What's changing — and the two things that aren't
The Autumn 2025 Budget rewrote the cash side of the ISA. From the 2027/28 tax year, new cash ISA subscriptions are capped at £12,000 a year if you're under 65. Savers aged 65 or over keep the full £20,000 cash allowance. The government's stated logic: Britain holds too much of its long-term wealth in cash, and the wrapper was subsidising the habit.
The £12,000 cap doesn’t bite until April 2027, which leaves one fiscal event in between: the Autumn Budget on 28 October 2026. If the number moves again, that’s where it moves — I’m tracking what’s confirmed and what’s still speculation.
Two things survive untouched, and most of the panic I've seen online comes from missing them. First, the overall £20,000 ISA allowance is unchanged — the £8,000 that no longer fits in cash can still be sheltered, it just has to go into a non-cash ISA, most obviously stocks & shares. Second, money already inside cash ISAs is not affected. Existing balances stay wrapped, keep earning tax-free interest, and can still be transferred between providers. This is a cap on new money, not a raid on old money.
The bit that makes it bite: from the same date, tax on savings interest rises two points — to 22% basic, 42% higher and 47% additional rate. Cash pushed out of the wrapper lands in taxable accounts at exactly the moment the tax on unwrapped interest goes up. The nudge toward investing is really a shove.
Who's actually affected
Be honest about the maths before rearranging anything. If you save £12,000 a year or less into cash ISAs — which is most people, most years — nothing changes for you. If you're 65 or over, nothing changes either. The people squeezed are under-65s consistently putting £12,000–£20,000 a year into cash: diligent savers building a house deposit, holding a big emergency fund, or parking a windfall.
For them, the cost compounds quietly. Say you save £16,000 a year into cash at 4.25% as a higher-rate taxpayer. From April 2027, £4,000 a year overflows. The first year or two it hides inside your £500 Personal Savings Allowance. But the pile grows — by year three the PSA is exhausted, and by year ten the cumulative tax handed over is well into four figures. All of it avoidable, because the overall allowance never stopped having room for that £4,000.
Run your own overflow
The Cash ISA Limit 2027 Planner takes your age, saving rate and tax band, and shows your new cap, the overflow, and the year-by-year tax cost of doing nothing — PSA-aware, at the new post-2027 savings rates.
Open the 2027 planner →Can you just hold cash in a stocks & shares ISA instead? Not from April 2027
It is the first thing most people reach for: keep the overflow in cash, but put it inside a different wrapper — cash sitting in a stocks & shares ISA, earning interest, still sheltered. That route was open when the cash limit was announced. It was closed on 14 September 2026, when the Individual Savings Account (Amendment) (No. 2) Regulations 2026 were laid before Parliament, and it closes in practice on the same day the limit itself lands: 6 April 2027.
What the ISA (Amendment) (No. 2) Regulations 2026 change
1. Interest on cash in a non-cash ISA is charged at the savings basic rate. Interest — or alternative finance returns — that a provider pays on cash held in a stocks & shares or innovative finance ISA carries a flat charge set at the savings basic rate, which is 22% from April 2027. Investment returns inside the ISA are untouched; it is parked cash that loses its shelter.
2. A stocks & shares ISA cannot consist entirely of money market funds. Money market funds remain allowed and can still be part of the holdings. What is no longer allowed is an ISA made up of nothing but them — which is precisely how it would be run as a cash substitute. Junior ISAs are excluded from this restriction.
3. Under-65s cannot transfer a non-cash ISA into a cash ISA. If you are under 65, money moved into a stocks & shares or innovative finance ISA cannot later be transferred into a cash ISA. Cash-ISA-to-cash-ISA transfers are unaffected, and so is everything already sitting in your cash ISA.
The number that decides it: the charge is set at the savings basic rate — the same 22% a basic-rate saver pays on taxable interest with no wrapper at all. For them, parking cash in a non-cash ISA stops being a tax play entirely. At 42% and 47% a gap remains, so the answer turns on your tax band rather than on the wrapper.
