A major ISA shift is scheduled for April 2027, and it will matter to anyone under 65 who prefers to keep the bulk of their allowance in cash. From that date, only £12,000 of the annual £20,000 allowance can be paid into a cash ISA.
Anything beyond that will need to go into an investment-type ISA if you want to use the full allowance. Savers aged 65 and over will still be able to keep the full £20,000 in cash if they wish.
These rules apply only to money you pay in from 6 April 2027 onwards. Cash already held inside your ISAs stays tax-free and does not have to move into investments under the new rules.
How the Allowance Will Work
If you’re under 65 and want to use your full £20,000 allowance from 2027, up to £12,000 can remain in a cash ISA and up to £8,000 must go into an investment-type ISA.
That could be a stocks and shares ISA, an innovative finance ISA, or a Lifetime ISA if you qualify. You don’t have to use the whole allowance; anything you don’t use simply lapses at the end of the tax year.
The aim is to push more long-term savings into assets with growth potential. Cash has its place, but the government believes younger savers rely on it too heavily, leaving long-term returns on the table. For people who like the certainty of cash ISAs, the change will mean adjusting how they use their allowance each year.
There are also other ISA reforms coming in 2027. Transfers from investment ISAs back into cash ISAs are expected to be restricted, and cash left sitting inside an investment ISA for long periods may face additional tax charges.
In short, the ISA system is being nudged further towards long-term investing rather than being used purely as a flexible savings shelter.
What This Means for You
If you’re under 65, you’ll need to think about three practical points:
1. How much cash you genuinely need.
If you normally place the full allowance into a cash ISA, you’ll need to rethink how best to use the remaining portion from 2027.
2. What kind of investment ISA feels right for the rest.
This doesn’t mean taking high levels of risk. Many people prefer balanced or multi-asset funds that spread risk. (Capital at risk.)
3. Whether your current provider can support both cash and investment ISAs.
If not, you may need to switch or transfer part of your allowance to another provider so you don’t lose access to the full £20,000 shelter.
It’s also worth noting that tax on savings held outside ISAs will rise from April 2027, making the ISA allowance more valuable and reducing the appeal of keeping large amounts of savings outside tax-sheltered accounts.
How to Prepare Now
You don’t need to wait until 2027 to make adjustments. Start by reviewing how much of your current ISA usage is cash and whether that matches what you’ll be allowed to do.
If you’ve never used an investment ISA before, now is a good time to understand your options and how different types of funds work. And if you already invest, consider how the £12,000 cap might change the way you structure your contributions in future tax years.
ISA rules rarely stay still, and this is one of the biggest changes in years. If you’d like to talk through how the 2027 rules fit into your wider saving and investment plan, our team is here to help.
📞 020 8366 4400
✉️ enquiries@cedarhfs.co.uk