From 6 April 2027 the cash ISA stops being somewhere a saver can put a whole year’s £20,000. Under-65s will be able to pay only £12,000 a year into cash, money in stocks and shares ISAs will no longer be allowed to move back into cash ISAs, and interest earned on cash left inside a stocks and shares ISA will face a flat 22% charge.
The rules are set by the Individual Savings Account (Amendment) (No. 2) Regulations 2026, made on 10 September 2026, and summarised in HMRC’s June 2026 savings newsletter. The £20,000 overall allowance does not change, so anyone who wants to keep using all of it will need to put at least £8,000 a year into something other than cash.
The change lands on a nation of cash savers. Savers paid £95.6bn into cash ISAs in 2024 to 2025, more than two and a half times the £37.2bn paid into stocks and shares ISAs, and cash ISAs made up 64% of the accounts subscribed to, according to provisional HMRC statistics published on 16 September 2026 (HMRC, Table 9.4). The FCA found that 61% of people with more than £10,000 in investible assets held at least three quarters of it in cash rather than investments (Financial Lives survey, data as at May 2024, published 16 May 2025).
Below: what changes, who it affects and what that money could become, asset by asset, with the risks and the tax. We explain the choices; we do not make them for you.
What changes on 6 April 2027
The cash ISA changes were announced at the Budget on 26 November 2025 (HMRC newsletter 19) and published as draft amendments to the Individual Savings Account Regulations 1998, on which HMRC ran a technical consultation from 25 June to 2 August 2026. They are now law.
The Treasury made the Individual Savings Account (Amendment) (No. 2) Regulations 2026 on 10 September 2026 and laid them before the House of Commons on 14 September; they come into force on 6 April 2027. HMRC’s September 2026 newsletter lists the changes made after consultation: the money market fund restriction will not apply to Junior ISAs, and a proposed rule on the purpose for which cash is held in investment ISAs was dropped.
| Measure | What the regulations say | Source |
|---|---|---|
| Cash ISA limit | £12,000 in any tax year in which you are 64 or under at the end of that year | Regulation 4ZA(1ZA) |
| Overall ISA limit | Stays at £20,000 until April 2031 | HMRC newsletter 19 |
| Aged 65 and over | £20,000 cash limit from the start of the tax year in which you turn 65 | HMRC newsletter 22 |
| Transfers | No transfers from stocks and shares or innovative finance ISAs into cash ISAs unless you are 65 or over at the end of the tax year. Cash ISA to stocks and shares ISA transfers remain allowed | Regulation 21(4ZA) |
| Cash inside investment ISAs | Flat 22% charge on interest, paid to HMRC by the ISA manager, at every age | HMRC newsletter 22 |
| Money market funds | Allowed in a stocks and shares ISA, but not as 100% of the investments other than cash | Regulation 7(10A) |
| Junior ISAs | Neither the interest charge nor the money market fund restriction applies; the £9,000 Junior ISA limit stays until April 2031 | Regulation 2D; HMRC newsletter 19 |
Who it affects
The new limit bites on anyone under 65 who pays more than £12,000 a year into cash ISAs. HMRC’s income tables give a sense of scale: in 2023 to 2024, about 3.5 million people who paid only into cash ISAs put in more than £12,000, and 2.6 million of them paid in the full £20,000 (HMRC, Table 9.7). That count includes over-65s, who keep the £20,000 limit, and leaves out people who split their subscriptions, so it is a guide to scale rather than a count of those affected.
The rules change what you can pay in and move, not what you already hold: nothing in the regulations or HMRC’s newsletters requires existing cash ISA money to leave. Over-65s keep the £20,000 cash limit and the right to transfer into cash, but HMRC’s June newsletter says the 22% charge and the ban on wholly cash-like portfolios still apply to them. That is a change from the Budget-day summary, which said the anti-avoidance rules would apply to investors under 65 (HMRC newsletter 19).
Cash outside ISAs gets more expensive to hold as well. From 6 April 2027 the savings basic, higher and additional rates of income tax rise to 22%, 42% and 47% across the whole UK, while the starting rate for savings and the Personal Savings Allowance stay as they are (HMRC technical note). The allowance is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and nothing for additional-rate taxpayers (GOV.UK).
