What’s changed: Updated 28 October 2026: the Budget dropped the £12,000 cash ISA cap for under-65s, so the cash ISA limit stays at £20,000, and raised the tax on savings interest from April 2027. Earlier, June 2026: the 22% charge on cash held in investment ISAs. Full update history.
⚠️ Educational Content Only: This article is for educational and informational purposes only and does not constitute financial, tax, or investment advice. Savvy Investor Guide is not a regulated firm and does not provide personalised advice. The Cash ISA rules described here reflect the Budget of 28 October 2026 and the Budget documents published that day. Keeping the cash ISA limit at £20,000 needs regulations, which the government says it will lay before Parliament in November 2026, and the new savings tax rates need the Finance Bill 2026-27, so details can change before 6 April 2027. Tax treatment depends on individual circumstances and is subject to change. Capital invested in Stocks & Shares ISAs can fall in value as well as rise. Before making decisions, consult a regulated financial adviser.
The £12,000 Cash ISA cap for under-65s will not happen. It was due to start on 6 April 2027 and had already been written into regulations, but in the Budget of 28 October 2026 the government said it “has decided not to reduce the cash ISA limit, so that it remains at £20,000.” Every adult saver keeps the full £20,000 Cash ISA allowance in 2027/28. What does still change on 6 April 2027 is the tax on savings interest held outside an ISA, which the same Budget raised by a further two percentage points. This guide sets out what was planned, what the Budget changed, and what stays the same.
What the Budget changed for Cash ISAs
- No £12,000 cap. The Cash ISA limit stays at £20,000 for every saver aged 18 and over from April 2027. The regulations to undo the cut are due in November 2026.
- The overall ISA allowance stays at £20,000. The Treasury’s costings assume it is held at that level up to and including 2030/31. The Junior ISA limit stays at £9,000.
- Savings interest outside an ISA is taxed more from April 2027. The rates become 24%, 44% and 49%, two points above the 22%, 42% and 47% already legislated and four points above today’s 20%, 40% and 45%. The Personal Savings Allowance is unchanged.
- The 22% charge and the transfer ban are not mentioned. The Budget documents do not say whether the 22% charge on cash in a Stocks & Shares ISA, or the ban on transfers from investment ISAs into Cash ISAs, will still apply. Both were announced as part of the cap.
- A First Time Buyer ISA replaces the Lifetime ISA for new savers from April 2029, and the Lifetime ISA withdrawal charge for homes above £450,000 falls to 20% from 29 October 2026.
Contents
What the Budget changed, and what was planned
Under the rules in force until 5 April 2027, every UK adult can put up to £20,000 into ISAs each tax year, in any combination of Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, and Lifetime ISA (the LISA has its own £4,000 sub-limit within the £20,000). Cash and S&S have always been interchangeable inside that £20,000.
The plan, announced in the Autumn Budget 2025, was to change that from 6 April 2027. Savers aged under 65 would have been limited to £12,000 a year in Cash ISAs, with the rest of the £20,000 available only for investment-type ISAs. The government framed it as a way to encourage savers to invest rather than hold large cash balances, and the rule was made in regulations in September 2026.
The Budget of 28 October 2026 reversed it. The Budget document says: “To continue providing generous support for savers, the government has decided not to reduce the cash ISA limit, so that it remains at £20,000.” HMRC’s overview of the Budget’s tax measures says the limit is retained “for all savers over 18 years old from April 2027”, and that the change will be made by regulations laid before Parliament in November 2026. In place of the cap, the government says it will work with the investment industry “to explore a new ISA incentive for people investing in a stocks and shares ISA for the first time”. No design, amount or start date has been published.
