Under-65s face £12,000 annual cash ISA cap from April 2027

Individual savers aged under 65 will be able to subscribe no more than £12,000 a year to cash ISAsGOV from 6 April 2027GOV. The change amends the Individual Savings Account Regulations 1998 to impose the age-dependent cash cap inside an unchanged overall annual ISA subscription limit of £20,000GOV. Investors aged 65 or over keep a £20,000 annual cash ISA limitGOV, so they can still hold the whole allowance in cash.

The cash cap comes with anti-circumvention rules designed to stop savers reproducing a large cash holding inside a non-cash wrapper. Transfers from stocks and shares ISAs and Innovative Finance ISAs into cash ISAs face new restrictionsGOV, so subscriptions cannot be routed through a non-cash ISA and then moved into cash. A flat-rate charge of 22% applies to interest and alternative finance returns arising from cash held within non-cash ISAsGOV, alongside rules relating to Money Market Funds. ISA managers take on additional reporting requirements, including reporting the market value of Money Market Fund holdings to HMRC.

The measure affects under-65 savers who currently put more than £12,000 a year into cash ISAs, and anyone holding cash or Money Market Funds inside a stocks and shares or Innovative Finance ISA. In 2022 to 2023, 78% of cash ISA subscribers aged under 65 subscribed less than £12,000 and 22% subscribed more, so roughly one in five younger cash ISA subscribers will need to adjust how they split funds between cash and non-cash ISAs and what they hold inside a stocks and shares ISA. The stated policy objective is to encourage greater retail investment on the view that historical trends show it provides better long-term returns than cash savings.

ISA managers face significant implementation work: updating systems, processes, reporting arrangements, customer communications and compliance procedures, with estimated one-off transitional costs of £6.0 million and ongoing costs of around £0.2 million a year for administering the revised limits, deducting and paying the charge on interest paid within non-cash ISAs, and reporting Money Market Fund values. To give managers room to implement the new ISA rules, the government has deferred ISA Digitalisation to April 2028. HMRC expects its own systems changes to cost around £0.2 million, and will monitor the measure through ISA managers' information, existing reporting returns and stakeholder engagement.

Legal basis: amendments to the Individual Savings Account Regulations 1998 (S.I. 1998/1870), made under Chapter 3 of Part 6 of the Income Tax (Trading and Other Income) Act 2005 and section 151 of the Taxation of Chargeable Gains Act 1992.