Britain’s planned Cash ISA limit does not cut the whole ISA allowance

Britain’s planned Cash ISA change is a split inside the allowance, not a sudden cut to the whole allowance and not a haircut to money already saved.

HM Revenue and Customs published draft regulations on 16 July for technical consultation. They would set the annual Cash ISA subscription limit at £12,000 for people below 65 from 6 April 2027. The consultation closes on 2 August, and HMRC says the amending regulations are due to be laid in the autumn.

That timetable is the first useful boundary. The lower cash limit is not in force this summer. GOV.UK says the maximum a person can subscribe across ISAs in the 2026 to 2027 tax year is still £20,000. The draft regulations have a commencement date of 6 April 2027, the start of the following tax year.

The second boundary is between a Cash ISA and the ISA system as a whole. HMRC’s November 2025 newsletter says the overall annual ISA subscription limit will remain £20,000 until April 2031. Under the planned rule, someone under 65 could put no more than £12,000 of that annual amount into Cash ISAs. The remaining £8,000 would not become a separate cash allowance. It could sit unused or, subject to the rules and a person’s circumstances, be subscribed to another ISA type.

That is a description of the wrapper, not an instruction to invest. Cash savings and investments do different jobs and carry different risks. A tax limit does not decide whether market exposure, ready access, a fixed rate or no new subscription at all is appropriate for a particular person.

Age creates a clear exception. The consultation says the Cash ISA limit would remain £20,000 for investors aged 65 or over. HMRC’s June newsletter adds a precise tax-year detail: the higher limit would apply from the start of the tax year in which someone turns 65. The draft legal text expresses the lower limit as applying when the account holder is 64 or under at the end of that tax year.

The word “subscription” matters too. The proposal limits new money paid into Cash ISAs during a tax year. The documents do not describe confiscating or reducing existing Cash ISA balances. A large balance built in previous years is not the same thing as a new annual subscription, although provider terms, maturity dates and current transfer rules can still affect what happens to a particular account.

The less obvious change is a one-way gate around transfers. For an account holder below 65, the draft package would prohibit transfers from a stocks and shares ISA or Innovative Finance ISA into a Cash ISA. A transfer in the other direction, from cash to a non-cash ISA, would remain possible. HMRC says this is intended to stop the lower Cash ISA subscription limit being bypassed.

That transfer restriction is wider than a rule about fresh deposits. It reaches money already inside the ISA system when someone wants to move it between account types. It also makes the age exception consequential: HMRC says the restriction would be disapplied from the tax year in which the person turns 65.

The government is also trying to close cash-like side doors inside non-cash ISAs. The newsletter says a portfolio made entirely of cash-like investments would not qualify, with money market funds initially listed as the relevant cash-like asset. Partial allocations would still be allowed. Where an ineligible holding is identified, managers would be expected to support the investor in selling and reinvesting within the wrapper or removing it from the ISA.

Ordinary cash held temporarily inside a stocks and shares or Innovative Finance ISA is treated separately. The draft allows cash for investing or paying account fees, but interest or an alternative finance return on that cash would face a charge. HMRC summarises it as a flat 22% charge, matching the planned savings basic rate for 2027 to 2028. The legal draft places the payment duty on the account manager and says the investor cannot reclaim that amount.

This is technical policy with an everyday consequence. A saver could see the same £20,000 headline allowance while facing a narrower Cash ISA lane, a blocked transfer back from investments to cash and a charge that discourages long-term cash parking inside a non-cash wrapper. Those details matter more than the comforting shorthand that the total allowance is “unchanged”.

They also remain future details. The government has made the policy decision, but the instrument is still in draft and the current tax year still runs under today’s rules. The clean reading is therefore chronological: £20,000 remains the current overall ISA subscription limit; the proposed cash split and related gates begin from 6 April 2027 if implemented as drafted.