Corporate report

ISA reform 2027: anti-circumvention rules factsheet

Published 23 June 2026

What is this about?

At Autumn Budget 2025, it was announced that from April 2027, the Cash ISA allowance would be reduced to £12,000 while the limit for Stocks and Shares and Innovative Finances ISA (non Cash ISAs) would remain at £20,000. The Cash ISA allowance for those aged 65 and over would remain at £20,000.

To support this change, a number of rules will be introduced to ensure the policy achieves its objective of encouraging retail investment and supporting better returns for savers. The new rules will minimise the opportunity for the lower Cash ISA limit to be circumvented, while preserving the flexibility needed for legitimate investment activity within non Cash ISAs.

Key facts

• Cash ISA limit (under 65): £12,000
• overall ISA limit: £20,000
• start date: 6 April 2027

What is changing and why?

In order to protect the integrity of the new cash ISA limit and ensure the reforms achieve their intended aim of encouraging retail investment so savers get more from their investments/savings, the following rules will be introduced to prevent the following:

• subscribe up to £20,000 cash in a non Cash ISA and leave it there long-term earning tax-free interest
• subscribe £20,000 to a non Cash ISA and then transfer those funds to a Cash ISA
• subscribe £20,000 to a non Cash ISA and use the funds to purchase wholly cash-like investments

What this means for savers

The government will introduce the following core measures:

22% Charge on interest paid on cash held in non Cash ISAs

A flatrate charge (22%) on any interest or alternative finance return paid on cash held within a non Cash ISA.

Non Cash ISA portfolios made up of 100% cash-like assets will be non-qualifying investments

Cash-like assets will be eligible for non Cash ISAs, provided that they are partial allocations and do not make up 100% of the investments in an individual’s non Cash ISA account. From April 2027 cash-like assets will be defined as Money Market Funds only and we will require ISA managers to report their market value via the established end of year statistical return. A money market fund is a low-risk, highly liquid mutual fund that invests in short-term debt securities.

What does not count as a cash-like asset?

Common investments held in Stocks and Shares ISAs, such as individual shares, funds, investment trusts, exchange-traded funds and corporate and government bonds, including UK gilts, would not be treated as cash-like assets under this measure. This list is illustrative and does not change the existing rules on which investments can be held in an ISA.

Restrictions on transfers into cash ISAs

Transfers from non Cash ISAs into Cash ISAs will not be permitted. It will remain possible to transfer from a Cash ISA to a non Cash ISA.

Application to those 65 and over

Individuals aged 65 and over will benefit from a higher Cash ISA limit of £20,000, entitlement to which will apply from the start of the tax year in which an individual turns 65. The transfer restriction will be disapplied from this point. The charge on interest earned on cash held in non Cash ISAs and the prohibition on 100% cash-like investments will remain in place.

What this means for savers from April 2027

• the new cash ISA limit for those under 65 will be £12,000. The limits for Innovative Finance ISAs, LISAs and Stocks and Shares ISAs will remain the same
• investors will still be able to hold cash in a non Cash ISA, but any interest paid on the cash holding in a non Cash ISA will be subject to 22% charge
• diversified portfolios including some cash-like exposure are allowed

Next steps

• a technical consultation with industry on the draft legislation will commence shortly
• regulations will be laid in the Autumn and the new rules will come into force from 6 April 2027