Under 65
Cash ISA limit cut to £12,000
- The overall £20,000 ISA allowance is unchanged; the other £8,000 can only go into a non-Cash ISA.
- Cannot move money from a Stocks and Shares ISA back into cash.
- Interest on cash held inside a non-Cash ISA is charged at 22%.
65 and over
Full £20,000 Cash ISA limit kept
- Exempt from the lower cash cap.
- Exempt from the transfer ban: can still move non-Cash ISA money back into cash.
- Neither the factsheet nor the tax policy paper narrows the exemption.
Confirmed in the UK government's ISA reform factsheet, 23 June 2026. The 2026/27 tax year is unaffected.
The Cash ISA limit for most UK savers is being cut by 40% from 6 April 2027, and the UK government has now published exactly how it intends to stop people working around that cut. A factsheet released on 23 June 2026 sets out four specific anti-circumvention rules alongside the headline change, and buried in the detail is a coincidence that has confused even some of the coverage written about it: two different 22% figures, from two different measures, both landing on the same date.
What's changing, and when
- 26 November 2025Autumn Budget policy paperRaises tax on savings, dividend and property income, separately from the ISA change.
- April 2026Dividend tax rates rise by two points
- 23 June 2026ISA reform factsheet publishedConfirms the £12,000 cash limit for under-65s and four anti-circumvention rules.
- Until 5 April 2027The 2026/27 tax year: full £20,000 in cash still allowed
- 6 April 2027Both changes take effectThe £12,000 cash limit, the anti-circumvention rules and the 22% basic rate on savings interest outside ISAs.
The policy itself was announced earlier, in Chancellor Rachel Reeves’ Autumn Budget on 26 November 2025. What the 23 June 2026 factsheet adds is the mechanics: specifically, the rules designed to stop the £8,000 shortfall from simply reappearing as cash held inside a different kind of ISA wrapper.
The four anti-circumvention rules, explained
The four anti-circumvention rules, from the 23 June 2026 factsheet
- 22% charge on cash interest in non-Cash ISAs: Interest or alternative-finance returns on cash sitting inside a non-Cash ISA are charged at a flat 22%, deducted by the ISA manager and paid to HMRC.
- Cash-like assets only as part of a holding: From April 2027 only Money Market Funds count as cash-like inside a non-Cash ISA, and they cannot make up the whole account.
- No transfers from non-Cash into Cash ISAs: Blocks moving Stocks and Shares ISA money into a Cash ISA to use the cash allowance. Transfers the other way are still allowed.
- Qualifying investments unchanged: Shares, funds, investment trusts, ETFs, bonds and gilts still qualify. The target is cash-like circumvention, not investing.
Read together, the four rules close the obvious workarounds one at a time: don’t let people just call cash something else (rule 1), don’t let a near-cash fund substitute for genuine investment (rule 2), don’t let money already in stocks migrate back into the newly scarce cash allowance (rule 3), and don’t touch the actual investment products that were never the target (rule 4).
The claim: The 22% ISA charge and the new 22% savings tax rate are the same change. What the record shows: They are separate. The factsheet’s 22% applies only to interest on cash held inside a non-Cash ISA. The Autumn Budget’s 22% is the new basic rate on savings interest outside any ISA, up from 20%. Same number, same start date, different money. False.
Treating them as one measure, as some coverage does, understates how much changes on 6 April 2027.
The separate tax rise landing on the same date
The government’s policy paper on this second change, also dated to the 26 November 2025 Budget, raises the tax rate on savings, dividend and property income by two percentage points across every band. The government’s own stated rationale: those with “property, savings or dividend income pay less tax than those whose income comes from employment or self-employment as they do not pay National Insurance,” and the change is meant to “narrow this gap between tax paid on work and tax paid on income from assets.”
| Income type | Old rate | New rate | Effective |
|---|---|---|---|
| Savings interest (basic rate | 20% | 22% | 6 April 2027 |
| Savings interest) higher rate | 40% | 42% | 6 April 2027 |
| Savings interest (additional rate | 45% | 47% | 6 April 2027 |
| Dividend income) ordinary rate | 8.75% | 10.75% | April 2026 |
| Dividend income: upper rate | 33.75% | 35.75% | April 2026 |
| Property income: basic/higher/additional | n/a (taxed as general income) | 22% / 42% / 47% | April 2027 |
This is where the Cash ISA cut and the savings-tax rise reinforce each other rather than operating independently. Right now, a basic-rate taxpayer gets a Personal Savings Allowance of £1,000 in tax-free interest a year before any tax applies outside an ISA (£500 for higher-rate taxpayers; nothing for additional-rate taxpayers), and that allowance has been frozen since 2016. From 6 April 2027, any interest earned above that frozen allowance, outside an ISA, is taxed two points higher than today, in the exact same tax year that the tax-free Cash ISA shelter for that interest shrinks by £8,000. Both changes push in the same direction: toward holding less cash, and holding more of it inside a wrapper rather than out.
