The Cash ISA is changing in 2027. Here’s how to make the most of yours now

If you have seen headlines suggesting the Cash ISA is being “scrapped” or “slashed”, you would be forgiven for feeling a little uneasy. The reality is calmer than some of that coverage implies. Your ISA is not going away, and for a great many savers across the Three Counties, very little will change at all. A genuine shift is on the way, though, and a little planning now could help you make the most of the years ahead.

What is changing, and when

For the current 2026/27 tax year, the overall ISA allowance stays at £20,000. You can still split that across a Cash ISA, a Stocks and Shares ISA, and other ISA types in whatever combination suits you, as long as the total does not exceed £20,000.

The change comes in from 6 April 2027. In her Autumn 2025 Budget, Chancellor Rachel Reeves announced that, from that date, savers under the age of 65 will be able to pay a maximum of £12,000 into a Cash ISA each year. The remaining £8,000 of the allowance could still be used, but it would need to go into a Stocks and Shares ISA or another type. Your total annual ISA allowance stays at £20,000. It is only the slice you can hold in cash that is being capped.

Because this applies from the start of the 2027/28 tax year, the year we are in now is the last full tax year in which under-65s can place the entire £20,000 into a Cash ISA.

If you are 65 or over, you can breathe easy

There is an important exemption. If you are aged 65 or over, the new cap does not apply to you. You will keep the full £20,000 Cash ISA flexibility. The government has said this exemption will stand “at least initially”, although it has not confirmed whether or when it might change in the future.

Since so many of the people we work with are at or approaching retirement, this is genuinely reassuring news. For a large share of our clients, the headline change simply will not bite.

Why the ISA wrapper still matters

It is worth remembering why a tax-free wrapper is valuable in the first place. Outside an ISA, the interest you earn on savings is only tax-free up to your Personal Savings Allowance. For the 2026/27 tax year this remains £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, and nothing at all for additional-rate taxpayers, according to the Low Incomes Tax Reform Group.

With savings rates higher than they were a few years ago, it is easier to use up that allowance than you might expect. A relatively modest pot can now generate enough interest to tip a higher-rate taxpayer past £500. On top of that, the rates of tax charged on savings income above the allowance are set to rise by two percentage points from April 2027. Taken together, that means keeping your interest sheltered inside an ISA, where it stays tax-free, could become more valuable rather than less.

Making the most of this tax year

Because under-65s keep the full £20,000 cash flexibility for 2026/27, this could be a sensible window to make fuller use of your Cash ISA allowance, if doing so fits your circumstances. There is no need to rush, or to stretch beyond what feels comfortable. Whether it makes sense will depend on how much you hold in savings, what you are saving for, and your wider tax position.

Cash and investing can both play a part

Part of the thinking behind the reform is to encourage more people to invest, rather than to hold large sums purely in cash. We would never suggest abandoning cash. It offers stability and peace of mind, and it is well suited to an emergency fund and to money you expect to need within the next few years.

For longer-term goals, though, investing could offer the potential for growth that cash may find harder to deliver, particularly once the effect of inflation is taken into account. Investing does carry risk, as the value of investments can fall as well as rise, and you could get back less than you put in. The right balance between cash and investments is personal, and it is exactly the kind of question a conversation with an adviser can help you work through.

Get in touch

If you would like to review how your savings and ISAs are set up before the rules change, we are here to help. Email contact@caliberfm.co.uk or call 01525 375286 to talk it through with your Caliber financial planner.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future. All contents are based on our understanding of HMRC legislation, which is subject to change. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate tax planning, estate planning, or cashflow planning.

The value of investments and any income from them can fall as well as rise. You may get back less than you originally invested. Past performance is not a reliable indicator of future performance.