Since 2017 the ISA allowance has been a simple, generous £20,000 a year, and you could put every pound of it into cash. From 6 April 2027 that changes for anyone under 65: new cash ISA subscriptions are capped at £12,000 a year. Savers aged 65 or over keep the full £20,000 cash allowance — the government's concession to retirees who hold cash for income rather than inertia.
Two things did not change, and they matter just as much. The overall £20,000 allowance survives intact — the other £8,000 can still be sheltered, it just can't be in a cash ISA. And existing balances are untouched: money already inside cash ISAs stays wrapped, keeps compounding tax-free, and can still be transferred between providers.
The double hit: the cap lands as savings tax rises
The same Budget raised tax on savings interest by two percentage points from April 2027 — to 22% basic, 42% higher and 47% additional rate. So the cash squeezed out of the wrapper lands in a taxable account at exactly the moment the tax on it goes up. A higher-rate taxpayer's overflow doesn't just lose its wrapper; the unwrapped interest is taxed at 42% instead of today's 40%. The nudge toward investing is really a shove.
Your defence, in order
First, use 2026/27 in full. The current tax year — ending 5 April 2027 — is the last one where under-65s can put the whole £20,000 into cash ISAs. If you're holding cash outside a wrapper, this year's allowance shelters up to £8,000 more than next year's rules will let you.
Second, keep the overflow wrapped. The £8,000 that no longer fits in cash can still go into a stocks & shares ISA — and an S&S ISA is a wrapper, not a command to buy shares. Most platforms let cash sit in a money market fund earning near-Bank-rate interest, entirely tax-free. If you're ready to invest it properly, our compound interest calculator shows what the long game looks like.
Third, mind your PSA. If overflow does end up in ordinary savings, the Personal Savings Allowance (£1,000 basic / £500 higher / £0 additional) absorbs the first slice of interest — but it's frozen, unchanged since 2016, and interest on cash you already hold outside ISAs uses it up first. The calculator above nets all of this off for your numbers.
A worked example
Take a 45-year-old higher-rate taxpayer saving £16,000 a year into cash ISAs at 4.25%. From April 2027 only £12,000 fits — £4,000 a year overflows. Left in ordinary savings, year one's £4,000 earns £170 of interest, inside the £500 PSA — tax £0. But the pile grows: by year five there's £20,000+ outside earning £900+, and the PSA is exhausted; by year ten the running total handed to HMRC is in the four figures — all avoidable by routing the same £4,000 into a stocks & shares ISA within the same overall £20,000 allowance. The full playbook — including where the overflow should live and why 2026/27 is the year that matters — is in what to do before April 2027.
Methodology
The planner applies your age to set the 2027 cap (£12,000 under 65, £20,000 at 65+), takes your stated yearly cash-ISA saving (capped at the £20,000 overall allowance), and computes the annual overflow. The do-nothing projection adds each year's overflow to a taxable savings pot (seeded with any non-ISA savings you already hold), credits interest at your rate, deducts your Personal Savings Allowance, taxes the remainder at the post-April-2027 savings rate for your band, and compounds the pot net of tax. It assumes flat rates and thresholds over the projection, that your other income uses the personal allowance and starting rate for savings, and that the PSA is applied to this pot's interest in full.