The ISA rules are changing next year. Here’s what that means for you

ISAs are one of the simplest and most effective ways to grow your savings and investments tax-efficiently.

Last year’s Autumn Budget included proposals to adjust the Cash ISA allowance from April 2027. It’s important to be on top of these changes so you can plan and make the most of the allowances currently available.

Read on to find out how the new limits could affect you.

Under the current rules, you can spread your allowance across your ISAs

In the 2026/27 tax year, you can put up to £20,000 into your ISAs. The rules also allow you to split this allowance across your ISAs as you wish.

There are several different types of ISAs, including:

Cash ISAs – Cash savings accounts that allow you to keep any interest free from tax. They’re typically good for shorter-term goals and immediate needs.
Stocks and Shares ISAs – Investment accounts that allow you to keep your returns tax free. These are generally best for your longer-term goals, though the value of your investments can go down as well as up.
Innovative Finance ISAs (IFISAs) – These work through peer-to-peer lending, where your money is lent to individuals or businesses. IFISAs can offer higher returns, but they also tend to come with higher risk.
Lifetime ISAs (LISAs) – A savings or investment account that allows you to save up to £4,000 a year towards your first home or retirement, with a 20% government bonus added on top. This counts towards your overall £20,000 ISA allowance. You can only move the funds held within a LISA to another LISA.

You can move your ISA holdings between providers or types (the rules are slightly different for LISAs), meaning you can adjust your savings and investments as your circumstances change or as better rates become available.

New limits for Cash ISAs are set to come into effect from 2027 for the under 65s

From 6 April 2027, the rules around Cash ISAs are set to change:

The annual limit for Cash ISA contributions will fall from £20,000 to £12,000.
The overall ISA allowance will stay at £20,000.
You will need to use the remaining £8,000 in investment-based ISAs.
The changes will only apply to people under 65, as retirees often have a greater need for cash savings.
The new proposals also suggest that it will no longer be possible to transfer money from a Stocks and Shares ISA or an IFISA into a Cash ISA.

Importantly, the changes only affect future contributions, so your existing Cash ISA savings will not be affected.

For many savers, these changes may have little impact. However, they could affect you if you regularly maximise your Cash ISA contributions or hold large cash savings for future spending plans.

The aim behind these reforms is to encourage more people to invest rather than hold large amounts in cash. The government believes directing more savings into investments could improve long-term returns for households while also increasing investment in UK businesses.

Government figures suggest that around 29 million adults in the UK currently hold money in cash accounts earning roughly 1% interest, and that the UK has the lowest level of retail investing among G7 nations.

Cash ISAs can still play an important role in your financial plan, particularly for your short-term goals or money that needs to remain easily accessible. However, over the long term, they are likely to offer lower returns than investing.

It may be worth reviewing your ISA strategy before the rules change

If you’re under 65 and tend to keep a large proportion of your savings in cash, the changes could affect you.

If you have upcoming significant expenses, you may want to make full use of your current Cash ISA limits to ensure you have enough cash to cover your short-term needs. This might include money for a property, school fees, or home renovations.

You could also consider moving your existing ISA funds into Cash ISAs while transfers are still permitted under the current rules.

However, while Cash ISAs can offer security, holding too much of your wealth in savings accounts over long periods can make it harder for your money to keep pace with inflation. Depending on your goals, moving more of your money into investment-based ISAs may offer stronger long-term growth potential.

But it’s also important to remember that the right mix of cash and investments should still be driven by your goals, time horizon, and attitude to risk.

So, before April 2027, if you are under 65, you should consider if:

You’ll need significant cash in the coming years
You’ve fully used your Cash ISA allowance
Your current mix of cash and investments still reflects your goals
Transferring funds between ISA types would be beneficial before the new rules take effect

A financial planner can help you prepare for the upcoming rule changes and work them into your existing plan.

To speak to a financial planner, get in touch.

Email [email protected] or call us on 01625 466360.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.