Measure
The Chancellor has announced that the maximum amount that can be annually invested into a cash Individual Savings Account (ISA) will be reduced from £20,000 to £12,000 from 6 April 2027. This will only apply to investors aged 65 and under.
Currently, there are four types of ISA (cash, stocks and shares, innovative finance, and lifetime) and up to £20,000 can be invested into one account or across multiple accounts (apart from the lifetime ISA, which has an annual limit of £4,000). Investing into an ISA means individuals do not pay tax on interest on cash in an ISA, or on income or capital gains from investments in other forms of ISA.
The overall limit will remain £20,000 but only a maximum of £12,000 can be invested into a cash ISA annually for those aged 65 and under.
The annual investment limits for Junior ISA and Child Trust Fund accounts are frozen at £9,000 until 5 April 2031.
Individual savers aged 65 and under.
These measures will be effective from 6 April 2027.
The changes will be bad news for savers (aged 65 and under) taking advantage of tax-free interest income in a cash ISA in a period of relatively high interest rates. The government has introduced these ISA reforms as part of a ‘wider strategy to develop a retail investment culture’ and will likely want to encourage more savers to invest more into stocks and shares.