The transfer ban, in practice
Today an investor can move a stocks and shares ISA back into a cash ISA. Under the regulations, from 6 April 2027 a stocks and shares or innovative finance ISA can be transferred only to another stocks and shares ISA, an innovative finance ISA, a Lifetime ISA, or to a cash ISA if the holder is 65 or over at the end of the tax year (regulation 21(4ZA)). HMRC says the package is designed to stop the lower cash limit being circumvented (HMRC). For under-65s, money paid into a stocks and shares ISA stays on the investment side of the ISA system or leaves it as a withdrawal.
The 22% charge on cash inside a stocks and shares ISA
Investment ISAs usually hold some cash. From 6 April 2027 any interest paid or credited on cash held in a stocks and shares or innovative finance ISA will face “a flat-rate charge of 22% to discourage long-term cash holdings” (HMRC). Under the regulations, the ISA manager pays HMRC a flat rate charge at the savings basic rate for the year, no later than six months after the end of the tax year, and no repayment can be made to the investor (regulation 22A).
On a hypothetical £10,000 of cash earning 3.5% a year inside a stocks and shares ISA, £350 of interest would carry a charge of £77, leaving £273. The pot it applies to is not small: stocks and shares ISAs held £22.4bn of cash on deposit at 5 April 2025 (HMRC, Table 9.6). Our explainer on the 22% charge covers what counts as cash and what HMRC has not yet said.
Money market funds and the “cash-like” test
The obvious alternative to cash inside an ISA is a money market fund: a fund that invests in short-term assets and aims for returns in line with money market rates or to preserve the value of the investment (Money Market Funds Regulation, Article 1). The new rules allow it, up to a point.
HMRC says cash-like assets held as part of a portfolio will be permitted, but “wholly cash-like portfolios will be ineligible assets”, and the list of cash-like investments will initially be limited to money market funds (HMRC). The regulations say that “100% of the value of the investments, other than cash, held under the stocks and shares component, must not be money market funds” (regulation 7(10A)).
When a wholly cash-like holding is found, HMRC expects the manager to help the investor sell and reinvest inside the ISA or take the asset out. HMRC says it will publish updated ISA manager guidance before 6 April 2027, and the government will keep the definition of money market funds under review (HMRC newsletter 23). We set out the detail in money market funds and the cash-like test.
What the money could become
None of the options below is a like-for-like replacement for an instant-access cash ISA. Each gives up something, whether certainty of value, access, protection or tax treatment.
Gilts held directly
A gilt is a sterling bond issued by HM Treasury. A conventional gilt pays a fixed coupon in two equal payments a year and repays its face value at maturity, with prices quoted per £100 of face value (DMO). The DMO says the British government “has never failed to make interest payments or principal payments on gilts as they fall due”. Gilts can be held in a stocks and shares ISA (GOV.UK). Outside an ISA, coupons are taxed as savings income but gains are exempt from capital gains tax (GOV.UK; TCGA 1992, section 115), which is why gilts with low coupons, priced below £100, appeal to taxpayers.
Bank of England staff estimate that private investors hold less than 4% of gilts in issue, with over 80% of their holdings in the lowest quartile of coupons and holdings concentrated in gilts maturing within three years (Bank Underground). Gilts held inside ISAs rose from £1.08bn at 5 April 2023 to £4.41bn at 5 April 2025 (HMRC, Table 9.6). The main risk is price: a gilt sold before maturity fetches the market price, which falls when yields rise. Behind a gilt stands the government’s promise to pay, not deposit protection. See how to buy gilts.
Money market funds
Marketing rules require these funds to state that they are not a guaranteed investment, that they differ from deposits because the principal can fluctuate, and that the investor bears the risk of loss (Article 36). The FSCS can pay up to £85,000 when an authorised firm fails and is short of the assets it holds for investors, but not for poor performance (FSCS).
Money market funds were UK fund investors’ best-selling asset class in 2025, taking a record £6.9bn (Investment Association). Outside an ISA, UK authorised funds with more than 60% of their investments in qualifying assets, such as deposits and debt, pay interest distributions, taxed as interest (AIF Tax Regulations; regulation 18).
