Cash ISA Allowance Cut to £12k: What UK Savers Must Do Before April 2027

From 6 April 2027, the amount you can shelter in a Cash ISA each year drops from £20,000 to £12,000 — if you're under 65. That's £8,000 less tax-free savings space every single year, gone by government policy. This isn't a rumour or a draft proposal. It was confirmed in the Autumn Budget 2025.

The good news: you have two full tax years to take maximum advantage of the current £20,000 limit before the cut arrives. But only if you act. The 2025/26 tax year deadline is 5 April 2026 — roughly four weeks away.

Capital at risk. This is not financial advice. Please speak to a qualified financial adviser before making investment decisions.

What exactly is changing — and why?

The UK government's stated aim is to nudge savers toward investing rather than keeping money in cash accounts. By limiting how much you can put in a Cash ISA each year, they hope more people will move money into Stocks & Shares ISAs, which (in theory) supports UK economic growth.

The overall ISA allowance stays at £20,000. But from April 2027, for under-65s, only £12,000 of that can sit in a Cash ISA. The remaining £8,000 must go into a different ISA type — most likely a Stocks & Shares ISA — if you want to use your full allowance.

This is a meaningful change. Cash ISAs are the go-to vehicle for millions of cautious UK savers who prefer certainty over stock market risk. Many people — particularly those building emergency funds, saving for a house, or simply uncomfortable with markets — will find their tax-free savings space meaningfully squeezed.

Who is affected?

The cut applies to anyone under 65 years old from the 2027/28 tax year onwards. If you are:

• Under 65: Your Cash ISA limit falls to £12,000 per year from April 2027
• 65 or older: No change — you keep the full £20,000 Cash ISA allowance
• Already in a Cash ISA: Existing balances are unaffected — you do not lose a penny already saved

The over-65 exemption came after significant campaigning by consumer advocates, including Martin Lewis, who argued that older savers — particularly retirees relying on interest income — should not be penalised for keeping money in cash rather than taking stock market risk.

The £8,000-a-year problem (and why it compounds)

On its own, losing £8,000 of annual Cash ISA space might not sound catastrophic. But think about what that means over time.

Say you're 40 and plan to maximise your Cash ISA every year until retirement at 67. Under the old rules, you'd shelter £20,000 per year. Under the new rules, you're limited to £12,000. That's a difference of £8,000 per year across 25 years — a total of £200,000 less in tax-free savings capacity over your working life.

And that assumes you'd never have used the extra £8,000 in a Stocks & Shares ISA anyway. For many people who specifically chose cash over investments, this is a genuine restriction — not a nudge.

What you should do before 5 April 2026

Here's a practical, step-by-step action plan for the next four weeks:

1. Check how much you've already put in this tax year

Log into your Cash ISA provider and check your current year contributions. The 2025/26 allowance is £20,000. Every pound you haven't contributed yet by April 5 is gone forever as an allowance opportunity.

2. Top up to as close to £20,000 as you can afford

You don't need to put in the full amount. Even a few thousand more before April 5 locks in extra tax-free savings capacity that won't exist from April 2027 for under-65s.

3. Check your provider's cut-off deadline

Don't assume you can transfer at 11:59pm on April 5. Many Cash ISA providers have cut-off times before the end of the day. Some require funds to clear 2–3 days in advance. Check your provider's terms now, not on April 4.

4. Plan your 2026/27 contributions from April 6

The 2026/27 tax year (April 6 2026 to April 5 2027) is the last full tax year under the old £20,000 Cash ISA limit. Set up a standing order to contribute monthly from April 6, so you don't miss the final window before the cap drops.

5. Consider a Stocks & Shares ISA for the extra £8,000

From April 2027, if you want to use your full £20,000 ISA allowance, you'll need to put £8,000 somewhere other than a Cash ISA. A Stocks & Shares ISA is the most common choice. See the section below for how this works.

Stocks & Shares ISA: a real alternative (not just a consolation prize)

For many savers, a Stocks & Shares ISA isn't the scary option it sounds. Here's how to think about it:

What it is: An ISA where your money is invested in funds, shares, bonds, or ETFs rather than sitting in cash. Growth and income are still tax-free — same wrapper, different contents.

Why it matters post-2027: If you want to maximise your full £20,000 ISA allowance as an under-65, you'll need both a Cash ISA (up to £12,000) and a Stocks & Shares ISA (up to £8,000 of the remaining allowance), or you'll leave allowance on the table.

The risk conversation: Unlike a Cash ISA, you can lose money in a Stocks & Shares ISA. Markets go up and down. Over the long term (10+ years), diversified global index funds have historically outperformed cash savings rates — but past performance is not a guarantee of future results. Capital at risk.

Who might consider it: If you have a long time horizon (5+ years), don't need the money in the short term, and are comfortable with some risk, a low-cost global index fund inside a Stocks & Shares ISA can be a sensible way to use the allowance that can no longer go into cash.

What about existing Cash ISA balances?

Your existing savings are completely safe. The £12,000 restriction applies only to new contributions from 6 April 2027. Money already sitting in a Cash ISA continues to earn interest tax-free, regardless of how much is in there.

You also cannot be forced to move existing savings out of a Cash ISA. The change is about future contributions only.

What about the Personal Savings Allowance?

From April 2027, savers outside of ISAs face a double squeeze. The Government confirmed a freeze to the Personal Savings Allowance (PSA) — the amount of interest you can earn outside an ISA before paying tax. As interest rates have risen, more savers are breaching the PSA and paying tax on interest from ordinary savings accounts.

This makes the ISA wrapper — even at £12,000 for Cash — more valuable, not less. Protecting savings interest from tax becomes more important when the PSA doesn't stretch far enough.

Four-week action plan: the short version

1. This week: Log in and check your current year Cash ISA balance
2. This week: Calculate how much you can realistically top up before April 5
3. Next week: Transfer your top-up — don't leave it to the last day
4. April 6: Set up regular contributions for the 2026/27 tax year — the final full year under the £20,000 Cash ISA limit
5. Before April 2027: Decide how you want to use the £8,000 that can no longer go into Cash from 2027/28 onwards

Frequently asked questions

When does the Cash ISA allowance drop to £12,000?

From 6 April 2027 — the start of the 2027/28 tax year. The current 2025/26 tax year (ending 5 April 2026) and the 2026/27 tax year still allow up to £20,000 in a Cash ISA for everyone.

Does the cut affect everyone?

No. Only savers aged 64 and under. If you are 65 or older, your Cash ISA limit stays at £20,000.

Does my existing Cash ISA balance get affected?

No. Existing balances are completely protected. The cap only applies to new contributions from April 2027.

Can I still contribute £20,000 to an ISA overall?

Yes. The total ISA allowance stays at £20,000. You can split it across ISA types — up to £12,000 in cash, and the remaining £8,000 in a Stocks & Shares ISA or other eligible ISA type.

What if I want to keep everything in cash?

From April 2027, under-65s will only be able to shelter £12,000 per year in a Cash ISA. There's no way to exceed that limit within the ISA wrapper. The remaining £8,000 of annual allowance can only be used in a non-cash ISA type. If you don't use it in a Stocks & Shares ISA, it goes unused.

Is switching to a Stocks & Shares ISA risky?

Yes — investing involves risk. You could get back less than you put in. However, for long-term goals (5+ years), a globally diversified index fund inside an S&S ISA has historically outperformed cash over time. Capital at risk. This is not financial advice.

Is this financial advice?

No. This article is for educational purposes only. It does not constitute financial advice. Always do your own research or speak to a regulated financial adviser before making decisions about your savings.