Overview
- From April 2027, the cash ISA allowance for savers under 65 will drop from £20,000 to £12,000, though the overall £20,000 ISA limit remains and over‑65s keep a £20,000 cash ISA cap.
- HMRC says it will block transfers intended to dodge the lower cash cap, assess whether investments are 'cash‑like,' and may charge for interest held as cash within stocks and shares or Innovative Finance ISAs.
- InvestEngine reports 7.1 million people used cash ISAs in 2022/23, with just over two million saving above £12,000 who could face tax on excess interest once outside ISA shelters.
- At a 4.5% rate, shifting the £8,000 excess into a taxable account could cost about £264 over five years for a basic‑rate payer and roughly £1,216 for a higher‑rate payer, according to InvestEngine estimates.
- Separately reported changes would raise tax on savings interest to 22% for basic‑rate, 42% for higher‑rate and 47% for additional‑rate taxpayers from April 2027, while advisers point savers toward stocks and shares ISAs, pensions and SIPPs as alternatives; a Lifetime ISA review is slated for early 2026.