From 6th April 2027, ISA rules are facing their biggest shake-up in years — meaning how you save could be affected.
Although we’ll go into further detail about them later in the article, here are the three main changes to understand:
- The annual Cash ISA allowance for under-65s will be reduced to £12,000.
- If you’re under 65, you won’t be able to transfer money from a Stocks and Shares ISA or Innovative Finance ISA into a Cash ISA.
- Regardless of age, a flat 22% charge will apply to any interest earned on cash held within a Stocks and Shares ISA, along with other non-Cash ISA types.
Let’s dive a little deeper into the rule changes, so you can get a clearer idea of how each one might affect you and your future finances.
Jump to a specific section below:
- What’s changing in April 2027?
- Why the government is doing this
- How this affects you
- What to do next
- FAQs
What’s changing in April 2027?
Cash ISA allowance cut to £12,000 for under-65s
Under-65s will only be able to pay up to £12,000 of new money into a Cash ISA each tax year. The current limits for Stocks & Shares ISAs, Innovative Finance ISAs & Stocks and Shares Lifetime ISAs will remain unchanged.
It’s important to emphasise “new money” here. If you’ve already built up savings in a Cash ISA, any interest on it remains tax-free under current ISA rules.
This change matters most if you regularly save large amounts of cash.
So, if you currently use most (or all) of your £20,000 ISA allowance in a Cash ISA, you may need to think differently about where future savings go.
Key facts:
- Applies to: Savers under 65.
- Does not apply to: Savers aged 65 and over.
- What changes: The amount of new money you can add to a Cash ISA each year from April 2027 onwards.
- What stays the same: The overall annual ISA allowance remains at £20,000 for all ages.
Transfers into Cash ISAs will be restricted
Under-65s will no longer be able to transfer money from a Stocks and Shares ISA or Innovative Finance ISA into a Cash ISA.
At the moment, ISA transfers can help you move money without losing your tax protection.
Under the new rules, flexibility is being reduced for people moving money into Cash ISAs. So, if you like having the option of moving between investing and cash later on, this is one of the most important changes to be aware of.
It’s important to note that this only works one way; you’ll still be able to transfer money out of a Cash ISA into another type of ISA, such as a Stocks and Shares ISA.
Key facts:
- Applies to: Savers under 65.
- Does not apply to: Savers aged 65 and over.
- What changes: Transfers into Cash ISAs from Stocks and Shares ISAs and Innovative Finance ISAs will stop for under-65s.
- What stays the same: Transfers out of Cash ISAs into other ISA types will still be allowed.
22% charge on interest earned from cash inside Stocks and Shares ISAs, Innovative Finance ISAs and Stocks and Shares Lifetime ISAs
Last but by no means least, interest earned on cash held in a Stocks and Shares ISA, Innovative Finance ISA and a Stocks and Shares Lifetime ISA will face a 22% charge.
Many people hold cash in a Stocks and Shares ISA for practical reasons. For example, you might be:
- Waiting to invest.
- Building up contributions over time.
- Keeping some money aside while you decide what to do next.
Under the new rules, the interest earned on that cash will be treated differently.
As part of this new rule, you might also see references to “cash-like” holdings; you can learn more about these at the bottom of this blog.
The charge is paid by the ISA manager directly to HMRC, meaning you won’t need to report it yourself on a tax return.
Key facts:
- Applies to: Savers of all ages (even over 65s) earning interest on cash held in Stocks and Shares ISAs and Innovative Finance ISAs.
- Does not apply to: Investment growth from assets such as shares, funds, or bonds.
- Paid by: Your ISA manager, not you directly.
- When it comes into effect: April 6th 2027
Why the government is doing this
First announced as part of the 2025 Autumn Budget, these new rules are being introduced as part of the government's wider policy "encouraging retail investment and supporting better returns for savers."[1]
The rules coincide with the government’s “Savvy the Squirrel” campaign, which was launched in April 2026 to encourage long-term investing across the nation.
HMRC also stated:
"The new rules will minimise the opportunity for the lower Cash ISA limit to be circumvented, while preserving the flexibility needed for legitimate investment activity within non-Cash ISAs."[1]
How this affects you
If you’re under 65 and save heavily into a Cash ISA
If you regularly pay close to £20,000 a year into a Cash ISA, this change could affect your plans. Because only £12,000 of new money can go into a Cash ISA each year if you’re under 65, you may need to think about:
- How much of your savings you want in cash compared with investments.
- Whether some savings should go into another ISA type.