Two rules were announced alongside the cap to stop people getting round it: a flat 22% charge on interest earned on uninvested cash inside a Stocks & Shares or Innovative Finance ISA, and a ban on transfers from those ISAs into Cash ISAs for under-65s. The Budget documents neither confirm nor withdraw either rule for ordinary ISAs. The one related line is in the government’s response on the new First Time Buyer ISA, which says that because the cash ISA limit is retained, “anti-circumvention rules no longer need to be applied to the FTB ISA, including on transfers.” Our guide to the 22% ISA cash charge covers the charge as announced, and will be updated when HMRC says what happens to it.
For the rest of the Budget, including the new Pension Tax Allowance and the triple lock change, see what the UK Budget 2026 changes for savers, investors and pensioners.
The tax timeline to April 2027
The Cash ISA cap was one of three changes due between April 2026 and April 2027. Two of them still go ahead, and one is now bigger than first announced. Between them they make the ISA wrapper worth more than it was, because more of the income it shelters would otherwise be taxed.
The combination matters. Dividend-paying funds and shares held outside an ISA pay more tax from April 2026. Savings interest above the Personal Savings Allowance pays more from April 2027. The ISA protects against both, and with the cap dropped, savers who prefer cash can still shelter the full £20,000 a year in it.
What did not change: The Personal Savings Allowance is still £1,000 for basic rate taxpayers and £500 for higher rate. The dividend allowance is still £500, and the dividend rates are unchanged for 2027/28. The Capital Gains Tax annual exempt amount is still £3,000 (down from £12,300 in 2022/23), with rates of 18% and 24%. The total ISA allowance is still £20,000.
What the savings tax rise costs: a worked example
With the cap gone, the change that still costs savers money is the higher tax on interest earned outside an ISA. One worked example shows the scale.
The higher-rate taxpayer with non-ISA savings
James is 50, a higher-rate taxpayer, and has £50,000 sitting in a regular savings account earning 4.5%. That is £2,250 of annual interest. His Personal Savings Allowance gives him £500 tax-free. The other £1,750 is taxed.
At the current 40% rate, James pays £700 in savings tax per year. From April 2027, at 44%, that becomes £770 per year. If his cash pile grows to £100,000, his interest is £4,500, of which £4,000 is taxed: £1,600 a year at 40%, and £1,760 a year at 44%. Interest earned inside a Cash ISA is not taxed at all, and from April 2027 he can still add up to £20,000 a year to one.
What stays the same
Most of the ISA rules carry on as they are.
- Existing Cash ISA balances. Anything already in a Cash ISA keeps its tax-free status, and continues to earn tax-free interest.
- The total £20,000 ISA allowance. The headline allowance is unchanged, and the Treasury’s costings assume it stays at £20,000 up to and including 2030/31. It still does not carry forward from one tax year to the next.
- The £20,000 Cash ISA limit. Cash and investments stay interchangeable within the £20,000.
- Junior ISA at £9,000. The JISA limit stays at £9,000 in 2027/28. Children under 18 with a JISA continue to have the full £9,000 cash-or-S&S flexibility.
- Lifetime ISA at £4,000, for now. The LISA continues at the £4,000 sub-limit (within the £20,000 main allowance) with the 25% government bonus. From April 2029 a new First Time Buyer ISA replaces it for new savers, with the same £4,000 limit and 25% bonus, paid when the money is used for a first home costing up to £450,000. Existing LISA holders can keep paying in under the current rules. From 29 October 2026, the LISA withdrawal charge for buying a home above £450,000 falls from 25% to 20%.
- Personal Savings Allowance and dividend allowance. £1,000 / £500 / £0 PSA and the £500 dividend allowance are unchanged. The savings tax rate rises in April 2027 apply only to interest above the PSA.
- Multiple Cash ISAs of the same type. Since 2024/25, you can contribute to multiple Cash ISAs across different providers in the same tax year, and that flexibility continues within the £20,000 limit.
One honest caveat: most savers do not actually fill the full £20,000 ISA allowance in any given year. According to HMRC subscription data, the average ISA contribution is well below the limit. The Treasury says a basic rate taxpayer would need over £25,000 in savings outside ISAs before paying any tax on the interest, a figure that assumes an average interest rate of 4%. For many savers, neither the cap nor its reversal makes any difference. Both matter most to disciplined high savers and higher-rate earners with significant cash outside an ISA.
