💰 Savings

Cash ISA Changes From April 2027: Why 2026/27 Is the Year to Act

The biggest change to ISAs in years is now on the calendar. From 6 April 2027, the amount you can pay into a Cash ISA each year will be cut from £20,000 to £12,000 if you're under 65. The current tax year — 2026/27 — is therefore the last one in which every adult can shelter the full £20,000 in cash. Here's what's changing, what isn't, and what it means for ordinary savers.

What exactly is changing?

• Now (2026/27): the overall ISA allowance is £20,000 and you can put all of it in a Cash ISA if you wish.
• From 6 April 2027: the overall allowance stays at £20,000, but under-65s can put a maximum of £12,000 of it into Cash ISAs. The remaining £8,000 can still be sheltered — but only in other ISA types, such as a Stocks & Shares ISA.
• Aged 65 or over: no cash cap — you can still put the full £20,000 into cash.

Money already sitting in Cash ISAs is unaffected: the new limit applies to new contributions from April 2027 onwards, not to existing balances, and previous years' savings can generally still be transferred between providers.

Why is the government doing this?

The stated aim is to nudge more of Britain's savings from cash into investment, supporting UK markets and — over long periods — potentially better returns for savers themselves. Critics point out that cash suits many people's circumstances, especially short-term savers and those who can't afford investment risk. Whatever your view, the rule change is coming, so the sensible move is to plan around it.

What should savers actually do?

• If you have spare cash savings outside an ISA: consider using as much of this year's £20,000 cash allowance as you can before 5 April 2027 — interest earned inside an ISA stays tax-free for good.
• If you save month by month: nothing changes for most people. The average saver puts nowhere near £12,000 a year into a Cash ISA, so the cap simply won't bite.
• If you regularly max your allowance in cash: this is the group affected. From April 2027 you'll face a choice: accept £12,000 of cash sheltering, pay tax on interest outside the wrapper, or learn about Stocks & Shares ISAs for the balance.
• Don't panic-invest. Moving money into investments purely to use an allowance is backwards — investments can fall as well as rise and suit money you can leave alone for years.

Don't forget the basics still apply

The Personal Savings Allowance (tax-free interest outside ISAs — £1,000 for basic-rate taxpayers, £500 for higher-rate) hasn't gone away, so smaller savers may pay no tax on interest anyway. But with rates on decent accounts still meaningful, it takes less savings than people think to breach it — which is exactly why the ISA wrapper has become valuable again.

⚠️ SmartBudgetUK.co.uk is not a financial adviser and this article is general information, not personal advice. Figures were checked in July 2026 but change over time — always confirm current rates, allowances and scheme rules directly with providers, HMRC and gov.uk before making decisions.