Upcoming ISA Rule Changes
Chancellor Rachel Reeves announced significant ISA reforms at the Autumn Budget 2025, effective April 6, 2027.
The annual cash ISA limit for under-65s will drop to £12,000, requiring savers to allocate the remaining £8,000 of the £20,000 allowance into stocks and shares or innovative finance ISAs.
Craig Rickman, personal finance editor at interactive investor, notes that around 15 million ISA accounts were opened in 2023-24, underscoring the broad impact.
The changes aim to drive domestic stock market investment and discourage low-yield cash holdings.
Anti-circumvention rules include a 22 percent tax charge on interest from cash held in non-cash ISAs and a ban on under-65 transfers from stocks to cash ISAs.
Non-cash ISA portfolios entirely in money market funds will be classified as non-qualifying investments, subject to consultation.
Individuals turning 65 before April 5, 2028, maintain full cash ISA capabilities for the 2027-28 tax year.
The full cash allowance applies from the start of the tax year in which the saver turns 65.
Rickman advises savers to understand the new rules to avoid accidental limit breaches and tax penalties.
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“Otherwise, you could overshoot the annual limits, end up paying a tax charge, or break eligibility rules,” he says.
