New cash ISA rules for 2027

18 July 2026

ISAs are getting more complicated - here’s what is changing.

The government wants to encourage retail investors to invest in growth rather than just save cash ¹. So it is changing some of the rules.

Cash ISA limit reduced to 12k, and you’ll pay tax on interest in non Cash ISAs

Here’s a quick summary:

• The overall ISA contribution limits of £20,000/year for over 18s aren’t changing.
• But if you’re under 65, the Cash ISA will be limited to £12,000 per year. If you’re 65 or older ², it stays at £20,000. (For the non Cash ISAs, the limits stay at £20,000 for Stocks and Shares ISAs, Innovative Finance ISAs, and LISAs, and £9,000 for Junior ISA.)
• If you hold cash in any non Cash ISA, you’ll pay tax of 22% (!) on any interest the cash earns you. That tax is only on the interest, not on the value of the cash or other assets in your ISA.
• However you can still hold “cash like” assets like money market funds in your stocks and shares ISA, as long as the value of the portfolio held in money market funds is under 100% ³.
• ISA transfers will become one way for people under 65, from cash ISA to other ISA only.
• These changes start from 6 April 2027, and they will not affect money you already have in your ISA(s).

More detail on all of this in HMRC’s ISA reform 2027: anti-circumvention rules factsheet and Tax update 2026: simplification, modernisation and fairness summary.

There’s less change if you’re over 65

If you are over 65, or are turning 65 during the 2027-28 tax year, these rule changes won’t affect you as much. Your Cash ISA limit stays at £20,000, and ISA transfers will remain two way.

But the tax charge on interest earned on cash held in non Cash ISAs, and the prohibition on 100% cash-like investments will both apply if you’re over 65.

For everyone else…

You can still hold cash in non Cash ISAs, but will pay tax on interest

If you want to hold as much cash as possible in your ISAs, then be ready to account for and then pay tax on interest if you’re holding the cash in a non Cash ISA.

Hold money market funds in non Cash ISAs to avoid tax on interest

If you want to pay as little tax as possible, keep your cash in Cash ISAs.

And in a non Cash ISA you can hold a money market fund without incurring any tax on interest, “provided that they are partial allocations and do not make up 100% of the investments in an individual’s non Cash ISA account”. CSH2.L is a popular UK money market fund.

Bigger returns require more risk than cash

And in non Cash ISAs, you can invest in other things too: individual shares, funds, investment trusts, exchange-traded funds and corporate bonds, government bonds including UK gilts, etc. If you want more growth, consider investing in these - you know, more risk, more reward. (I don’t know about your personal situation, so this is not finance advice.)

Anyway, none of this changes the bigger picture: saving for retirement or a rainy day is important, and ISAs are one way to do that.

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1. More than 14m people in the UK have about £360 billion in Cash ISAs, vs total asset value in all ISAs of 872 billion, from HMRC’s Commentary for Annual savings statistics: September 2025. More Cash ISA stats in the Treasury Committee’s Cash ISA report, Oct 2025. The aim of encouraging investment is solid but the policy feels a bit incoherent: government wants to “develop a retail investment culture” but is also making investment and saving more complicated. And a cynic might fear that this installs the institutional wiring for more taxes in the ISA space in future.↩︎

2. For ISAs, “over 65” means “in the tax year during which you turn 65 (and the tax years after that one)”.↩︎

3. So this means that if you want to hold cash like assets in a non Cash ISA, you could have 99% in money market funds and 1% in stocks, something like that. Individual shares, funds, investment trusts, exchange-traded funds and corporate and government bonds, including UK gilts are not considered to be either cash or cash-like assets, so they shouldn’t incur the 22% tax on interest.↩︎