Bond funds
A bond fund holds many gilts or company bonds. Unlike a single gilt it has no maturity date, so no day on which a known sum falls due; its value moves with bond prices and the credit quality of its holdings. Distributions from funds that pass the same 60% test are taxed as interest. Gains on fund units held outside a wrapper can be liable to capital gains tax (GOV.UK), at 18% or 24% above the £3,000 annual exempt amount for 2026 to 2027 (GOV.UK). Our desk cornerstone, bonds explained, covers duration and credit risk.
Equity funds
Equity funds own company shares, which have no fixed income and no repayment date. Their value can fall as well as rise and can stay below the price paid for long periods; that is the trade for growth that investors hope for but cannot count on. Inside an ISA, income and gains are tax-free (GOV.UK). Outside one, dividends above the £500 allowance are taxed at 10.75%, 35.75% or 39.35% from 6 April 2026 (HMRC), and gains at 18% or 24% above £3,000.
NS&I and Premium Bonds
NS&I is backed by HM Treasury (NS&I). Premium Bonds pay no interest. Instead, a prize fund with an annual rate of 4.35%, variable, as at 9 October 2026, pays tax-free prizes in a monthly draw, with odds of 21,000 to 1 for each £1 Bond and a maximum holding of £50,000. The rate is an average across all Bonds: 80% of the prize fund goes on £25, £50 and £100 prizes (NS&I prize table, October 2026), so most holders receive less than the headline. We compare it with gilts and savings in Premium Bonds against gilts.
Cash outside an ISA
Deposits are protected by the FSCS up to £120,000 per eligible person, per bank, building society or credit union (banks that share a licence count as one), a limit that rose on 1 December 2025 (FSCS). Interest above the Personal Savings Allowance is taxed at the higher savings rates from 6 April 2027.
The options side by side
| Option | What you own | Main risks | Tax outside an ISA, 2027 to 2028 | In an ISA after 6 April 2027 | Protection |
|---|---|---|---|---|---|
| Cash ISA | A bank or building society deposit | Inflation; variable rates can fall | Not applicable | Up to £12,000 of new money a year if under 65 | FSCS up to £120,000 per banking licence |
| Cash outside an ISA | A deposit | Inflation; variable rates can fall | Interest above the allowance at 22%, 42% or 47% | Not applicable | FSCS up to £120,000 per banking licence |
| Cash inside a stocks and shares ISA | Cash held by the ISA manager | Inflation | Not applicable | Interest charged at 22% | Ask the ISA manager how the cash is held |
| Gilts held directly | A loan to the UK government | Price falls if sold before maturity; inflation for conventional gilts | Coupons taxed as savings income; gains free of CGT | Allowed | The government’s promise to pay |
| Money market funds | Units in a fund of short-term debt | Value can dip; charges | Interest distributions taxed as interest; CGT may apply to gains | Allowed, but not as 100% of non-cash investments | FSCS up to £85,000 if an authorised firm fails with a shortfall; not for performance |
| Bond funds | Units in a fund of bonds | Falls when yields rise; credit losses; no maturity date | Interest distributions taxed as interest; CGT may apply to gains | Allowed | As for money market funds |
| Equity funds | Units in a fund of shares | Large and lasting falls | Dividends at 10.75%, 35.75% or 39.35% above £500; CGT at 18% or 24% above £3,000 | Allowed | As for money market funds |
| Premium Bonds | NS&I Bonds entered in a prize draw | Prizes vary; most holders earn less than the prize fund rate; inflation | Prizes tax-free | Not an ISA product | Backed by HM Treasury |
What to watch before April
- HMRC’s updated ISA manager guidance, which it says it will publish before the changes take effect on 6 April 2027 (HMRC newsletter 23), and the formal response to the technical consultation, which the consultation page still lists as under analysis as at 9 October 2026 (HMRC).
- The Budget on 28 October 2026, when the OBR publishes its next forecast.
- The next Bank of England decision on 5 November 2026. Bank Rate was held at 3.75% on 17 September 2026, with three of the nine committee members voting for 4% (Bank of England).
The 2026 to 2027 tax year, the last under the old cash rules, ends on 5 April 2027.