The over-65 angle
Under the plan, savers aged 65 and over were to keep the full £20,000 Cash ISA allowance while younger savers were capped. The Treasury’s reasoning, set out in its formal response to the Treasury Committee report on Cash ISAs, was that older savers tend to need quicker access to their money and are less able to absorb investment risk. With the cap dropped there is no age split. The same £20,000 Cash ISA limit applies to every adult, and the question of how the rules would treat someone turning 65 partway through a tax year no longer arises.
Over-65s are still affected by the tax changes. The savings tax rise from April 2027 (interest taxed at 24% / 44% / 49% above the Personal Savings Allowance) hits any over-65 with non-ISA cash savings. The dividend tax rise from April 2026 (10.75% / 35.75%) hits any over-65 with non-ISA dividend income. Pensioners on low incomes may also be affected by the new Pension Tax Allowance from April 2027, covered in our Budget 2026 guide.
The self-employed angle: dividends, savings, and KDP authors
If you run a small ltd, freelance, consult, or earn self-employment income from sources like KDP author royalties, the 2026-27 changes hit harder than they hit a typical PAYE saver. Two reasons:
- Dividend tax rise from April 2026. If you pay yourself in dividends from your own Ltd, the basic rate already rose from 8.75% to 10.75% in April 2026, and higher rate from 33.75% to 35.75%. The dividend allowance is £500. So the first £500 of dividends each year is tax-free, but anything above is taxed at the new higher rates. The 28 October 2026 Budget left these rates unchanged for 2027/28.
- Savings tax rise from April 2027. Self-employed earners often hold larger cash balances than PAYE workers because they need to set aside money for tax bills, VAT, and lumpy income. That non-ISA cash will be taxed at 24%, 44% or 49% above the Personal Savings Allowance from April 2027.
KDP authors are a specific case worth thinking about. Royalty income is paid into the personal account (sole trader) or business account (Ltd). Either way, after tax there is often a meaningful surplus that needs a home. The traditional order has been: pension first for the in-life tax relief, then ISA for liquid tax-free growth, then non-ISA savings for short-term needs. With the cap dropped, the ISA layer keeps its full £20,000 of cash capacity, while the tax on the non-ISA layer rises. Authors building a self-publishing business with a service like Heppe Smith Publishing face the same rules as any other saver.
For Ltd directors specifically, one structural question worth asking is whether to take more salary and less dividend. Salary is taxed at PAYE rates with NI on top, but it is pension-relievable income, which lets you put more into a SIPP at the higher tax-relief level. The maths varies sharply by income level, so this is a “talk to your accountant” question rather than a blanket recommendation, but it is one of the conversations the new rates are pushing.
📚 Where to Go Next
The Cash ISA decision is one piece of a wider 2026/27 UK tax picture. These pieces sit alongside it.
Frequently Asked Questions
Is the £12,000 Cash ISA cap still happening?
No. In the Budget of 28 October 2026 the government said it “has decided not to reduce the cash ISA limit, so that it remains at £20,000.” From April 2027, every adult saver can put up to £20,000 a year into Cash ISAs, as now.
When does the reversal become law?
The cap had already been made in regulations in September 2026, so it needs new regulations to undo it. HMRC’s overview of the Budget’s tax measures says these will be laid before Parliament in November 2026, ahead of the 6 April 2027 date the cap would have started.
Can I transfer Stocks & Shares ISA money into a Cash ISA after April 2027?
Under the current rules, transfers between ISA types are allowed in both directions. A ban on transfers from investment ISAs into Cash ISAs for under-65s was announced as part of the cap, and the Budget documents do not say whether it still applies. For the new First Time Buyer ISA, the government says that because the cash ISA limit is retained, anti-circumvention rules no longer need to be applied, “including on transfers.”
