Rachel Reeves's Autumn Budget 2025 left the headline ISA allowance untouched at £20,000. What it did was more surgical: from 6 April 2027, anyone under 65 will only be able to put £12,000 of that allowance into a Cash ISA. The remaining £8,000 has to go somewhere else — a Stocks & Shares ISA, an Innovative Finance ISA, or nowhere at all if you'd rather leave it unused. For UK savers who have spent years treating the Cash ISA as the default first stop for their annual allowance, this is the biggest change to the ISA system in almost a decade, and the 2026/27 tax year — the one you're in right now — is the last chance to put the full £20,000 into cash if that's genuinely what you want to do.
What Actually Changes From 6 April 2027
The mechanics are fairly simple once you strip away the political noise around them. Anyone under 65 will be capped at £12,000 of new Cash ISA contributions per tax year, down from the current £20,000. The other £8,000 of your overall allowance doesn't disappear — it has to be directed into a non-cash ISA, most obviously a Stocks & Shares ISA, or you can put the whole £20,000 into shares and funds and skip cash entirely. Savers aged 65 and over are exempt from the cap and keep the full £20,000 Cash ISA allowance, a carve-out the Treasury added after pressure from groups representing older savers who rely on cash for security rather than growth.
None of this touches money you've already saved. Existing Cash ISA balances built up before April 2027 aren't affected, retested, or forced to move — the £12,000 cap applies only to new contributions from that date onward. If you've got £60,000 sitting in a Cash ISA from previous tax years, it stays exactly where it is, earning whatever rate your provider offers, under the same tax-free wrapper it's always had.
Money Market Funds and the New Definition of "Cash-Like"
One detail that's easy to miss: from April 2027, "cash-like assets" inside a non-Cash ISA will be defined specifically as money market funds. You'll still be able to hold some cash-like exposure inside a Stocks & Shares ISA — platforms often use it as a temporary parking spot between trades — but only as a partial allocation, not as the whole account. Treat your Stocks & Shares ISA as an investment account with an occasional cash buffer, not as a second Cash ISA wearing a different label.
The 22% Charge Designed to Close the Loophole
The government clearly anticipated the obvious workaround — parking your extra £8,000 as cash inside a Stocks & Shares ISA rather than actually investing it — and built in a deterrent. From April 2027, a flat-rate charge of 22% will apply to interest or other returns paid on cash sitting inside a non-Cash ISA. Compare that with the tax you'd otherwise pay on savings interest outside an ISA altogether: basic-rate taxpayers are set to see their rate on interest above the £1,000 Personal Savings Allowance rise from 20% to 22% from the same date, higher-rate taxpayers from 40% to 42%, and additional-rate taxpayers from 45% to 47%. The ISA wrapper still shelters your capital from those headline rates, but the 22% cash-holding charge specifically targets the loophole of using an investment wrapper as a cash hideout.
The Building Societies Association pushed back hard while this policy was being drafted, and its lobbying is widely credited with getting the cap raised from an originally floated £10,000 to the £12,000 that actually landed. Dame Meg Hillier, who chairs the Treasury Select Committee, has separately warned that stacking a new cap, a new charge and a redefinition of "cash-like assets" onto an ISA system that was supposed to be simple risks confusing exactly the savers it's meant to help.
Should You Start Moving Cash Into Investments Now?
Yes — but not blindly.
If you're holding Cash ISA balances you genuinely don't need for five years or more, shifting new contributions toward a Stocks & Shares ISA before the 2027 deadline is the stronger move: equities have outperformed cash over almost every ten-year stretch in UK market history, and from 2027 the tax treatment of parked cash inside an investment wrapper gets noticeably worse. Waiting until April 2027 to make the decision, rather than using the 2026/27 tax year to get comfortable with a platform and a fund choice, just delays a transition you're going to make anyway. This isn't a call to abandon cash altogether, though. If you're sitting on an emergency fund, saving for a house deposit due within two or three years, or simply someone who sleeps better knowing a chunk of your money can't fall in value overnight, keeping that portion in cash remains entirely sensible — no reform changes the basic maths that money you need soon shouldn't be exposed to a market downturn right before you need it.
Here's the detail that matters if safety, not growth, is what's on your mind: investments held with an FCA-authorised platform are covered by the Financial Services Compensation Scheme up to £85,000 per person, per firm, if the firm itself fails — not per individual fund, but across everything you hold with that one provider. That's the same protection that applies to your existing Cash ISA balances, and it's entirely separate from the ordinary risk that your investments can fall in value, which the FSCS doesn't cover and never has.
SIPPs, LISAs and Junior ISAs Aren't Part of This
This reform is narrower than the headlines suggest, and it's easy to lump it in with pension or Lifetime ISA changes that have nothing to do with it. The Lifetime ISA keeps its own £4,000 annual limit, which counts toward — not on top of — your overall £20,000 allowance, and the 25% government bonus on LISA contributions is untouched by any of this. Junior ISAs, with their separate £9,000 allowance for 2026/27, aren't affected either; the Cash ISA cap applies specifically to adult ISAs held by savers under 65. SIPPs sit entirely outside the ISA system, governed by pension tax relief rules rather than ISA rules, so none of this changes how much you can pay into a pension.
A Practical Illustration — Not a Rate Quote
Say you're 42 and, in a normal year, you'd put the full £20,000 into a Cash ISA without a second thought. Purely for illustration — not a rate offered by any specific bank or building society — imagine that money earning somewhere in the region of 4% a year. From April 2027, you can still put £12,000 of it into that Cash ISA and keep earning whatever rate is on offer. The other £8,000 either has to go into a Stocks & Shares ISA, where its return depends entirely on what you invest in and markets can fall as well as rise, or you leave it unused and lose that portion of the year's allowance for good, because unused ISA allowance never rolls over into the next tax year. There's no version of this where the £8,000 quietly stays as cash inside the ISA wrapper without the new 22% charge eating into whatever interest it earns.
What to Check With Your Platform Before April 2027
A few practical steps are worth taking during this tax year rather than waiting until the deadline is on top of you:
- Confirm your platform — Hargreaves Lansdown, AJ Bell, Vanguard UK, or whichever provider you use — actually offers a Stocks & Shares ISA alongside your Cash ISA, and check whether moving between the two on their system counts as an internal transfer or a full withdrawal-and-redeposit, because the latter can cost you allowance you don't want to lose.
- If you're planning to move existing Cash ISA money into a Stocks & Shares ISA, use the formal ISA transfer process rather than withdrawing the cash yourself and redepositing it elsewhere. A DIY withdrawal breaks the tax-free wrapper and counts against your current year's allowance.
- Ask your provider directly how it intends to implement the money market fund rules from 2027 — some platforms hadn't finalised their approach as of mid-2026, and the practical detail of enforcement matters as much as the headline policy.
- If your Cash ISA balance is close to or above £85,000 with a single provider and it's the FSCS limit rather than investment risk that worries you, spreading cash across two FCA-authorised firms is a sensible step regardless of this reform.
None of this requires a decision today. But treating the 2026/27 tax year as a dry run — moving even a modest slice of new contributions into a Stocks & Shares ISA now, while the full £20,000 cash option still exists — beats scrambling to understand fund choices and platform mechanics in the weeks before the April 2027 deadline hits. If you're unsure how any of this interacts with your own tax position, an FCA-regulated financial adviser can look at your specific circumstances in a way a blog post never can.