Why cash specifically: the £419 billion behind the policy
The reform targets Cash ISAs specifically because of how large that pool of money has become. HMRC’s own annual savings statistics, covering the 2024–25 tax year, put the total UK ISA market at £952 billion: of which £419.2 billion, or 44.1%, sat in Cash ISAs, against £532.1 billion in Stocks and Shares ISAs. That cash share had grown from 41% the year before: Cash ISA balances rose 16.7% year on year, more than five times the 2.9% growth in Stocks and Shares ISA balances over the same period. The government’s stated aim, building “a stronger investment culture”, is a direct response to that widening gap, not an abstract preference.
Who's exempt
Savers aged 65 and over keep the full £20,000 Cash ISA allowance and stay exempt from the transfer restriction, so they can still move money from a Stocks and Shares ISA back into cash. Nothing in either document narrows that exemption.
What this costs a saver: computed, not estimated
One widely shared claim about this reform, from a financial advisory firm’s own blog, put the ten-year cost of the lower cash limit at roughly £100,000 in lost tax-free interest. That figure could not be reproduced from the assumptions the firm stated, so it is not repeated here. Below is the arithmetic worked from scratch, with the assumptions stated plainly.
| Scenario | Annual contribution | Value after 10 years | Total interest earned |
|---|---|---|---|
| Pre-2027 rules: full Cash ISA | £20,000/yr, all cash | £256,824 | £56,824 |
| Post-2027, cash portion only | £12,000/yr, cash | £154,094 | £34,094 |
| Post-2027, redirected portion | £8,000/yr, non-Cash ISA | £102,729 | £22,729 |
| Post-2027, both portions combined | £12,000 cash + £8,000 non-cash | £256,823 | £56,823 |
Assumes a flat 4.5% annual return compounding once a year, contributions made in full at the start of each tax year, and, critically, that the £8,000 redirected out of cash earns the same 4.5% return in its non-Cash ISA. That last assumption is doing significant work: a Stocks and Shares ISA is not a savings account, and nothing about its return is guaranteed at 4.5% or any other fixed figure.
The arithmetic resolves a genuine point of confusion in coverage of this reform: if the full £20,000 allowance is still used every year (£12,000 in cash, £8,000 redirected into a non-Cash ISA) and that £8,000 happens to earn the same rate as the cash would have, there is no loss in total tax-free growth at all. The commonly repeated “£100,000 lost over ten years” framing is only true for a saver who stops saving the £8,000 difference entirely, or who leaves it outside any ISA where it is now also exposed to the higher savings tax rate described above.
Equal returns is the assumption everything rests on, and it is not a safe one. Cash ISA interest is contractual and close to risk-free; a Stocks and Shares ISA’s return depends on markets and can be negative in any year. The reform does not cost most disciplined savers money in expectation. What it does is convert £8,000 a year of every under-65 saver’s allowance from a low-risk asset to a market-risk one, whether or not they were ready for that.
Where the industry disagrees
This is not a reform the financial industry views uniformly, and the disagreement is worth stating in the words of the people making it rather than summarised away.
Robin Fieth, chief executive of the Building Societies Association, argued against the cut directly: “Simply changing Isa limits is unlikely to encourage people to invest, but it will hurt people who are responsibly saving for short-term goals, when investing is not appropriate.” The BSA’s broader case is structural: building societies and smaller banks rely on Cash ISA deposits to fund mortgage lending, so a smaller pool of cash savings risks tightening mortgage supply and pushing up rates. Sue Hayes, chief executive of the Nottingham Building Society, made a related point about savers’ actual circumstances: “There’s a place for risk, and a place for reward. Britain needs both. But we must ensure people can save for the future in the right way, at the right time and with the right purpose.”
