Published 28 October 2026 | By FJP Investment Editorial Team

Published 28 October 2026 | By FJP Investment Editorial Team

The cash ISA allowance will remain at £20,000 from April 2027, following the government’s decision in Budget 2026 to cancel the planned reduction. The Treasury Committee confirmed the announcement on 28 October.

For savers who had been preparing for a lower cash limit, the decision preserves more room for tax-free saving. It comes alongside higher tax rates on savings income outside ISAs, making the distinction between contributions, interest and tax allowances particularly useful.

Is the cash ISA allowance being cut to £12,000?

The previous policy would have reduced the annual cash ISA limit to £12,000 for people under 65 from 6 April 2027. Older savers would have retained £20,000.

The Budget reverses that planned cut. HMRC’s implementation document says the government will retain £20,000 for adult cash ISA savers, with secondary legislation planned for November 2026.

This is a confirmed policy announcement; the necessary implementing regulations still have to follow.

How does the £20,000 ISA allowance work?

Under the ISA framework, £20,000 is the total amount of new money an eligible adult can subscribe across their ISAs during a tax year. It is not a separate allowance for every account.

For example, £14,000 paid into a cash ISA and £6,000 into a stocks and shares ISA would use the whole £20,000 allowance. Paying £20,000 into each would exceed it.

The allowance limits new subscriptions, not the total balance accumulated over several years. Interest earned inside the account does not use up new subscription allowance. The tax year runs from 6 April to 5 April.

What happens to savings tax from April 2027?

The Budget’s rates table sets out these savings-income rates:

Savings tax band	2026/27 rate	Announced 2027/28 rate
Basic	20%	24%
Higher	40%	44%
Additional	45%	49%

The new rates are planned from 6 April 2027, subject to Finance Bill legislation. Today’s announcement adds two percentage points to the previously planned 22%, 42% and 47% rates. Compared with the current year, the total increase would be four percentage points.

These are rates on taxable savings income, not charges on the capital in a savings account. They do not apply to interest sheltered inside an ISA.

How much savings interest can you receive tax-free?

The Personal Savings Allowance generally permits basic-rate taxpayers to receive £1,000 of savings interest without tax, and higher-rate taxpayers £500. Additional-rate taxpayers have no Personal Savings Allowance.

People with lower other income may also benefit from unused Personal Allowance or the starting rate for savings. The starting-rate band can cover up to £5,000, but it reduces as other income rises.

HMRC considers interest across accounts together. Opening several taxable savings accounts does not create a new allowance for each one.

Worked example: £2,000 of annual interest

Suppose someone receives £2,000 of savings interest outside ISAs, has used their Personal Allowance against other income and cannot use the starting rate for savings. Assume the interest stays entirely within the stated tax band.

Illustrative taxpayer	Interest taxable after savings allowance	Tax at current rate	Tax at announced 2027/28 rate
Basic rate	£1,000	£200	£240
Higher rate	£1,500	£600	£660
Additional rate	£2,000	£900	£980

These calculations illustrate the rate change. Actual liability depends on total income, allowances and whether interest crosses a tax-band boundary.

Does keeping the allowance make every cash ISA better?

The tax wrapper is one part of the comparison. A saver’s result also depends on the interest rate, access conditions, withdrawal restrictions and any transfer or early-exit charges.

Someone whose ordinary savings interest is already tax-free may receive no immediate tax saving from an ISA. Someone who exceeds their allowances may face a different comparison. The relevant figure is the interest retained after any tax, assessed alongside the account’s terms.

The Budget announcement does not determine which account or investment suits a particular person.

Can you transfer an existing ISA?

HMRC’s transfer guidance explains how to move ISA money through the receiving provider’s transfer process. Existing savings transferred correctly can retain their ISA treatment.

Withdrawing money into a normal bank account and paying it back elsewhere is different: it can affect allowance use and tax treatment. Provider restrictions and charges should also be checked before moving an account.

Who can open an adult ISA?

Eligibility normally requires being at least 18 and UK resident, with specified exceptions for certain Crown servants and their spouses or civil partners. The Budget’s retention of the cash limit does not remove the underlying eligibility rules.

What should savers check next?

The immediate policy position is clear: the planned cash ISA cut has been cancelled, while higher savings-income tax rates are announced for April 2027. The ISA regulations and Finance Bill will implement the relevant changes.

When reviewing savings, distinguish money already sheltered in an ISA, unused annual contribution room and taxable interest outside it. Those figures answer different questions and should not be treated as interchangeable.

This article is for general information and is not financial, investment, pension, legal or tax advice. FJP Investment acts solely as an introducer and does not provide personalised advice, assess suitability, endorse investments, manage investments or hold client money. Tax treatment depends on individual circumstances and may change.