Some of the biggest changes for the future of ISAs have now been announced in Chancellor Rachel Reeves’ latest budget. From April 2027, the Cash ISA limit will be set at £12,000 for people under 65.
ISAs have never been more popular for subscribers in the United Kingdom. Recently published government data shows that in the 2023/24 tax year, the total number of account holders swelled to around 15 million. Of this figure, 9.94 million decided to save in Cash ISAs, while 4.09 million opted to invest using Stocks and Shares ISAs.
More money than ever before was subscribed to ISAs in the 2023/24 tax year, with a total of £103 billion contributed to adult Individual Savings Accounts. This is not only a record-breaking figure for account holders, but it’s also almost £20 billion more than the next most substantial tax year for amounts subscribed, which took place in 2014/15.
The growing popularity of ISAs means that the changes are likely to affect more UK residents, and so it’s important to take the right measures to protect your savings or investment strategy.
Because ISAs have a defined set of rules and allowances that are specified for every tax year, the changes announced in the budget won’t come into effect immediately, meaning that you have until the beginning of the 2027/28 tax year to adjust.
But how can you prepare for Cash ISA changes? Let’s take a look at the new rules for Individual Savings Accounts and how they can affect you:
How ISAs are Changing
The main change that Reeves announced in the recent budget focuses on the annual tax-free allowance for ISAs, specifically, the contribution limit for Cash ISAs.
Effective from April 2027, the savings-focused Cash ISA allowance has been cut to £12,000 per year. However, for the investing-focused Stocks and Shares ISA, the original £20,000 limit remains intact.
Why has the Chancellor targeted only Cash ISA limits? The decision to retain the same allowance as before for Stocks and Shares ISAs, Reeves hopes, could encourage more people to invest their money rather than save it. As a result, this would help to support more growth for UK businesses.
The cut to Cash ISA allowances represents an £8,000 shortfall on the current ISA allowances of £20,000 spread across all ISA types: cash, stocks and shares, innovative finance, and Lifetime ISAs (although the latter already has a £4,000 cap per tax year in place).
However, if you’re aged 65 or over, your Cash ISA limit will remain at £20,000 even after April 2027. This move to protect the savings of retirement-age adults helps more individuals to make use of low-risk, tax-efficient products at a time when they’re more likely to begin accessing their savings.
How Often Do ISA Allowances Change?
Interestingly, Reeves’ Cash ISA allowance cut wouldn’t be the first time that an imbalance was created between saving and investing into Individual Savings Accounts.
When they were first introduced in 1999, ISA allowances were set at £3,000 for Cash ISAs and £7,000 for Stocks and Shares ISAs.
Following a series of smaller increases, the government decided to boost the ISA allowance to £15,000 for the 2014/15 tax year. By 2017/18, ISA allowances had grown to £20,000, which is where they’ve remained ever since.
So, given that ISA allowances can change, can we expect the £20,000 limit to change for Stocks and Shares ISAs in a future budget as well? Thankfully, the answer is no. The government has protected the £20,000 annual allowance until 2030, which is when it could be subject to an increase or decrease.
How Can I Prepare?
You could help protect yourself against Cash ISA changes by reviewing your savings strategy and planning adjustments should allowance cuts impact your approach to growing your wealth.
If you only save spare change into your Cash ISAs, it’s unlikely that the new £12,000 allowance is going to impact your approach. But at a time when the Bank of England is cutting interest rates, it may be worth looking at whether a Stocks and Shares ISA could complement your financial goals instead.
Because there are no limits to how many ISAs you hold (aside from the Lifetime ISA, which is one per person), provided that you don’t surpass your £20,000 allowance, looking into splitting your savings into a Cash ISA and investments in a Stocks and Shares ISA could be an effective way of getting the best of both worlds.
The Future of ISAs
For 2026 and beyond, ISAs are set to remain the UK’s tax-free tool to save or invest, and their popularity will likely remain regardless of the impact of allowance cuts.
By anticipating any changes for the 2026 tax year and beyond, you could avoid any unwanted surprises by planning out a way to adapt that suits your wealth management wants and needs.
Using the year ahead by preparing for the changes starting in April 2027 can help you continue getting the most out of your ISAs long into the future.
