ISA Changes Coming in April 2027 – What You Need to Know
The Government has announced significant changes to Individual Savings Accounts (ISAs) from 6 April 2027. The reforms are designed to encourage more investment in the UK economy and reduce the amount of money held in tax-free cash savings.
While the overall ISA allowance remains unchanged, the way you can use it will be different, particularly if you're under the age of 65.
Here's what you need to know.
The Overall ISA Allowance Stays at £20,000
The annual ISA allowance will continue to be £20,000 per person.
However, from 6 April 2027, there will be a limit on how much of that allowance can be paid into a Cash ISA if you are under 65.
Cash ISA Limit Reduced for Under-65s
Currently, you can choose to place your entire £20,000 annual ISA allowance into a Cash ISA if you wish.
From 6 April 2027, if you are under 65, you will only be able to contribute up to £12,000 each tax year into a Cash ISA.
The remaining £8,000 of your annual ISA allowance can still be invested in:
Stocks and Shares ISAs
Innovative Finance ISAs
Lifetime ISAs (subject to the separate £4,000 annual Lifetime ISA limit)
If you prefer investing rather than holding cash, you can still choose to invest the full £20,000 in qualifying investment ISAs.
Good News for Those Aged 65 and Over
If you are 65 or older, these changes won't affect your Cash ISA allowance.
You'll still be able to contribute the full £20,000 into a Cash ISA each tax year if you wish.
You'll also retain the flexibility to transfer money between different types of ISA without the new restrictions applying.
New Tax Charge on Cash Held Inside Investment ISAs
Another important change affects people who hold large amounts of uninvested cash within a Stocks and Shares ISA or Innovative Finance ISA.
From 6 April 2027, any interest earned on cash sitting inside these investment ISAs will be subject to a 22% charge.
The charge will be applied by the ISA provider, so there is nothing extra for you to report on your Self Assessment tax return.
An Example
Suppose you have:
£5,000 sitting as cash within a Stocks and Shares ISA
earning 4% interest
The interest earned would be £200.
Under the new rules, a 22% charge (£44) would apply, leaving you with £156 of net interest.
This means leaving large cash balances uninvested inside investment ISAs will become less tax-efficient.
Restrictions on ISA Transfers
The Government is also introducing new rules to prevent people from working around the reduced Cash ISA allowance.
From April 2027, if you are under 65, you will no longer be able to transfer money from a Stocks and Shares ISA or Innovative Finance ISA into a Cash ISA.
However, transfers in the opposite direction will still be allowed, meaning you can continue moving money from a Cash ISA into an investment ISA.
Existing Savings Are Protected
The new rules only affect new subscriptions made from 6 April 2027.
Any money already held in a Cash ISA before that date remains fully protected and continues to benefit from the existing tax-free treatment.
What Should You Do?
Talk to your financial advisor about whether your current strategy is still optimal for your circumstances.
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