New government announcements and HMRC guidance indicate significant changes to ISA rules from April 2027, though existing ISA savings will not be abolished or lose their tax-free status. The overall annual ISA allowance will remain £20,000.
From 6 April 2027, savers under 65 will generally be limited to paying £12,000 of new money into cash ISAs each tax year, a reduction from the current £20,000. Savers aged 65 and over will retain the £20,000 cash ISA allowance. HMRC's impact assessment found that 78% of cash ISA subscribers under 65 contributed less than £12,000 in the 2022/23 tax year.
The Lifetime ISA (LISA) is also set to be replaced with a new product aimed at first-time buyers. However, existing LISA holders will be able to continue using their accounts under current rules. The final terms and launch date for the proposed replacement have not yet been confirmed.
Additionally, a 22% charge will apply from April 2027 to interest earned on uninvested cash held within stocks and shares ISAs and innovative finance ISAs. This charge is intended to prevent the use of investment ISAs to bypass the reduced cash ISA contribution limit. Furthermore, savers under 65 will no longer be able to directly transfer funds from stocks and shares ISAs or innovative finance ISAs into cash ISAs.