Cash ISA allowance to be cut for some – we explain who will be affected and how

In the Budget announcement on 26th November 2025, the Chancellor of the Exchequer, Rachel Reeves, announced that the tax-free annual allowance for Cash ISA deposits will be slashed from £20,000 to £12,000 for those aged under 65. The move is aimed at reshaping the UK’s savings landscape, encouraging savers to move from cash deposits into investments to boost the UK economy. In this article we explain who is affected by the changes and when they will be implemented.

How will the Cash ISA allowance change?

Cash ISAs (Individual Savings Accounts) are a way for savers to earn interest on deposits without paying tax. Currently, if you are over the age of 18 and a UK resident, you can deposit up to £20,000 into a Cash ISA annually and not pay any tax on the interest that is earned. From April 2027, those aged under 65 will have their cash ISA allowance cut to £12,000. However they can still use the remaining £8,000 of their overall ISA allowance (which will remain at £20,000), but it must be invested in other ISA types, such as Stocks and Shares ISAs. The overall ISA £20,000 limit, along with the limits for Junior ISAs (£9,000) and Lifetime ISAs (£4,000), will be frozen until 5th April 2031.

Individuals aged 65 and over will retain the full £20,000 Cash ISA allowance for Cash ISAs.

Why has the Chancellor chosen to cut Cash ISA allowances?

The Chancellor pointed to the need to direct savers towards investing in the UK markets, where they may stand to gain better returns and also help the UK economy. Additionally, the move may raise taxes on deposits that previously enjoyed tax-free returns. Tom Selby, Director of Public Policy at AJ Bell said that there is "scant evidence the proposal to cut the Cash ISA allowance from £20,000 to £12,000 will do anything to encourage retail investing. Instead, there is a real risk that the April 2027 deadline will drive more people to Cash ISAs in the short term."

What do the changes mean for ISA savers?

There will be no change to the current ISA regime for now and savers can continue to invest up to £20,000 into a Cash ISA in the 2025/26 and 2026/27 tax years. However, from April 2027, savers under 65 will not be allowed to deposit more than £12,000 into a Cash ISA each year. Fixed-rate Cash ISAs currently offer up to 4.30% interest on deposits and you can source the best rates in our article, “Best fixed rate Cash ISAs in the UK”.

How the government plans to implement the rules to ensure that the new Cash ISA allowance rules are adhered to is yet to be confirmed. For example, currently you are able to hold cash in a Stock and Shares ISA as well as a Cash ISA, meaning that simply forcing people to use a Stocks and Shares ISA wouldn't currently prevent them having their full £20,000 ISA allowance in cash, even if they are aged under 65.