None of this moves the headline numbers. The overall ISA allowance stays at £20,000, the cash limit is £12,000 for under-65s, and the position for savers 65 and over is unchanged. What narrowed is the room to manoeuvre around them — which is why the order of the moves below matters more than it did. Source: HMRC, Tax-free savings newsletter 23, September 2026.
The moves, in order
1. Use the last full £20,000 cash year
The current tax year — 2026/27, ending 5 April 2027 — is the final year under-65s can put the whole £20,000 into cash ISAs. Allowances don't carry forward. If you're sitting on unwrapped cash (in easy-access accounts, or a maturing fixed-rate bond), moving up to £20,000 of it inside the wrapper this year shelters £8,000 more than any future year will allow.
2. Decide the overflow's new home now, not in panic next April
Three candidates — and the rules for the first tightened in September 2026. A stocks & shares ISA keeps the money wrapped inside the same £20,000 overall allowance, and it is still a wrapper rather than a command to buy shares: investment returns inside it are untaxed. Three things change on 6 April 2027, though. Interest on cash left sitting in a non-cash ISA carries a charge at the savings basic rate, 22%. The ISA can no longer consist entirely of money market funds, so it cannot be run as a pure cash substitute. And under-65s can no longer transfer from a stocks & shares ISA into a cash ISA, so it is not a decision that can be unwound later. Note what the first of those means at basic rate: 22% inside the wrapper is the same 22% you would pay on taxable interest outside it, so for a basic-rate saver parking cash there stops being a tax play — the saving only survives at 42% and 47%. Premium bonds are tax-free but the average return usually trails best-buy savings — reasonable for additional-rate taxpayers with no PSA. Ordinary savings are taxed above your PSA at the new, higher rates.
3. If the overflow should really be invested, admit it
The uncomfortable question hiding under this policy: if you're under 65 and reliably saving £16,000+ a year in cash, is all of it genuinely short-horizon money? Cash for a deposit or emergency fund, absolutely. But cash that's been "waiting for the right moment" for five years is a long-term holding earning a short-term return. If some of your overflow has a ten-year horizon, the compound interest calculator shows what the wrapper could be doing instead — and if you also hold investments outside ISAs, Bed-and-ISA is the companion move while the CGT allowance is £3,000.
4. Check your PSA headroom against the new rates
The Personal Savings Allowance — £1,000 basic, £500 higher, £0 additional — hasn't moved since 2016 and isn't moving now, while rates on interest rise. If you already hold cash outside ISAs, its interest eats the PSA before any overflow arrives. A higher-rate taxpayer with £12,000 of outside savings at 4.25% has already used the whole £500. From April 2027 every unwrapped pound above it is taxed at 42%, not 40% — small per pound, relentless per decade.
The calendar that matters
Now to 5 April 2027: last chance at a £20,000 cash ISA year; savings tax still at today's rates. 6 April 2027: the £12,000 cap begins for under-65s, savings tax rises to 22/42/47, and — same day, different cliff — unused pensions join estates for inheritance tax (that one's a bigger story: see the pension IHT 9-month checklist). April 2027 is quietly the busiest date in UK personal finance for a decade. The theme across both changes is identical: wrappers and allowances get more valuable as everything outside them gets taxed harder.
Frequently asked
When does the cash ISA limit change, and to how much?
Is money already in my cash ISA affected?
Can I avoid the cap by opening ISAs with different providers?
What's the best home for cash that no longer fits in a cash ISA?
Why use the 2026/27 cash ISA allowance before 5 April 2027?
Can I just hold cash in a stocks & shares ISA instead?
Are money market funds still allowed in an ISA?
Can I move the overflow back into a cash ISA later?
This is general information, not financial or tax advice. ISA rules and allowances depend on individual circumstances and can change; the April 2027 figures reflect the measures announced in the Autumn 2025 Budget and the Individual Savings Account (Amendment) (No. 2) Regulations 2026. WealthR is not authorised by the Financial Conduct Authority. Whether to hold cash or invest — and in what wrapper — is personal to your situation; for significant sums, consult a qualified FCA-regulated financial adviser.