Three steps to prepare for the changes to cash ISA limits
From April 2027, the government is introducing changes to cash ISA limits, giving savers under the age of 65 a new split allowance between cash ISAs and stocks and shares ISAs. While we know the details of the changes now, savers still have plenty of time to plan before they come into effect.
So, if you’re unsure how these changes to cash ISA limits might affect your savings, here’s a simple three step guide to help you understand what’s changing, what’s staying the same, and how to make the most of your ISA allowance before the new rules arrive.
Step 1: Understanding the changes to cash ISA limits
Starting on 6th April 2027 (the start of the 2027/28 tax year), your overall allowance will remain £20,000, but how you use it will shift.
You can currently save the full £20,000 in a single cash ISA or split it between different cash ISA types and providers. When the new rules come into effect, you’ll be able to save a maximum of £12,000 in cash ISAs. The remaining £8,000 will need to be placed in a stocks and shares ISA if you wish to use the full allowance.
You can still choose any mix you like, as long as you don’t save more that £12,000 in a cash ISA and stay within the overall £20,000 annual limit. For example, you could save £12,000 in a stocks and shares ISA and £8,000 in a cash ISA, or the other way around.
What’s not changing?
- If you’re aged 65 or over, the changes to cash ISA limits will not apply to you and you can continue saving up to £20,000 in a cash ISA if you wish
- Junior ISA rules remain the same
- Existing cash ISA balances up to 5th April 2027 are protected and continue to earn tax-free interest
- These changes only apply to new contributions from April 2027 onwards
Alongside the changes to cash ISA limits, the government is increasing the income tax you pay on savings’ interest outside of your ISA allowance and above your personal savings allowance (PSA). This will increase to 22% for basic-rate taxpayers, 42% for higher-rate taxpayers and 47% for additional-rate taxpayers, making understanding your savings matter more than ever.
Step 2: Making the most of your current cash ISA allowance before 2027
With more than a year before the new rules begin, there’s still a window of opportunity for savers to:
- Save up to £20,000 in a cash ISA this tax year (before 5th April 2026) and next tax year (between 6th April 2026 and 5th April 2027)
- Move money between providers to secure better rates.
If you rely on cash ISAs for tax-free flexibility and protection, you may want to maximise today’s allowance while the limits remain at their highest. Remember, this isn’t about rushing into decisions, it’s about making the most of the cash ISA limit now, if that’s what aligns with your goals.
Think of it as being able to lock in two more years under the existing rules, while still planning for the changes.
Step 3: Start thinking about cash vs investments
The changes to cash ISA limits are designed to give a more balanced mix between cash and investments. By encouraging more people to invest, the government hopes to support UK businesses and boost the economy, while savers will potentially see higher, long-term returns.
A study by Which found that in 2023/24, more than twice as many cash ISAs were opened compared with stocks and shares ISA, showing how strongly UK savers favour cash. Yet the typical ISA subscription is £5,296 and in 2022/23 only 28.5% were £12,500 or above. That means for many savers, the £12,000 cash isa limit still will fit comfortably within how they already save.
Those who are not currently investing but considering stocks and shares ISAs for either all, or part of their savings, it will depend on their goals, timelines and appetite for risk.
Here are a few simple considerations:
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What is your short-term goal?
If you want to access your cash within the next one to three years, a cash ISA or easy access savings account could be more suitable.
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What is your longer-term goal?
If you’re comfortable investing for a longer period, like five years or more, a stocks and shares ISA may offer higher returns.
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Do you have emergency savings?
Easy access savings accounts still play a crucial role in having flexible access to your money for emergencies. So, consider all the options available so you can choose the best one to suit your needs.
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Will you need to transfer your savings?
You’ll still be able to transfer between ISA types after 2027, you’ll just need to follow the new rules.
ISA changes comparison table
| Today’s cash ISA rules | Cash ISA rules as of April 2027 |
|---|---|
| Up to £20,000 ISA allowance – all can go into cash ISAs | Up to £20,000 ISA allowance – with a max £12,000 in cash ISAs |
| Unlimited stocks and shares ISA (within £20,000 ISA total limit) | Unlimited stocks and shares ISA (within £20,000 ISA total) |
| Applies to all UK adults over 18 | Applies to all UK adults aged 18-64 |
| Existing cash ISAs unaffected | Existing balances remain tax-free |
| PSA unchanged | Higher tax on savings interest earned outside ISAs and PSA |
FAQs
Your existing ISA balances remain protected and tax-free. The new rules only apply to new contributions made from 6th April 2027 onwards.
Transfers will continue as normal, but the new contributions must follow the new limits.
People aged 65 and over will continue to have a full £20,000 allowance to use for cash or investments.
From 6th April 2027 the overall ISA limit will stay at £20,000. However, you’ll only be able to put a maximum of £12,000 into a cash ISA
Yes. Until 5th April 2027, you can save the full £20,000 in a cash ISA.
Yes. From April 2027 there will be changes to cash ISA limits. You’ll be able to put up to £12,000–a–year in a cash ISA.
No. The allowance stays at £20,000.
If you want to access your cash within the next one to three years, a cash ISA or easy access savings account could be more suitable.
How Hodge can support your saving goals
We can help you to maximise your savings with a competitive interest rate on your savings account. There are different types of personal savings accounts available, visit Personal savings to find out more about saving with Hodge.
You can find our full range of Hodge Fixed-rate cash ISAs and more information on how savings accounts work at Hodge ISAs.
*Please be aware that Hodge does not currently offer Stocks and Shares ISAs
This article is correct at time of publishing and for general information purposes only. We recommend you speak to a professional financial adviser for advice. You can find a financial adviser and further personal finance information at unbiased.co.uk .