Cash ISA Allowance Cut to £12,000: What's Changing in 2027 and What to Do Now

From April 2027, the amount most UK savers can shelter in a Cash ISA each tax year is being cut from £20,000 to £12,000, under changes confirmed in the Autumn Budget. Savers aged 65 and over are exempt and keep the full £20,000 Cash ISA limit, according to Aetas Wealth's breakdown of the reform.

Why the Treasury is doing this

The stated goal is to nudge cash sitting in low-yielding savings accounts into UK shares and investment funds, supporting "long-term wealth creation and capital flows into the UK stock market," as the Treasury's rationale is summarised by Fidelity. The overall £20,000 ISA "wrapper" allowance isn't disappearing — savers will still be able to put the difference (up to £8,000 for most people) into a Stocks & Shares ISA, a Lifetime ISA, or an Innovative Finance ISA instead of cash.

Who is affected — and who isn't

Anyone under 65 who currently maxes out a Cash ISA will feel this. According to bmmagazine's coverage of the reform, the changes also introduce new "anti-circumvention" rules and, controversially, a proposed 22% tax treatment affecting cash held within Stocks & Shares ISAs — details that are still being finalised ahead of the April 2027 start date.

Building societies have lobbied hard against the change, warning it could deter first-time buyers who use cash ISAs to save for a deposit, a concern flagged in reporting from St. James's Place. Financial planners quoted by MoneyWeek and elsewhere also note there's no guarantee the change pushes cautious savers into shares at all — many may simply switch to Premium Bonds or standard taxable savings accounts instead.

What this means in practice

For the 2026/27 tax year, which runs until 5 April 2027, the full £20,000 ISA allowance still applies as normal, so there is no need to rush any decisions before then. The cut only bites from the following tax year.

Checklist: what to do before April 2027

• Check your current Cash ISA balance and how much of this year's £20,000 allowance you've used via your provider's app or gov.uk ISA guidance.
• If you hold significant cash savings and won't need them for 5+ years, research whether a Stocks & Shares ISA fits your risk appetite — compare options on Which?'s ISA guide.
• If you're saving for a house deposit, note that cash ISAs remain unaffected until April 2027 — there's no need to panic-move funds now.
• If you're 65 or older, no action is needed — your £20,000 Cash ISA allowance is unaffected.
• Watch for final rules on the proposed tax treatment of cash within Stocks & Shares ISAs before making new contributions after April 2027.
• Speak to a regulated financial adviser before shifting cash into investments — capital is at risk and past performance isn't a guide to future returns.

Key Numbers

• £20,000 — current annual ISA allowance, unchanged until April 2027
• £12,000 — new Cash ISA-specific limit from April 2027
• 65 — age at which savers keep the full £20,000 Cash ISA allowance
• 22% — proposed tax rate under discussion for cash held within Stocks & Shares ISAs

Sources

• Aetas Wealth: Cash ISA allowance cut from 2027
• St. James's Place: Chancellor cuts cash ISA limit
• BM Magazine: ISA reform 2027
• Fidelity UK: How ISAs will change in 2027
• gov.uk: Individual Savings Accounts

Educational content only — not financial advice.