Andy Burnham Backs Cut to Under-65 Cash ISA Limit to £12,000 and New Charge on Other ISA Cash

Savers aged under 65 will see the amount they can shelter in tax-free cash ISAs cut by 40 per cent to £12,000 a year from 6 April 2027, under regulations the Government has already put before Parliament. The overall ISA allowance will remain at £20,000, but younger savers who want to use it in full will have to put the remaining £8,000 into other types of ISA, such as stocks and shares products, subject to existing rules. Savers aged 65 and over will keep a £20,000 annual limit for cash ISAs.

The change applies to new contributions only. It does not cap the total balance already built up in cash ISAs and does not make earlier savings taxable or require withdrawals. Money already saved in previous tax years will stay within the ISA wrapper, and any interest on those past contributions will continue to be paid tax-free in line with current rules.

Andy Burnham Backs New ISA Cash Limit

From the same date, a flat-rate 22% charge will apply to interest paid on cash held within stocks and shares ISAs and innovative finance ISAs.

The charge is intended to stop savers avoiding the lower cash limit by holding cash in other types of ISA. It will apply whether or not a saver has used their full £12,000 cash ISA allowance. ISA managers will account for the charge to HM Revenue & Customs (HMRC), so savers will not need to declare the interest themselves or take any extra steps on their tax returns.

The Government has also introduced restrictions on certain transfers into cash ISAs. It has not removed all cash-like holdings from other ISAs. Money market funds, for example, can still be held in stocks and shares ISAs, subject to rules covering portfolios that are wholly cash-like and to any wider limits set out in HMRC guidance.

The 22% rate has been set as a single flat figure, rather than being aligned with income tax bands. The intention is that the charge should apply in a consistent way across different ISA providers and that it should be straightforward for firms to operate. Further technical detail is expected to be covered in accompanying guidance for ISA managers.

What Burnham's Support Means for Under-65 Savers

The most direct impact is on under-65s who currently use the full £20,000 allowance in cash. From April 2027, they will need to decide whether to put up to £8,000 of new contributions into non-cash ISAs, accepting that investments can fall as well as rise in value.

Younger savers who are wary of stock market risk may look at a wider spread of ISA options, including diversified funds within stocks and shares ISAs or innovative finance ISAs that offer different levels of risk and return. Some may also choose not to use their full ISA allowance if they are unwilling to move away from cash.

Older savers keep the higher cash limit, but they are not exempt from the 22% charge on interest paid on cash held within non-cash ISAs. Anyone over 65 who holds significant cash inside a stocks and shares ISA, rather than in a cash ISA, may therefore also see a change in the way that interest is treated.

Some critics say the changes could disadvantage savers who prefer the security of cash. The Government says its aim is to encourage greater retail investment and improve long-term returns for individuals who are able to take on investment risk over time.

Timeline, Burnham's Stance and What Happens Next

The reduction in the cash ISA limit was announced at the November 2025 Budget. Measures to prevent savers bypassing it were published in June 2026.

HMRC said on 29 September that the amending regulations had been laid before Parliament on 14 September and would come into force on 6 April 2027. This means the broad shape of the regime is already set, even though some operational details for ISA managers are still expected to emerge.

The Budget is due on Wednesday 28 October. Any further changes announced there will be separate from the provisions already set out in the regulations. Savers should consult HMRC guidance for the detailed rules governing each type of ISA and how cash holdings are treated, and may also wish to take independent financial advice on how best to structure their savings before the new limits start to apply.