding cash inside a stocks and shares ISA (rather than actually investing it) now carries a tax cost it didn’t before.
That doesn’t mean cash ISAs become pointless.
If you need the money within a few years, an emergency fund, a house deposit, cash still has a place, and £12,000 a year of tax-free headroom is still substantial.
What it does mean is that “leave it as cash in my investment ISA because I haven’t decided what to buy yet” gets more expensive from April 2027.
See our full breakdown: cash ISA vs stocks and shares ISA.
Is a cash ISA still worth it after the reform?
For most people, yes, just with a lower ceiling.
A cash ISA still shelters interest from tax, still suits short-term savings and emergency funds, and the £12,000 limit covers the vast majority of realistic annual cash savings for most households.
The people most affected are higher savers who were routinely maxing out £20,000 in cash each year and will now need to split that between cash and investments (or accept some of it becomes taxable outside an ISA).
If you’re consistently saving under £12,000 a year in cash, this reform barely touches you in practice, your allowance simply matches what you were already using.
It is still worth checking the rate you are getting, though. Compare it against the best savings accounts before you leave money sitting somewhere paying less.
What to do before April 2027
A few practical, low-effort moves make sense ahead of the deadline:
- Check what’s sitting as uninvested cash in your stocks and shares ISA. If you’ve been meaning to invest a lump sum “at some point,” the 22% charge is a reason to actually decide rather than let cash drift there indefinitely.
- If you’re over 65 (or turning 65 before April 2027), you’re largely unaffected, no need to rush anything on the cash ISA limit.
- If you routinely save more than £12,000 a year in cash, plan where the excess goes: a stocks and shares ISA if your time horizon suits investing, a Lifetime ISA if eligible (£4,000 limit, unchanged, plus the bonus), or a taxable savings account using your Personal Savings Allowance.
- Don’t panic-move money before the changes are even in force. The 2026/27 tax year still runs under current rules.
- Unsure whether cash or investing suits your goals? Read Cash ISA vs Stocks and Shares ISA and What Is an ISA. Pensions questions are separate: see SIPP vs ISA.
If investing is the part putting you off, start with our guide to investing for beginners in the UK and move in steps rather than all at once.
What is NOT changing
To be clear about the boundaries of this reform:
- The overall £20,000 annual ISA allowance stays the same. This is a reshuffle of how much can be cash, not a cut to your total tax-free capacity.
- The stocks and shares ISA, innovative finance ISA, and overall allowance all stay at £20,000, as now.
- The Lifetime ISA limit stays £4,000, counting towards the overall £20,000. Separately, a consultation (closed 17 August 2026) proposes replacing the LISA with a new First Time Buyer ISA from 2028. That’s a different reform track to the cash ISA and 22% charge changes covered here, and worth watching in its own right.
- Actual investments inside a stocks and shares ISA stay fully tax-free. Shares, funds, ETFs, investment trusts, and bonds (including UK gilts) aren’t touched by the 22% charge, which only applies to cash holdings.
- Money already saved before April 2027 is not affected retrospectively.
- Your ISA allowance still resets every 6 April, exactly as now. See when your ISA allowance resets.
Junior ISAs are untouched too, so the best Junior stocks and shares ISA options work exactly as they do now.
