ISA Allowance is Dropping to £12,000 in 2027: What to Do Before April

From 6 April 2027, adults under 65 will only be able to put £12,000 a year into a Cash ISA. The overall ISA allowance stays at £20,000, but the remaining £8,000 will need to go into a Stocks and Shares ISA or another non-cash ISA type. The 2026/27 tax year, which started on 6 April 2026, is the last year everyone under 65 can use the full £20,000 cash limit. After that, if you want to use your full £20,000 allowance, at least £8,000 has to go into investments.

What exactly is changing

The Chancellor confirmed the change as part of the Autumn Budget on 26 November 2025. It applies from 6 April 2027, the start of the 2027/28 tax year.

Here is the key detail: the cut is to the Cash ISA limit only, not the overall ISA allowance. The total you can shelter from tax each year stays at £20,000. What changes is the maximum you can put into cash specifically.

For under-65s, from 6 April 2027:

• Cash ISA limit: £12,000 (down from £20,000)
• Stocks and Shares ISA limit: unchanged at £20,000, but your cash contribution eats into this
• Overall annual ISA limit: £20,000 (unchanged)
• Transfers from Stocks and Shares or Innovative Finance ISAs into Cash ISAs: banned for under-65s

The age exemption is a real one. Savers aged 65 and over will keep the full £20,000 Cash ISA limit, at least for now. The government has said this protection will stand “at least initially” but has not confirmed whether it will eventually be phased out.

Existing money in your ISA is not affected. The cut only applies to new contributions made on or after 6 April 2027.

Why the government is doing this

The stated aim is to push more money into the UK stock market. The government wants savers, particularly younger ones, putting money into equities rather than sitting in cash. The logic is that stocks and shares generate better long-term returns and benefit the wider economy.

Critics have pushed back. Not everyone putting money into a Cash ISA is making an irrational decision. Short-term savings goals, a house purchase in the next two years, an emergency fund, genuine low risk appetite — all of these are reasonable reasons to prefer cash. The blanket cut ignores that context.

The age carve-out reflects at least some recognition of this. Older savers with shorter time horizons have less capacity to absorb market volatility, so the full £20,000 cash limit stays for them.

What this means in practice

If you currently max out your Cash ISA at £20,000 a year, from April 2027 you have a choice:

Option 1: Take the £12,000 limit. Put £12,000 into cash and leave the remaining £8,000 unused. You lose £8,000 of tax-protected space.

Option 2: Move £8,000 into a Stocks and Shares ISA. You keep the full £20,000 allowance but accept some investment risk on the £8,000 portion. Over a 5–10 year horizon, equities have historically outperformed cash significantly, though there is no guarantee and values can fall.

Option 3: Use the £8,000 for a Lifetime ISA or Innovative Finance ISA if those products fit your situation. Lifetime ISA limits are unchanged at £4,000/year (plus the 25% government bonus), so this only partially fills the gap.

One thing to be aware of: HMRC will also introduce a 20% tax charge on interest earned from cash held within a Stocks and Shares ISA in excess of the permitted cash allowance. This is designed to close the obvious loophole of simply parking cash inside a Stocks and Shares ISA wrapper instead. A saver holding £20,000 in uninvested cash inside a Stocks and Shares ISA could face a charge of roughly £162 a year at current rates, according to figures from Trading 212.

Transfers from Stocks and Shares or Innovative Finance ISAs back into Cash ISAs will also be banned for under-65s. So you cannot simply move money in the opposite direction to take advantage of the cash limit.

Run the numbers on your savings

Before deciding how to split your allowance, it’s worth understanding what your current savings are actually earning and what the compound effect looks like over time.

What you should do now

If you haven’t used your 2026/27 ISA allowance yet: You can still put up to £20,000 into a Cash ISA before 5 April 2027. This is the last full year under the old rules.

If you are already thinking about the 2027/28 year and beyond: Start getting comfortable with the idea of at least some money in a Stocks and Shares ISA. You do not have to pick individual stocks. A global index fund from providers like Vanguard, iShares, or Legal and General gives you broad market exposure for around 0.05–0.20% annual cost.

If you are a higher-rate taxpayer: Think carefully about the Personal Savings Allowance interaction. Higher-rate taxpayers only get £500 of tax-free interest outside ISAs. At 4.5% interest rates, £20,000 in a regular savings account generates £900 — already above your PSA. The Cash ISA wrapper has real value here even at £12,000.

If you will turn 65 before April 2027: You keep the full £20,000 cash limit and the change does not affect you at all.

The freeze on ISA limits until 2031

One detail that has received less attention: all ISA subscription limits are now frozen until 5 April 2031. The main adult ISA limit of £20,000 has been unchanged since 2017/18. Had it been inflation-linked from that point, it would be worth around £27,500 today. It will remain at £20,000 for at least another five years. In real terms, that is a gradual erosion of the tax-free shelter each year.

The practical implication is that the case for using your full allowance every year you can, while you can, is stronger than ever.