In her 2025 Autumn Budget, the chancellor announced upcoming changes to ISA rules for savers under 65.
Under the current rules, you can invest up to £20,000 across all the ISAs you hold. However, the government is capping the annual amount you can save in a Cash ISA at £12,000.
If you’re over 65, the current rules will remain in place beyond 2027. But if you’re under 65, they could impact the way you manage your investments. Read on to find out whether the new rules could impact you.
ISAs offer a tax-efficient way to invest, making them a key part of many financial strategies
ISAs are a popular way of saving and investing, as they are tax-efficient. You don’t pay tax on the interest you earn in a Cash ISA, while gains you make in a Stocks and Shares ISA are free of both Income Tax and Capital Gains Tax (CGT).
According to gov.uk, around 12.4 million adult ISAs were subscribed to in 2022/23, with the number of Cash ISAs held rising by 722,000 compared to the previous year. The number of Stocks and Shares ISAs decreased by around 126,000 during the same period.
Under the new proposals, the government is hoping to reverse this trend and incentivise savers to allocate some of their wealth to investments.
The current rules will remain in place for 2026/27. For this tax year, you’ll be able to continue to allocate up to £20,000 across the range of ISA products. This includes a Lifetime ISA (LISA), which has its own £4,000 allowance.
These rules are changing from 6 April 2027 for under-65s
The £20,000 ISA allowance will remain, but new rules will determine how it can be distributed.
- You will only be able to pay a maximum of £12,000 into a Cash ISA (with any further amount allocated for investments).
- If you choose, you can pay more than £8,000 into a Stocks and Shares ISA, but you won’t be able to exceed the £12,000 cap for Cash ISAs.
For example, you could allocate £15,000 into a Stocks and Shares ISA and £5,000 into a Cash ISA. However, you could not use this allocation the other way around.
If you’re over 65, the current rules are remaining in place, and you can distribute your £20,000 as you choose.
Investing your wealth rather than choosing cash savings historically shows higher levels of growth
A Cash ISA operates in a similar way to a standard savings account, where you pay in your money and interest is added.
However, with a regular savings account, you may need to pay tax on interest once it exceeds certain thresholds:
- £1,000 for basic-rate taxpayers
- £500 for higher-rate taxpayers
- Zero for additional-rate taxpayers, who must pay tax on all savings income.
With a Cash ISA, these thresholds don’t apply. A Stocks and Shares ISA, meanwhile, is a way to invest your money into shares, bonds, or unit trusts, and any returns are usually free from Income Tax and Capital Gains Tax (CGT).
The government has introduced these changes to promote increased investment, which it hopes will stimulate the economy.
Cash savings can often simply ‘sit’ in an account, while investments are a much more active wealth management option.
One upside of cash is that it is more instantly accessible, while withdrawing funds from a Stocks and Shares ISA can take up to seven days, or longer in some cases.
Keeping a reserve of instantly available cash can be helpful in case of emergencies, such as a big, unexpected household repair, or to save for a particular expense.
But investing is almost always a more effective way of seeing higher long-term growth.
According to Schroders, putting money into Cash ISAs rather than investing left UK households more than £500 billion worse off than if they’d invested in the stock market in the 10 tax years to April 2023.
For context, this is the equivalent of almost 20% of the UK’s Gross Domestic Product (GDP).
Get in touch
As with most aspects of financial planning, preparation is key. We can help you understand the best way to manage your ISA distribution, in line with your wealth and your financial goals.
Please get in touch by emailing hello@fingerprintfp.co.uk or calling 03452 100 100.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.