The Cash ISA shrinks for under-65s. What April 2027 actually changes

Illustration only, published . Updated .

For years the April ritual was simple. Open (or top up) a Cash ISA, park as much of the £20,000 allowance as you could in cash, sleep easier. From 6 April 2027 that ritual splits by age.

HMRC’s tax information and impact note, published 17 September 2026, sets out the new rules. The overall annual ISA subscription limit stays at £20,000. The Cash ISA slice of that pot does not, unless you are 65 or over.

The new cash ceiling

From the 2027/28 tax year:

  • If you are aged 64 or under at the end of the tax year, you can subscribe up to £12,000 to Cash ISAs in that year.
  • If you are 65 or over, the Cash ISA limit stays at £20,000.
  • The overall ISA allowance remains £20,000 for everyone.

So an under-65 who still wants to use the full allowance will need another home for up to £8,000: typically a stocks and shares ISA, or another qualifying non-cash ISA. That is the policy point. The government says it wants more retail money in investments rather than cash, pointing to long-run returns. Whether that fits your own risk, timeline and emergency buffer is a different question, and not one a tax note can answer for you.

HMRC’s note also cites older subscription data: in 2022/23, about 78% of Cash ISA subscribers aged under 65 paid in less than £12,000. The people who feel this most are the minority who already push past that line every year.

Why the anti-circumvention rules exist

Cutting the Cash ISA limit would be easy to dodge if you could still pour £20,000 into a stocks and shares ISA, leave it as cash earning tax-free interest, buy a portfolio that is entirely cash-like, or transfer the lot into a Cash ISA later. From April 2027 the rules try to close those doors.

In plain terms, for under-65s:

  1. Transfers from stocks and shares or Innovative Finance ISAs into Cash ISAs will not be allowed. Transfers the other way (cash into non-cash) stay possible.
  2. You can still hold some cash inside a non-cash ISA, but interest (or alternative finance return) on that cash faces a flat 22% charge, paid by the ISA manager to HMRC. You do not have to declare that interest yourself.
  3. A non-cash ISA that is 100% “cash-like” will not qualify. From April 2027 that cash-like definition focuses on Money Market Funds. Partial MMF exposure in a diversified portfolio is still allowed; an account that is all MMF is not. Ordinary shares, funds, investment trusts, ETFs and bonds (including gilts) are not treated as cash-like under this measure.

Savers aged 65 and over keep the £20,000 Cash ISA limit. The transfer restriction into Cash ISAs is lifted for them from the start of the tax year in which they turn 65. The 22% cash-interest charge inside non-cash ISAs, and the ban on 100% cash-like non-cash portfolios, still apply to that age group.

What it feels like at the kitchen table

If you are under 65 and already keep a large emergency fund in Cash ISAs, April 2027 does not empty those accounts. It caps how much new cash you can add each tax year. Existing balances stay. The awkward bit is the next contribution: cash up to £12,000, then a decision about the rest.

That decision is partly about tax wrappers and partly about life. Cash is for money you may need soon or cannot afford to see fall. Investments are for money with a longer horizon and a stomach for ups and downs. Government impact notes talk about “encouraging retail investment.” Your mortgage, job security and sleep at night still get a vote.

For lining up how much actually lands in the bank against what you might set aside, Money Engine’s free Take-Home Salary and Financial Profile tools are illustration only. They sketch scenarios; they are not tax, investment or regulated financial advice.

The short read

From 6 April 2027, under-65s: Cash ISA subscriptions capped at £12,000 inside a £20,000 overall ISA limit. Age 65+: Cash ISA limit stays £20,000. Anti-circumvention: no non-cash-to-cash transfers for under-65s, 22% charge on interest on cash inside non-cash ISAs, and no 100% Money Market Fund non-cash portfolios. Confirm the live GOV.UK note and your ISA manager’s guidance before you rearrange anything.

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Disclaimer

Illustration only. Not tax, investment or regulated financial advice. Rules summarised from publicly available GOV.UK / HMRC material and may be updated. Confirm with official sources and take regulated advice before acting.