ISA changes from April 2027: what could they mean for you?
ISAs are a familiar way to save and invest tax-efficiently. From 6 April 2027, some of the rules will change.
The Government wants to encourage more people to invest for the longer term. But that doesn’t mean investing is right for every pound you have saved.
Cash still has an important place, particularly for emergencies and money you expect to spend soon. Here are the main changes and what they could mean for you.
A lower cash ISA allowance for those under 65
The overall ISA allowance will remain at £20,000 each tax year.
However, if you are under 65, you will generally only be able to pay £12,000 a year into cash ISAs. You can use the rest of your allowance in other types of ISA, such as a stocks and shares ISA.
From the start of the tax year in which you turn 65, you can continue to pay the full £20,000 into cash ISAs.
This is a limit on new contributions, not the amount you can already have saved. If you have more than £12,000 in cash ISAs, you will not have to take money out.
A charge on interest from cash held in investment ISAs
A stocks and shares ISA is designed for investing, but it can also hold cash—for example, while you decide where to invest or prepare to make a withdrawal.
From April 2027, interest paid on that cash will be subject to a 22% charge. The same rule will apply to cash held in Innovative Finance ISAs.
The charge is on the interest, not your savings themselves. For example, if you receive £100 of interest on cash held in one of these ISAs, the charge will be £22.
Your ISA provider will handle this, and it will apply regardless of your age.
Interest earned within a cash ISA will remain tax-free.
There will also be restrictions on using investment ISAs entirely for certain investments that behave much like cash. If this affects your arrangements, we can explain what it means for you.
Less flexibility to move from investments into a cash ISA
If you are under 65, you will generally no longer be able to transfer money from a stocks and shares ISA or Innovative Finance ISA into a cash ISA.
This restriction will stop applying from the start of the tax year in which you turn 65. Transfers in the other direction—from a cash ISA into a stocks and shares ISA—will still be allowed.
This does not mean your money is locked away. You can still sell investments and withdraw money, although taking it out of an ISA may mean losing its tax advantages.
The change is worth bearing in mind if you expect to move some of your investments into a cash ISA in the future.
Should you do anything now?
There is no need to rush into changes simply because the rules are changing.
If you normally save less than £12,000 a year into cash ISAs, the new contribution limit may make little difference to you. If you save more, or hold a substantial cash balance within a stocks and shares ISA, it is worth reviewing your arrangements.
Most importantly, a change in tax rules should not push you into taking investment risks you are uncomfortable with.
The right balance between cash and investments depends on what the money is for, when you might need it and how much uncertainty you can comfortably accept. Money for a holiday next year has a different job from money intended to support you through retirement.
Financial planning is about life, not just money. These changes are another reason to check that your savings and investments continue to support the life you want to lead.
If you are unsure how the changes could affect you, we’re always happy to talk them through.
This article reflects the published ISA reforms and Government guidance available at the time of writing. Further guidance is expected before the changes take effect on 6 April 2027. Nothing in this article should be taken as personal financial advice.
Best wishes,
Michael Roberts FPFS
Chartered Financial Planner and Director
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