Our guide to the new ISA rules
The Sampson Fielding team working together
New ISA Rules Confirmed: What Savers Need to Know Before April 2027
The government confirmed significant changes to the ISA regime on 23 June 2026, providing important clarity on how it intends to enforce the Cash ISA limit reduction announced at Autumn Budget 2025. These are not minor tweaks — they represent a fundamental shift in how cash savings within ISAs will be treated, and savers who do not plan ahead could face unexpected tax charges from April 2027.
What Was Announced Yesterday?
The Treasury published a detailed factsheet setting out anti-circumvention rules to accompany the previously announced reduction in the Cash ISA allowance. The key measures confirmed are:
1. Cash ISA Limit Reduced to £12,000 for Under-65s
From 6 April 2027, the annual Cash ISA allowance will be cut from £20,000 to £12,000 for savers under the age of 65. The overall ISA allowance remains £20,000, meaning up to £8,000 of the remaining allowance could be directed into a Stocks & Shares or Innovative Finance ISA.
Savers aged 65 and over are unaffected — their Cash ISA allowance stays at £20,000. Importantly, the higher limit will apply from the start of the tax year in which an individual turns 65, not from their birthday.
Existing cash ISA balances are protected. Only new contributions from 6 April 2027 are subject to the new limit.
2. A 22% Charge on Cash Held in Non-Cash ISAs
This is the headline measure from yesterday's announcement. To prevent savers from sidestepping the lower Cash ISA limit — by parking cash in a Stocks & Shares ISA instead — the government will introduce a flat-rate 22% charge on any interest earned on cash held within a non-Cash ISA.
This applies from April 2027. In practical terms, if you hold uninvested cash in your Stocks & Shares ISA and earn interest on it, that interest will no longer be tax-free.
3. No Transfers from Non-Cash ISAs into Cash ISAs (Under-65s)
Under the new rules, savers under 65 will no longer be permitted to transfer funds from a Stocks & Shares or Innovative Finance ISA into a Cash ISA. This closes what the government viewed as an obvious workaround — subscribing up to £20,000 into a non-Cash ISA and then transferring the balance across.
The reverse direction — Cash ISA to non-Cash ISA — will still be allowed. Savers aged 65 and over are exempt from this restriction.
4. Money Market Funds Restricted in Non-Cash ISAs
Savers will no longer be able to hold 100% of their non-Cash ISA in Money Market Funds (MMFs). MMFs, which invest in short-term debt instruments and behave similarly to cash, have been designated as "cash-like assets" for these purposes.
From April 2027, MMFs can only be held as a partial allocation alongside conventional investments such as individual shares, funds, investment trusts, ETFs, and bonds (including gilts). Holding MMFs as the sole investment in a non-Cash ISA will not be permitted.
Timeline
Date: Now – 5 April 2027
What happens: Current rules apply. Cash ISA limit remains £20,000.
Date: Summer/Autumn 2026
What happens: Technical consultation on draft legislation. Regulations laid in Parliament.
Date: 6 April 2027
What happens: New rules take effect. £12,000 Cash ISA limit for under-65s. 22% charge and transfer restrictions apply.
What Does This Mean for You?
These changes require careful consideration for anyone who currently maximises their Cash ISA allowance or holds cash within a Stocks & Shares ISA.
If you are under 65 and primarily a cash saver, you have the remainder of this tax year and all of 2026/27 to contribute up to £20,000 to a Cash ISA. From April 2027, your annual limit falls to £12,000 — make sure your savings strategy reflects this well in advance.
If you hold a Stocks & Shares ISA, review any cash holdings within it. Interest earned on cash balances will become taxable at 22% from April 2027. Consider whether those funds should be invested or, where eligible, moved to a Cash ISA before the rules change.
If you rely on Money Market Funds as a cash equivalent within a non-Cash ISA, you will need to ensure they do not represent 100% of your ISA holdings by April 2027.
If you would like to discuss these changes in more detail, please speak to one of the Sampson Fielding team.
