The annual Cash ISA deposit limit will fall to £12,000 from April 2027 under Andy Burnham. Over-65s keep their £20,000 cash allowance, while existing deposits remain unaffected
Households with savings above £12,000 are set to be hit by a new Cash ISA rule that’s due to come into force under new Prime Minister Andy Burnham. Former Chancellor Rachel Reeves unveiled changes to Cash ISAs after years of speculation around cuts to the tax-free savings accounts, in what she called a bid to push Britons towards investing in the stock market instead of hoarding cash reserves.
Since former Prime Minister Sir Keir Starmer stood down, the Chancellor was ousted from her role, but her replacement John Healey will forge ahead with Reeves’ overhauls.
Under the fresh rules, from next April, savers will only be allowed to put £12,000 into Cash ISAs, slashed from the existing £20,000 ceiling. Those with savings beyond £12,000 may be hit with tax bills on savings interest for any sum exceeding the Personal Savings Allowance.
The Personal Savings Allowance allows savers to pocket £1,000 in interest without paying tax, though this drops to £500 for earners above £50,270 and £0 for those earning over £125,140. Those earning interest on cash held outside ISAs will therefore face tax bills, reports the Express, reports Yorkshire Live.
One significant exemption applies to state pensioners. Over-65s – not all of whom are state pensioners, given that the state pension age is now 66, climbing to 67 – will be handed a special exemption, enabling them to keep the full £20,000 annual limit.
In her Autumn Budget, Reeves revealed a long-awaited and widely-feared cut to Cash ISAs, despite resistance from leading financial campaigners such as Martin Lewis. Nevertheless, the MSE founder praised the exemption for older people, which he had been pushing for.
Under the new rules, savers will still be able to put away £20,000 a year into tax-free ISAs as they do now, but Cash ISAs will be limited to just £12,000, rather than the full £20,000. Those wanting to make use of the complete £20,000 allowance will need to put the remaining £8,000 into a Stocks and Shares ISA instead.
Cash ISAs, which allow savers to put money aside and protect it from tax each financial year, have faced growing criticism. At one point, rumours suggested the cap could be set as low as £10,000.
Online platforms are to be created, designed “to help people invest” in the UK, Rachel Reeves announced as she set out changes to the ISA system. The Chancellor told MPs: “From April 2027, I will reform our ISA system, keeping the full £20,000 allowance while designating £8,000 of it exclusively for investment, with over-65s retaining the full cash allowance.
“And thanks to our changes to financial advice and guidance, banks will be able to guide savers to better choices for their hard-earned money. Over 50% of the ISA market – including Hargreaves Lansdown, HSBC, Lloyds, Vanguard and Barclays – have signed up to launch new online hubs to help people invest here in Britain.”
Those who usually save more than this will need to explore other options before the changes come into effect, such as considering Stocks and Shares ISAs, although any existing deposits won’t be affected.
Newly appointed Prime Minister Andy Burnham will be in charge when these new rules are introduced, starting from April 2027. Mr Burnham has also committed to keeping the state pension triple lock in place and will uphold Reeves’ Income Tax exemption for state pensioners.