The annual tax-free Cash ISA allowance for individuals under 65 is set to be cut to £12,000 from 6 April 2027, a notable reduction from the current £20,000 limit. This move, while leaving the overall £20,000 ISA allowance intact, marks a significant shift for millions of savers who have increasingly favoured Cash ISAs.
For those aged 65 and over, the existing £20,000 Cash ISA allowance will remain unchanged. This distinction creates a two-tiered system, adding a layer of complexity to future savings strategies.
A Shifting Landscape for Savers
The upcoming change arrives amidst a period of robust growth for Individual Savings Accounts. HMRC's latest statistics for the 2023/24 tax year reveal total ISA holdings reached a record £872 billion, a substantial 20.1% increase from the previous year. This growth was largely propelled by Cash ISAs, which saw subscriptions jump by 67% year-on-year to £69.5 billion. Stocks & Shares ISAs also grew, with subscriptions rising 10.9% to £31.1 billion.
Approximately 15 million adult ISA accounts received subscriptions in 2023/24, the highest number since 2010/11. This suggests that despite economic headwinds, a significant portion of the UK population is actively engaging with tax-efficient savings.
However, the broader picture of UK savings remains mixed. While the average savings amount in the UK stands at £19,214 in 2026, a concerning 39% of Brits hold £1,000 or less, and 16% have no savings at all. This disparity highlights the challenge of making tax-efficient savings accessible and relevant to all income brackets.
“The latest HMRC data shows the continued popularity of ISAs as a vital tool for personal savings, with record market values and subscriptions in 2023/24.” – HMRC, Annual Savings Statistics, September 2025.
New Flexibility: Multiple ISAs
Adding another dimension to the ISA landscape, from the 2026/2027 tax year, UK residents will be permitted to open multiple ISAs of the same or different product types within a single tax year. This offers greater flexibility, allowing savers to spread their allowance across various providers or investment strategies without waiting for a new tax year.
The five main types of ISAs remain: Cash ISA, Stocks and Shares ISA, Innovative Finance ISA (IFISA), Lifetime ISA (LISA), and Junior ISA (JISA). Lifetime ISAs, designed for first-time buyers or retirement savings, allow a maximum annual contribution of £4,000, which counts towards the overall £20,000 ISA allowance, and come with a 25% government bonus on contributions.
What this means for you
If you are under 65 and typically maximise your Cash ISA allowance, you will find your tax-free savings capacity reduced by £8,000 from April 2027. This means any interest earned on savings above £12,000 in a Cash ISA, or above your Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate taxpayers), will be subject to tax. It necessitates a re-evaluation of where you hold your cash savings to ensure you continue to benefit from tax efficiencies.
Scenario: Planning for the Cut
Consider a basic rate taxpayer under 65 who currently saves £20,000 annually into a Cash ISA. From 6 April 2027, they will only be able to put £12,000 into a Cash ISA. The remaining £8,000 of their overall £20,000 ISA allowance could still be used, but it would need to go into a Stocks and Shares ISA, an Innovative Finance ISA, or a Lifetime ISA (up to its £4,000 limit). If placed in a standard savings account, interest on that £8,000 would quickly exceed the Personal Savings Allowance, making it taxable.
But there are risks
While Cash ISAs offer security, the current UK inflation rate stands at 3.3%, according to the ONS, against a Bank of England base rate held at 3.75% as of April 2026. This means the real purchasing power of cash savings, even in a tax-free wrapper, is barely keeping pace with rising costs. The cut to the Cash ISA allowance might inadvertently push some savers towards options like Stocks and Shares ISAs, which carry investment risk and are not suitable for everyone, particularly those needing immediate access to funds.
Step-by-step: What to do right now
- Review your savings: Understand how much you currently hold in Cash ISAs and standard savings accounts.
- Consider your age: If you are 65 or over, your Cash ISA allowance remains £20,000. If you are under 65, plan for the £12,000 limit from April 2027.
- Explore alternatives: If you anticipate saving more than £12,000 in cash annually, consider using the remaining £8,000 of your overall ISA allowance for a Stocks and Shares ISA, an Innovative Finance ISA, or a Lifetime ISA (if eligible).
- Maximise current allowances: You still have the full £20,000 Cash ISA allowance for the current 2026/2027 tax year.
- Utilise Lifetime ISAs: For first-time buyers aged 18-39, contributing up to £4,000 per year to a LISA can secure a 25% government bonus, up to £1,000 annually.
When Effective
The change to the Cash ISA allowance for individuals under 65 is effective from 6 April 2027. The ability to open multiple ISAs of the same type within a single tax year is effective from the 2026/2027 tax year.
Where to get help
For personalised guidance on your savings and investment strategy, consider speaking with an independent financial adviser. Information on ISA rules is also available on the HMRC website.
Sources
- HMRC — Annual Savings Statistics, September 2025 (covering 2023/24 data)
- Bank of England — Monetary Policy Committee, 30 April 2026 (Base Rate)
- Office for National Statistics (ONS) — Consumer Prices Index (Inflation)
- Office for National Statistics (ONS) — Household Savings Statistics, Q4 2025
This is not financial advice. Seek independent financial guidance. Interest on standard accounts may be subject to tax above your Personal Savings Allowance.