Cash ISA Limit Cut to £12,000: What It Means for Your Savings
Chancellor Rachel Reeves announced a cut to the Cash ISA allowance from £20,000 to £12,000 for under-65s. Here's what's changing, why, and what you should do about it.
In the Budget 2025, Chancellor Rachel Reeves confirmed a significant change to the Cash ISA: from April 2027, the annual Cash ISA contribution limit will be cut from £20,000 to £12,000 for anyone under 65. The details were published in HMRC’s Tax-Free Savings Newsletter 19.
It’s the first reduction to the Cash ISA allowance since 2017, and it signals a clear shift in government policy - away from cash savings and towards investment.
What Exactly Is Changing?
| 2026/27 (current) | From April 2027 | |
|---|---|---|
| Total ISA allowance | £20,000 | £20,000 (unchanged) |
| Cash ISA limit (under 65) | £20,000 | £12,000 |
| Cash ISA limit (65+) | £20,000 | £20,000 (exempt) |
| Stocks & Shares ISA | Up to £20,000 | Up to £20,000 |
The overall £20,000 annual ISA allowance stays the same. But if you’re under 65, you’ll only be able to put up to £12,000 of that into a Cash ISA. The remaining £8,000 would need to go into a Stocks & Shares ISA, Lifetime ISA, or Innovative Finance ISA.
Those aged 65 and over are exempt - they can continue putting the full £20,000 into a Cash ISA.
Why Is the Government Doing This?
Reeves was clear about the reasoning. In her Budget speech, she stated:
The UK has some of the lowest levels of retail investment in the G7, and that is not only bad for business, who need that investment to grow; it is bad for savers, too.
The government wants to encourage more people to invest in the stock market rather than holding large sums in cash. The logic: over the long term, investments in equities tend to outperform cash savings, and more retail investment supports UK businesses.
What This Means for You Right Now
The change doesn’t take effect until April 2027, so the current 2026/27 tax year is unaffected. You can still contribute up to £20,000 to a Cash ISA this year. But it’s worth planning ahead:
1. Max Out Your Cash ISA This Year
If you rely on Cash ISAs for tax-free savings, use the full £20,000 allowance before 5 April 2027 while you still can. Unused allowance doesn’t roll over.
2. Consider Starting a Stocks & Shares ISA
If you haven’t invested before, now is the time to explore it. From April 2027, you’ll have £8,000 of your allowance that can’t go into cash. Getting comfortable with a Stocks & Shares ISA before the deadline makes the transition easier.
3. Review Your ISA Mix
Think about how your allowance is currently split:
- Cash ISA - emergency funds, short-term savings
- Stocks & Shares ISA - long-term growth
- Lifetime ISA - first home or retirement (under 40s, up to £4,000/year)
- Innovative Finance ISA - peer-to-peer lending
4. Track Your Contributions
With a split allowance, it’s more important than ever to know exactly how much you’ve put where. Overcontributing to a Cash ISA after April 2027 could mean penalties.
How Lunar Helps
Lunar brings all your accounts - ISAs, pensions, general investment accounts - into one dashboard. You can see exactly how much of your ISA allowance you’ve used, track your tax-efficient investments, and make sure you’re not caught out by the new limits.
No spreadsheets. No logging into five different platforms. Just a clear picture of where you stand.
Sources
- Budget 2025 - GOV.UK
- HMRC Tax-Free Savings Newsletter 19 - November 2025
- Rachel Reeves confirms cash ISA allowance changes - MoneyWeek
- Cash ISA limit cut to £12,000 - MoneySavingExpert
Join the waitlist to be the first to track your ISA contributions with Lunar.
This article is for informational purposes only and does not constitute financial advice. If you're unsure about your finances, consider speaking to a qualified financial adviser.