ISA changes ahead – what they could mean for you

From 6 April 2027, under-65s will face a £12,000 yearly limit on Cash ISAs, while the overall £20,000 ISA allowance stays in place. New HMRC rules may also limit how cash is held in other ISAs. These changes are designed to encourage long-term investing but could make financial planning feel more complex. We’re here to help.

A shift in how ISA allowances work

ISAs have long given savers and investors a straightforward way to keep more of their returns, thanks to their tax-free status¹. Right now, you can put up to £20,000 a year into ISAs and divide it across Cash ISAs, Stocks & Shares ISAs and Innovative Finance ISAs however you choose.
However, the government has signalled a clear change in direction.
From 6 April 2027, people under 65 will only be able to place up to £12,000 each year into Cash ISAs². The full £20,000 allowance will still be available – but only if some of that money is directed towards investments instead.

The aim is to encourage a longer-term approach, with more people looking beyond cash savings.

New limits on holding cash within investment ISAs

• Alongside the reduced Cash ISA limit, HMRC is introducing measures to stop people simply holding cash in other types of ISAs².

These proposals include:

• A 22% charge on interest earned on cash holdings held in Stocks & Shares or Innovative Finance ISAs¹
• Restrictions on transferring funds from these ISAs back into Cash ISAs
• Rules limiting the extent to which these ISAs can be fully held in cash-like assets

In essence, the changes are designed to keep each type of ISA focused on its intended purpose. Cash ISAs would remain the main home for cash savings, while Stocks & Shares and Innovative Finance ISAs would stay focused on investing, rather than acting as an alternative home for cash.

It’s also worth noting that these rules won’t apply in the same way to those aged 65 and over, recognising that investment risk may be less suitable later in life.

A mixed response from the industry

While the intention is to boost investment and support economic growth, the reaction from across the industry has been cautious³.

Some commentators have raised concerns that:

• Adding age-based rules could make ISAs harder to understand
• Introducing tax within ISAs could reduce their appeal
• Increased complexity might discourage people from using them at all

Research from the lang cat consultancy suggests these changes could unintentionally deter the very behaviour they’re meant to promote⁴.

What this means for your planning

Some of the detail is still being finalised, and the Government is consulting on how the new rules will apply. So, while the direction of travel is clear, the final position may still change.

The key takeaway is that the ISA landscape is evolving – and making the most of your allowances may require a more considered approach in future.

At Partners Wealth Management, we believe a Stocks & Shares ISA is best used for investing. Cash can play a role in a portfolio, but usually only for a short time and for a clear reason. For example, it may be held while waiting to make an investment, meet a planned expense or provide a short-term buffer.

Because of this, we don’t expect these changes to affect most of our clients. Where cash is held within an ISA, it is usually there as part of a planned strategy and not as a long-term home for savings.

If you have any questions or would simply like to talk things through, we’re here whenever you need us. Please get in touch.

This article is for information purposes only and doesn’t constitute financial, investment or tax advice. Tax treatment depends on individual circumstances and may change. Investments can fall as well as rise in value, and you may get back less than you invested.

Sources

¹ HMRC Tax-free savings newsletter 19 – November 2025 – GOV.UK
² HMRC ISA reform 2027: anti-circumvention rules factsheet – GOV.UK
³ Reeves’ new tax charge on cash ISAs faces fierce industry backlash and Cash Individual Savings Account: Government Response
⁴ The lang cat consultancy, response to HMRC ISA reform proposals, June 2026.