What happens to the 22% charge on cash in a Stocks & Shares ISA?
The Budget documents do not mention it. The charge was announced in June 2026 to stop savers parking cash in an investment ISA to get round the £12,000 cap. With the cap dropped, its future is not stated. Our guide to the 22% charge sets out the rule as announced.
Can I still open multiple Cash ISAs from different providers?
Yes. Since 2024/25, you can contribute to multiple Cash ISAs across different providers in the same tax year. That flexibility continues, within the overall £20,000 limit across all your ISAs in the year.
Are Lifetime ISAs and Junior ISAs affected?
The Junior ISA limit stays at £9,000. The Lifetime ISA limit stays at £4,000 per year (within the £20,000 main allowance) with the 25% government bonus, but from April 2029 a new First Time Buyer ISA replaces it for new savers. Existing LISA holders can keep paying in under the current rules. From 29 October 2026, the LISA withdrawal charge for buying a home above £450,000 falls from 25% to 20%; other unauthorised withdrawals still carry the 25% charge.
Will the savings tax rise apply to ISA interest?
No. ISA interest is completely tax-free regardless of the rate of tax that applies to taxable savings interest. The April 2027 rise to 24% / 44% / 49% applies only to interest earned outside an ISA wrapper, above the Personal Savings Allowance (£1,000 for basic rate, £500 for higher rate, £0 for additional rate taxpayers).
Is anything new for Stocks & Shares ISAs?
Possibly. The government says it will work with the investment industry “to explore a new ISA incentive for people investing in a stocks and shares ISA for the first time.” The detailed design is to be developed with industry, and no amount or start date has been published.
Last Updated: 28 October 2026
Sources: HM Treasury, Budget 2026 (28 October 2026); HM Treasury and HMRC, Budget 2026: Overview of tax legislation and rates; First Time Buyer ISA consultation: government response; HM Treasury Autumn Budget 2025 announcement; HM Treasury ISA reform 2027 anti-circumvention rules factsheet (23 June 2026); HMRC ISA guidance; Treasury Committee response on Cash ISA reforms; MoneySavingExpert Budget coverage; Office for Budget Responsibility Economic and Fiscal Outlook November 2025.
Related guides
- UK Budget 2026: what it changes for savers, investors and pensioners
- The 22% ISA Cash Charge from April 2027: What It Means for Investment-ISA Savers
- First Time Buyer ISA 2026: What the LISA Replacement Means for Savers
- Best Cash ISA Rates in May 2026: a Companion to the £12,000 Under-65 Cap Guide
- High-yield savings accounts explained: how to earn more on your emergency fund (2026)
- Premium Bonds rise to 3.8% from July: are they finally worth it again?
Update history: 28 October back to June 2026
Update, 28 October 2026. The Budget of 28 October 2026 dropped the £12,000 Cash ISA cap for under-65s, so the Cash ISA limit stays at £20,000 from April 2027, and raised the tax rates on savings interest from April 2027 to 24%, 44% and 49%. The article has been rewritten around that decision. Sections built on the cap have been removed or recast: the “6-move strategy”, the cap-based worked example, and the FAQ answers on turning 65 mid-year and on fixed-rate ISAs spanning the cap date. The 22% charge and the transfer ban are now described as not mentioned in the Budget documents. The note below moved here from the top of the article and is unchanged. One correction: the earlier worked example gave a higher-rate saver with £100,000 at 4.5% a savings tax bill of £1,800 at 40%; after the £500 Personal Savings Allowance it is £1,600, and £1,760 at the new 44% rate.
Updated June 2026: The under-65 Cash ISA cap drops to £12,000 from 6 April 2027 (confirmed in the November 2025 Autumn Budget); existing balances are unaffected and S&S-to-Cash transfers are banned for under-65s. The June 2026 anti-circumvention rules add a flat 22% charge on uninvested cash held inside a Stocks & Shares ISA from 6 April 2027.