New rules for cash ISAs are set to come into effect from 6 April 2027. While the overall ISA allowance will remain at £20,000 per person per tax year, individuals under the age of 65 will only be able to contribute £12,000 of this into a cash ISA.
The remaining portion of the £20,000 allowance can be allocated to other ISA types, such as stocks and shares ISAs, lifetime ISAs, or innovative finance ISAs. Those who turn 65 during the 2027-28 tax year will be treated as 65 for the entire tax year, allowing them to continue paying up to £20,000 annually into a cash ISA.
The government is reportedly consulting on proposals to prevent savers from circumventing these new rules by using stocks and shares ISAs for cash savings. Potential measures include banning transfers from stocks and shares ISAs to cash ISAs for under-65s and introducing a 22% tax on interest earned on cash held within stocks and shares ISAs for savers of all ages.
Alternatively, savers could consider non-ISA savings accounts, where the personal savings allowance offers some tax protection. Basic-rate taxpayers can earn up to £1,000 in savings interest tax-free, while higher-rate taxpayers can earn up to £500 tax-free.