What the Cash ISA changes mean for savers

On 26 November 2025, Chancellor Rachel Reeves delivered the Autumn Budget, confirming a series of changes to how Individual Savings Accounts (ISAs) work in the UK. The headline reform is a reduction in the annual Cash ISA allowance for most savers – the first cut to the limit since 2017. But the picture is more nuanced than the headlines suggest, and for the majority of Cash ISA holders, the practical impact will be limited.

This article sets out exactly what’s changing, who’s affected, when the changes apply, and what it means in practice for how you manage your savings.

Key facts in a nutshell:

• Cash ISA limit for under-65s: reduced from £20,000 to £12,000 from 6 April 2027
• Cash ISA limit for those aged 65 and over: unchanged at £20,000
• Overall annual ISA allowance: unchanged at £20,000 (confirmed until 2030/31)
• Changes apply to new contributions only – existing balances are fully protected
• Transfers between Cash ISAs remain permitted; transfers from Stocks & Shares ISAs into Cash ISAs will no longer be allowed

Can you still use the full £20,000 ISA allowance?

Yes. The total annual ISA allowance remains at £20,000 and is confirmed to stay at this level until at least 2030/31. The change affects only how that allowance can be split, not the overall limit.

How is the Cash ISA allowance changing?

The current annual Cash ISA allowance – the maximum amount you can contribute to Cash ISAs in a single tax year – stands at £20,000. From 6 April 2027, this limit will be cut to £12,000 for savers under the age of 65. For those aged 65 or over, nothing changes: the full £20,000 Cash ISA allowance will remain in place.

Chancellor Reeves framed the reform as designating £8,000 of the existing £20,000 annual ISA allowance exclusively for investment products. This means that under-65s who want to use their full ISA allowance will need to direct at least £8,000 into a Stocks & Shares ISA, an Innovative Finance ISA, or another qualifying investment wrapper.

For savers who want to use their full ISA allowance from April 2027, part of it will need to be held in investment-based ISAs rather than cash.

Importantly, you’ll no longer be able to transfer money from a Stocks & Shares ISA or an Innovative Finance ISA into a Cash ISA. However, transfers between Cash ISAs will still be permitted, so moving your balance to a better-paying provider remains straightforward.

The Government has also announced plans to introduce a tax charge on cash held within investment ISAs, to prevent savers from using them as a workaround for the new Cash ISA limits. Full details are yet to be confirmed.

What does this mean for existing Cash ISA savers?

Your current balances are completely unaffected and any money you’ve already saved into a Cash ISA – whether that’s £1,000 or £100,000 – is completely protected. The new rules apply only to new contributions made from 6 April 2027 onwards. Your existing ISA funds retain their full tax-free status and will continue to earn interest without any tax liability, regardless of how large the balance grows.

There’s no requirement to move existing Cash ISA money, restructure your accounts, or take any action as a result of these changes. Past contributions are ring-fenced.

The tax picture: why ISAs still matter

The Personal Savings Allowance is not enough for everyone

Outside of an ISA, savings interest is taxable once it exceeds the Personal Savings Allowance (PSA). Currently, basic rate taxpayers can earn up to £1,000 of interest per year tax-free; higher rate taxpayers receive a £500 allowance; and additional rate taxpayers receive nothing.

A basic rate taxpayer can earn a few thousand pounds in interest in a standard savings account before they exceed the £1,000 Personal Savings Allowance. For many savers with modest balances, this means they currently pay no tax on savings interest – though the Budget will make this less favourable over time.

Savings tax rates are rising from 2027

The Budget confirmed that Income Tax rates on savings interest earned outside an ISA will increase from April 2027. Basic rate savings tax rises from 20% to 22%, higher rate savings tax rises from 40% to 42%, and additional rate savings tax rises from 45% to 47%.

These increases apply to savings income above the Personal Savings Allowance. The PSA itself is not changing, but because Income Tax thresholds are also being frozen through to April 2031, more people will be dragged into higher tax bands over time, reducing or eliminating their PSA.

Why the ISA wrapper becomes more valuable, not less

The combination of rising savings tax rates and frozen Income Tax thresholds means that keeping money inside an ISA is becoming more important for more people, even as the amount that can go into a Cash ISA is being restricted.

Any interest earned within an ISA – regardless of amount – is entirely outside the tax system. It doesn’t count towards the PSA and isn’t affected by rising savings tax rates. For higher earners, those with substantial savings, and anyone who expects their savings balance to grow significantly over time, making full use of the ISA allowance each year remains one of the most effective ways to protect savings income from tax.

Explore our ISAs today and make the most of your tax-free savings.

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