Cash ISA Cap (2027)

Announced in the Autumn Budget 2025 and taking effect on 6 April 2027, the UK Government will reduce the annual subscription limit for Cash ISAs from £20,000 to £12,000 for individuals aged 65 and under. The overall annual ISA allowance remains at £20,000, meaning savers must direct any contributions above the £12,000 cash cap (up to £8,000) into other ISA variants, such as Stocks & Shares or Innovative Finance ISAs, to keep them tax-free. Savers aged 65 and over are exempt from this cut and retain the full £20,000 Cash ISA limit.

Real-World Example Emma, age 35, has £20,000 to save in the 2027-28 tax year. Before the reform, she could put all £20,000 into a Cash ISA earning 4.5% interest, accumulating £900 tax-free annually. Under the new rules, she can only put £12,000 in a Cash ISA (£540 interest) and must invest the remaining £8,000 in a Stocks & Shares ISA to maintain tax-free status. If she keeps the £8,000 as cash in the S&S ISA at 4.5%, she pays a 22% flat tax on the £360 interest (£79.20 tax), netting only £280.80. This reduces her total tax-free return from £900 to £820.80, costing her £79.20 annually compared to the old system.