What's Actually Changing?
From 6 April 2027, the rules around ISAs are changing in ways that will affect most savers in the UK. The changes were announced at the Autumn Budget 2025 and confirmed by HM Treasury on 23 June 2026. The aim is to encourage savers - particularly younger ones - to move money out of cash savings and into investments. But the detail matters, and it's worth understanding exactly what applies to you.
The New Cash ISA Limit - and Who It Affects
If you are under 65, your annual Cash ISA allowance will fall from £20,000 to £12,000. The overall ISA allowance remains at £20,000, so the remaining £8,000 can go into a non-cash ISA - such as a Stocks and Shares ISA. If you are 65 or over, you retain the full £20,000 Cash ISA allowance. Importantly, the higher allowance applies from the start of the tax year in which you turn 65, not from your actual birthday.
Alongside this, under-65s will lose the ability to transfer funds from a Stocks and Shares ISA into a Cash ISA. Transfers in the other direction - from Cash ISA to Stocks and Shares ISA - remain permitted. Again, this restriction lifts from the start of the tax year in which you turn 65.
The 22% Charge on Cash Interest Inside Investment ISAs
This is the change that catches many people by surprise. From April 2027, any interest earned on cash held inside a Stocks and Shares ISA or Innovative Finance ISA will be charged at 22%. This applies to all ages - there is no exemption for over-65s on this particular rule.
The charge applies to interest only; the cash principal is not taxed. Returns from Money Market Funds held inside a Stocks and Shares ISA are exempt from the charge, though from April 2027 you cannot hold 100% of a Stocks and Shares ISA in Money Market Funds - at least one other qualifying investment must be held alongside.
Standard investments - shares, funds, ETFs, investment trusts, and corporate bonds - are completely unaffected, as are short-dated UK government gilts, which HMRC has confirmed are not classified as cash-like assets.
The Key Takeaways
The April 2027 ISA changes are worth getting your head around now, before they take effect. Three things to keep in mind:
First, if you are under 65, you still have a £20,000 annual ISA allowance - but no more than £12,000 of it can go into a Cash ISA. The good news is that interest earned inside a Cash ISA remains tax-free, as it always has been.
Second, if you hold cash inside a Stocks and Shares ISA - even temporarily, between investment decisions - any interest that cash earns will be taxed at 22% from April 2027. This applies regardless of your age.
Third, if you do need to park cash inside a Stocks and Shares ISA, Money Market Funds offer a way to avoid the charge - returns from these funds are exempt. One condition applies: from April 2027, you cannot hold your entire Stocks and Shares ISA in Money Market Funds. At least one other qualifying investment must sit alongside them.
As with any change to savings rules, it is worth reviewing your current ISA arrangements before April 2027 to make sure your money is working as efficiently as possible.
Back to Search