On the other side, Michael Healy, managing director of the investment platform IG, welcomed the direction of the policy before the final £12,000 figure was confirmed at the Budget: “The Chancellor is absolutely right to tackle the UK’s overreliance on savings, starting with a product that does nothing for long-term wealth creation,” adding that “suggestions that it could threaten the mortgage market are simply scaremongering.”
Both sides are describing real trade-offs rather than talking past each other. The BSA is right that Cash ISA deposits fund a real share of mortgage lending and that not every saver’s money belongs in the market. IG is right that cash, however much of it, does not build long-term wealth the way diversified investment can. The policy settles the disagreement by decision, which is what a Budget measure does.
How the industry is framing it for customers
NatWest’s own customer-facing page on the change leads with reassurance: existing savings “should remain protected and continue to earn tax-free interest,” and the total £20,000 allowance “will still be £20,000.” Both statements are accurate. The bank also flags the grace period clearly (savers can still deposit the full £20,000 into a Cash ISA “until 5 April 2027”) and that is what to act on now for anyone with spare cash to shelter before the rules change.
5 April 2027: The last day an under-65 saver can put the full £20,000 into a Cash ISA. Anyone with £20,000 or more in taxable cash savings has one more full tax year to shelter it all in cash before £8,000 of the annual capacity moves to non-Cash ISAs for good.
The date that matters and the figure people confuse
The Cash ISA limit cut is real, confirmed by the government’s own 23 June 2026 factsheet, and takes effect on a specific, unmovable date: 6 April 2027. The four anti-circumvention rules that accompany it are narrowly targeted at genuine workarounds (parking cash in a different wrapper, hiding it in a near-cash fund, or shuttling it back from investments) rather than at investing itself, which remains untouched.
What the coverage of this reform gets wrong most often is conflating two separate 22% figures that happen to share a number and a start date, and repeating a “six-figure loss” framing that only holds if the redirected £8,000 simply stops being saved. Run the compounding honestly, with the £8,000 still working in a non-Cash ISA, and the total tax-free growth is essentially unchanged: the real cost of this reform is not a lost sum of money but a lost choice: £8,000 of every under-65 saver’s annual allowance moves from a guaranteed-return asset to a market-risk one, on 6 April 2027, whether they are ready for that or not.
Our read: the single concrete action this reform actually calls for is using the current, unreduced £20,000 Cash ISA allowance before 5 April 2027 if there is cash to shelter: everything else is a structural shift in where future savings are allowed to sit, not a one-time loss to react to.
Frequently asked
- When does the UK Cash ISA limit actually change?
- From 6 April 2027, the start of the 2027/28 tax year. The 2026/27 tax year is unaffected: the full £20,000 Cash ISA allowance for under-65s still applies until 5 April 2027, per the government’s own 23 June 2026 factsheet.
- Is the overall £20,000 ISA allowance being cut?
- No. The total annual ISA allowance stays at £20,000. What changes is the composition: under-65 savers can put a maximum of £12,000 of it in a Cash ISA, with the remaining £8,000 required to go into a non-Cash ISA (Stocks and Shares, Innovative Finance, or a Lifetime ISA).
- Is the 22% anti-circumvention charge the same as the new savings tax rate?
- No, and conflating them is a common error in coverage of this reform. The 22% anti-circumvention charge applies only to interest earned on cash held inside a non-Cash ISA. A separate, unrelated policy, announced in the same Autumn Budget, raises the general tax rate on savings interest outside any ISA from 20% to 22% for basic-rate taxpayers. Both take effect 6 April 2027 and both happen to be set at 22%, which is the coincidence causing the confusion.
- Who is exempt from the new Cash ISA limit?
- Savers aged 65 and over. They keep the full £20,000 Cash ISA allowance and remain exempt from the rule blocking transfers from a non-Cash ISA back into a Cash ISA.
- Does this reform actually cost savers money?
- Not necessarily. A widely repeated claim puts the ten-year cost at roughly £100,000 in lost tax-free interest, but that assumes the redirected £8,000 a year simply stops being saved. Computed directly: if the £8,000 is invested in a non-Cash ISA earning the same rate as the cash would have, total tax-free growth over 10 years is effectively unchanged. The real change is that £8,000 of the allowance moves from a risk-free asset to a market-risk one, not a straightforward loss of money.
