From 6 April 2027, the government is introducing important changes to how Cash ISAs work. Alongside a lower Cash ISA allowance for some savers, new “anti‑circumvention” rules have now been clarified to make sure the system is used as intended.
If you’re planning your savings strategy for the years ahead, here’s a clear and practical guide to what’s changing — and what stays the same.
What’s changing from April 2027?
The headline change is straightforward:
- If you are under 65, your annual Cash ISA allowance will reduce to £12,000
- If you are 65 or over, your Cash ISA allowance will remain at £20,000
- The overall ISA limit stays at £20,000, regardless of age
To understand the government’s full explanation, you can read the official factsheet here: ISA reform 2027 anti‑circumvention rules (GOV.UK)
What new anti‑circumvention rules are being introduced?
Alongside the lower Cash ISA limit, HMRC has recognised that without further rules, it would be possible to work around the system.
For example, savers could:
- Put £20,000 into a Stocks & Shares ISA but leave it held as cash
- Move money from an investment ISA back into a Cash ISA later
- Invest in assets that behave like cash but sit inside an investment ISA
To prevent this, the reforms introduce three key measures:
- A charge on cash held in investment ISAs – A flat‑rate 22% charge will apply to interest earned on cash held within Stocks & Shares or Innovative Finance ISAs
- Restrictions on “cash‑like” investments – Portfolios made up entirely of cash‑like assets (such as money market funds) will not qualify as valid investment ISA holdings
- Transfer restrictions into Cash ISAs – You will no longer be able to transfer funds from investment ISAs into Cash ISAs, although transfers in the opposite direction will still be allowed
In short, these rules are designed to ensure that the reduced Cash ISA allowance cannot be sidestepped.
What happens if you turn 65 during a tax year?
One area where HMRC has provided helpful clarification is how age is treated within a tax year.
If you turn 65 at any point during a tax year, you will be treated as eligible for the full £20,000 Cash ISA allowance for that entire year
That means:
- You do not need to split your allowance before and after your birthday
- You can contribute up to £20,000 into a Cash ISA across that tax year
This is an important point for anyone approaching 65, as it removes uncertainty and allows for simpler planning.
Which rules apply regardless of your age?
While the Cash ISA allowance differs by age, several rules apply to everyone:
The overall ISA allowance
You can still contribute up to £20,000 into ISAs each tax year, regardless of your age, but your age drives the type of ISA you can contribute to.
Tax‑free benefits remain
Interest and investment returns earned within ISAs will continue to be tax‑free
Existing savings are unaffected
These changes apply to new contributions only. Anything you’ve already built up in a Cash ISA remains fully tax‑free.
Investment ISAs
- Transfer restrictions: Movement from investment ISAs into Cash ISAs is restricted under the new regime
- Treatment of cash in investment ISAs: The introduction of rules governing cash holdings and “cash‑like” assets shapes how these accounts must be managed
- Definition of qualifying investments: ISA providers must ensure portfolios meet eligibility requirements
