The cash ISA as most people know it is on borrowed time. Under draft regulations published by HMRC on 16 July 2026, anyone aged 64 or under will only be able to pay £12,000 a year into cash ISAs from 6 April 2027. The overall £20,000 ISA allowance survives, but for younger savers the remaining £8,000 will only fit inside a stocks and shares or innovative finance ISA. Savers aged 65 and over keep the full £20,000 cash allowance.
That is the headline, and it has produced a predictable mix of outrage and panic. Both are worth examining, because the details of the draft say something different from the headlines: most savers will not hit the new cap at all, the people who will are exactly the ones with the best reasons to hold cash, and there is still a full tax year to plan around it.
What do the draft rules actually say?
The proposal is a technical consultation on The Individual Savings Account (Amendment) Regulations 2026, published on 16 July and now closed. It is draft secondary legislation, which means it is not yet law: the regulations still have to be made before any of this takes effect. The policy direction was announced at Autumn Budget 2025; the July draft supplies the mechanics.
| Now (2026/27) | From 6 April 2027 (draft) | |
|---|---|---|
| Overall ISA allowance | £20,000 | £20,000, unchanged |
| Cash ISA limit, under 65 | £20,000 | £12,000 |
| Cash ISA limit, 65 and over | £20,000 | £20,000 |
| Transfer stocks and shares ISA into cash, under 65 | Allowed | Blocked |
| Existing cash ISA balances | Untouched | Untouched |
| Interest on cash parked inside a stocks and shares ISA | Tax free | A new charge proposed |
Two rows of that table matter more than the headline. The transfer ban means an under-65 cannot route around the cap by subscribing to a stocks and shares ISA and moving the money across, and it also removes a genuinely useful option: shifting invested money into cash when your circumstances change. And the proposed charge on interest earned on cash held inside investment ISAs is there to stop the obvious dodge of leaving the money uninvested. The drafters have thought about the workarounds.
Who actually hits the £12,000 cap?
Fewer people than the outrage suggests. The parliamentary petition against the change makes the point itself: the average annual cash ISA subscription is around £7,000, comfortably under the new cap. If you drip £300 a month into a cash ISA, nothing about April 2027 affects you, and your existing balances are untouched either way.
The people who do hit it are a specific group: savers moving £15,000 to £20,000 a year into cash. That describes someone building a house deposit over two or three years, someone in their fifties and sixties de-risking ahead of retirement, and anyone parking the proceeds of a house sale or inheritance while they decide what to do. Critics, including building societies, have argued this is precisely the money that should not be pushed towards investment risk, because it has a short time horizon and a fixed purpose. The age split has drawn particular fire: a 65-year-old keeps the £20,000 cash allowance while a 65th-birthday-in-May saver does not, which is hard to defend as anything but arbitrary.
The Treasury’s counterargument is that Britain holds too much long-term wealth in cash, and that £12,000 a year of new cash saving is still generous. Both things can be true. The policy is aimed at money that sits in cash for decades; the collateral damage lands on money that sits in cash for three years for a good reason.
What should savers do before April 2027?
The current tax year and the next one, 2026/27 running to 5 April 2027, are the last under the old rules if the draft goes through unchanged. That makes the planning straightforward rather than clever.
If you are a heavy cash saver, use the full £20,000 cash allowance while it exists, and remember the cap restricts new subscriptions, not balances: money already inside cash ISAs stays there, keeps its tax wrapper, and can still be transferred between cash ISAs for better rates. The rates themselves are also cooperating for now. According to Which?, the best one-year fixed cash ISA paid 4.91% in early August, with longer fixes touching 5%, and NS&I lifted its fixed bonds to between 4.82% and 4.85% on 19 August. With the Bank of England holding Bank Rate at 3.75% in July by six votes to three, and the three dissenters voting for a rise, nobody should assume today’s rates survive the winter, a dynamic we covered when we looked at why rates moved the way they did this year.
Two cautions before anyone stuffs every spare pound into cash. First, this is still a draft: consultations produce amendments, and the final regulations could soften the cap, change the age rule or slip the date. Acting on the parts that benefit you anyway, like using an allowance you were going to use, is sensible; reorganising your finances around an unmade law is not. Second, filling a cash ISA is only the right move if cash is the right home for that money. If it is a ten-year pot, the argument for investing it existed before this policy and exists after it. The same logic we applied to the two-year versus five-year fix decision applies here: match the product to your actual time horizon, not to a rule change.
Frequently asked questions
Does the £12,000 cap affect money already in my cash ISA? No. The cap applies to new subscriptions from 6 April 2027. Existing balances keep their tax-free status in full, and transfers between cash ISAs remain allowed, so you can still chase better rates on old money.
Can I put £12,000 in cash and £8,000 in stocks and shares? Yes. The overall £20,000 allowance is unchanged; only the cash portion is capped for under-65s. The draft blocks the reverse route, moving invested ISA money back into cash, for under-65s.
Is this definitely happening? Not yet. The regulations were published in draft on 16 July 2026 and the consultation has closed, but they have not been made law. The direction is clearly signalled, the details could still move.
Why are over-65s exempt? The government’s logic is that older savers legitimately need capital security. Critics call the cliff-edge arbitrary, and it is one of the most challenged features of the draft.
The cash ISA cap is that unusual thing: a policy that will genuinely affect only a minority of savers, wrapped in a headline that alarms all of them. Work out which side of the £12,000 line your actual saving habits fall on, and most of the anxiety resolves itself. If you are under it, carry on. If you are over it, you have until April 2027 and one full allowance year to arrange things on your own terms, which is more notice than savers usually get.
