The Cash ISA Cut Has Been Scrapped: What It Means for Your £20,000 Allowance

The planned cut to the Cash ISA limit from April 2027 is off. The Budget on 28 October 2026 confirmed you can keep putting the full £20,000 into cash each year, whatever your age. Several of our earlier articles were written when the cut was confirmed policy, and this one explains what’s changed and what to do now.

What we said before, and what’s true now

At the November 2025 Budget, the government announced that from 6 April 2027 savers under 65 could only put £12,000 of their £20,000 allowance into a Cash ISA, with the other £8,000 going into stocks and shares. Our articles on using your full £20,000 before the cut and on 2026/27 being the last full-allowance year were based on that.

The 2026 Budget reversed it. In the Treasury’s words, the government “has decided not to reduce the cash ISA limit, so that it remains at £20,000”. So:

• The overall ISA allowance stays at £20,000 a year.
• You can still put all of it into a Cash ISA from April 2027, at any age.
• The under-65 versus over-65 distinction no longer matters for Cash ISAs.
• Junior ISAs are unaffected, as they always were, and stay at £9,000 a year.

The £12,000 figure also appears in our articles on Cash ISAs vs easy-access accounts, ISA season, ISA vs SIPP and the Marriage Allowance. The rest of what those articles say still holds - only the £12,000 cash cap no longer applies.

If you rushed money into a Cash ISA this year

Nothing is lost. Money you’ve already put in keeps its tax-free status, and filling this year’s allowance early was never a bad move in itself. The difference is that there’s no longer a deadline: you’ll be able to do the same again in 2027/28 and beyond.

If you moved money out of a savings account you’d normally keep easy access to, check you still have a separate, accessible emergency fund. Most Cash ISAs are flexible or allow withdrawals, but fixed-rate Cash ISAs can charge you to get out early.

The part of the Budget that makes ISAs more valuable

The same Budget increased tax on savings interest held outside an ISA. From 6 April 2027, interest above your Personal Savings Allowance will be taxed at:

• 24% for basic-rate taxpayers (20% today, and 22% under the previous plan)
• 44% for higher-rate taxpayers (40% today)
• 49% for additional-rate taxpayers (45% today)

The Personal Savings Allowance itself hasn’t changed: £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and nothing for additional-rate taxpayers. So the higher rates only bite on interest above those amounts - but when they do, they bite harder.

For example, a higher-rate taxpayer with £40,000 in an easy-access account paying 4% earns £1,600 of interest. After the £500 allowance, £1,100 is taxable. At today’s 40% that’s £440 in tax; from April 2027 at 44% it’s £484. In a Cash ISA, it’s nothing.

Who should now think hardest about a Cash ISA

• Higher and additional-rate taxpayers with more than a few thousand pounds in ordinary savings, because their allowance is small or zero.
• Basic-rate taxpayers whose savings outside ISAs are getting close to £25,000. The Treasury’s own figure is that a basic-rate taxpayer would need over £25,000 in savings outside ISAs before paying tax, and frozen thresholds mean more people are moving into the higher-rate band.
• Anyone expecting a lump sum, such as an inheritance or a house sale, that will sit in cash for a while.

If all your interest comfortably fits inside your Personal Savings Allowance, the ISA wrapper still doesn’t save you anything today, and you’re free to pick whichever account pays the best rate. But an ISA you fund now keeps protecting that money in later years, when your savings, interest rates or tax band may be higher.

What about stocks and shares?

The original cut was designed to push savers towards investing. That aim hasn’t gone away: the government says it will work with the investment industry on a new incentive for people opening a Stocks & Shares ISA for the first time, with details still to be designed. Nothing has been announced about how it will work or when.

You don’t need to wait for it. Whether cash or investing suits you depends on how long you can leave the money - for anything you might need within a few years, cash is usually the safer home. For a longer horizon, our article on Stocks & Shares ISAs vs pensions covers the trade-offs.

The bottom line

The deadline is gone, but the reason to use your ISA allowance is stronger than before. You can keep putting up to £20,000 a year into cash tax-free, while interest outside ISAs will be taxed more heavily from April 2027. If you have savings that already produce more interest than your Personal Savings Allowance covers, moving them into a Cash ISA is one of the simplest tax savings available.