Cash ISA savers face final chance to lock in £20,000 allowance before April cuts
Savers under 65 face their last opportunity to take full advantage of the £20,000 Cash ISA allowance before sweeping government reforms slash the limit by 40 per cent next spring.
From 6 April 2027, the annual Cash ISA allowance for under-65s will be cut to £12,000, while those aged 65 and over will retain the full £20,000 limit. The change, announced by Chancellor Rachel Reeves at the Autumn Budget 2025, marks the end of equal treatment across age groups and creates urgency for younger savers to maximise contributions in the current 2026/27 tax year.
The reforms extend beyond simple allowance cuts. The government will introduce a 22 per cent charge on interest earned on uninvested cash held inside Stocks and Shares ISAs and Innovative Finance ISAs from April 2027, designed to prevent savers from circumventing the reduced Cash ISA limit by parking money in investment wrappers.
Additionally, under-65s will lose the ability to transfer funds from Stocks and Shares ISAs or Innovative Finance ISAs back into Cash ISAs, though transfers in the opposite direction and all transfers for over-65s will continue. These restrictions further limit the options available to younger savers seeking to preserve tax-free returns on cash savings.
Cash ISA popularity surges
The timing of the cuts reflects the dramatic resurgence in Cash ISA popularity as interest rates have climbed. Annual deposits in Cash ISAs jumped from £30.9 billion in 2021/22 to £69.5 billion in 2023/24, according to Lloyds Banking Group analysis of HMRC data. Over the same period, Stocks and Shares ISA investments fell slightly from £34 billion to £31 billion.
In the 2023/24 tax year alone, 9.9 million people subscribed to a Cash ISA, representing a 26 per cent increase from 7.9 million the previous year. Cash ISAs now account for two-thirds of all ISA subscriptions. The average Cash ISA deposit stood at £6,993 in 2023/24, while the average Stocks and Shares ISA deposit was £7,594.
Where to find the best rates
With the Bank of England base rate holding at 3.75 per cent following the June 2026 decision, savers can still secure competitive returns on Cash ISAs. The highest fixed Cash ISA rate currently available is 4.87 per cent AER from Marsden Building Society on its five-year product, while the best one-year fixed ISA offers 4.72 per cent AER.
Savers have benefited from increased flexibility since April 2024, when rules changed to allow opening and contributing to multiple Cash ISAs with different providers in the same tax year. Partial transfers of current-year Cash ISA contributions are now also permitted without affecting the allowance, enabling savers to move funds to better rates more easily.
Financial experts emphasise the importance of acting before the April 2027 deadline. Savers who fail to use their full £20,000 allowance this year cannot carry forward the unused portion, meaning under-65s could permanently lose access to £8,000 of tax-free savings capacity.
The reforms represent a significant shift in government policy toward ISAs, which have remained largely unchanged since their introduction. The age-based distinction marks a departure from the principle of universal allowances and signals potential further changes to the ISA landscape in future years.