- Whether part of your money stays outside an ISA altogether.
Although this new rule might feel a little frustrating for you, knowing the limit in advance gives you time to prepare.
If you hold cash within a Stocks and Shares ISA
If you leave money uninvested as cash in a Stocks and Shares ISA, the new charge could reduce the value of doing that for long periods.
This may be relevant if you:
- Add money regularly but invest it later.
- Keep a large cash balance while waiting for new investment opportunities.
- Hold some cash inside your investment account for flexibility.
A useful next step is to check whether your cash balance is temporary or whether it tends to sit there for months at a time; that will help you judge whether the rule change is likely to affect you.
If you’re aged 65 and over
If you fall into this bracket, the Cash ISA allowance cut won’t affect you.
However, if you hold cash in a Stocks and Shares ISA, Innovative Finance ISA and/or Stocks and Shares Lifetime ISA, the 22% charge will still be relevant, as it’s not based on age.
What to do next
As with any financial planning, taking time to understand the context first is crucial, as this helps you make a decision that's right for you and your future finances.
So, before making that decision, here are a few sensible steps that could help you feel more in control.
Make sure you understand the difference between cash and investments
In simple terms, cash earns interest — investments rise and fall in value over time.
The new 22% charge is aimed only at interest in cash inside Stocks and Shares ISAs, not normal investment growth.
Review how much you currently hold in cash
Look at:
- Your Cash ISA balance.
- Any uninvested cash in your Stocks and Shares ISA.
- How much you normally contribute each tax year.
If you usually max out your Cash ISA with £20,000, you could consider pursuing long-term returns by investing more in a Stocks and Shares ISA.
Check how your Stocks and Shares ISA cash is being used
Ask yourself:
- Is this cash only there temporarily?
- How long does it usually stay uninvested?
- Does my provider pay interest on it?
All this helps you understand whether the 22% charge is likely to have a meaningful impact.
If you haven’t reviewed your ISA mix recently, now could be a good time to do it.
A simple check of what’s in cash, what’s invested, and what you plan to add before April 2027, could help you make more informed decisions.
Ready to make the switch? Transfer your Cash ISA to a Wealthify Stocks and Shares ISA in a few simple steps. Click the button below to get started.
Frequently Asked Questions
Will my existing Cash ISA be taxed?
No. Interest earned within a Cash ISA is not subject to income tax under current HMRC rules, and this protection continues for existing balances regardless of size. From 6th April 2027, under-65s will only be able to pay up to £12,000 of new money to a Cash ISA each year — but this is a contribution limit, not a tax on savings. Any money already held in a Cash ISA before that date continues earning tax-free interest, with no cap on how much can remain sheltered.
What counts as "cash-like" for the new 22% charge?
The 22% charge applies to interest earned on cash held within a Stocks and Shares ISA, Innovative Finance ISA or Stocks and Shares Lifetime ISA. Money Market Funds are the one notable exemption; returns from these aren't hit by the charge, since they're treated as investments rather than plain cash. Separately, HMRC has confirmed a portfolio can't be made up entirely of Money Market Funds to qualify as a valid Stocks and Shares ISA.
Do I need to declare or pay the 22% charge myself?
No, the charge is handled entirely by the ISA manager, not the individual. When interest is earned on cash held within a Stocks and Shares ISA, Innovative Finance ISA or Stocks and Shares Lifetime ISA, the provider calculates the 22% due, deducts it, and pays it directly to HMRC.
I'm over 65 — do any of these changes apply to me?
The Cash ISA allowance cut doesn't apply to you; savers aged 65 and over are unaffected, and the higher £20,000 limit applies from the start of the tax year in which you turn 65. However, the 22% charge on interest generated from cash held in Stocks and Shares ISAs, Innovative Finance ISAs and Stocks and Shares Lifetime ISAs will still apply to you, as it affects all ages.
Can I still transfer money from my Stocks and Shares ISA into a Cash ISA from 6th April 2027?
No, under-65s will not be able to transfer money from a Stocks and Shares ISA (or an Innovative Finance ISA) into a Cash ISA. It will still be possible to transfer money in the opposite direction: Cash ISA to Stocks and Shares ISA.
What's happening to Junior ISAs?
No changes have been made to the Junior ISA allowance, which remains at £9,000 each tax year per child.
Your tax treatment will depend on your individual circumstances and it may be subject to change in the future.
Please remember that past performance is not a reliable indicator of your future results.
With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.
Wealthify does not provide advice. If you’re not sure whether investing is right for you, please speak to a financial adviser.
