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How much you can save into your cash ISA each year will be cut from £20,000 to £12,000 from April 2027, the Chancellor Rachel Reeves has confirmed – though only if you’re under 65, a caveat MoneySavingExpert.com Martin Lewis had called for. The change was announced on Wednesday 26 November as part of the Government’s Autumn Budget.
A number of other savings-related announcements were also made – Lifetime ISAs (LISAs) are to be scrapped and tax on savings, dividends and property is to rise – which you can read more on below.
Cash ISA limit to be reduced to £12,000 from April 2027
An ISA is simply a savings account where you never pay tax on the interest you earn. Currently, you are able to contribute up to £20,000 each tax year into a cash ISA (or you can split this allowance between other types of ISA).
However, the Chancellor has confirmed the cash ISA limit will be reduced to £12,000 a year from April 2027. The Government hopes the change – the first cut to the cash ISA allowance since 2017 – will encourage more people to invest in stocks and shares instead.
Here are the key need-to-knows from April 2027:
Aged 65 or older? There will be no change. The £20,000 cash ISA contribution limit will CONTINUE to apply.
Aged 64 or under? Your cash ISA limit will fall to £12,000. This will only apply to new contributions you make from April 2027. It won’t have any impact on savings you’ve already contributed to a cash ISA up until this point.
There’s NO change to the annual contribution limit to stocks & shares ISAs. This will remain at £20,000.
The OVERALL annual ISA contribution limit will remain at £20,000, regardless of age. So you’ll continue to be able to contribute £20,000 across different ISAs in one tax year.
Martin Lewis: ‘This isn’t as bad as it could’ve been’
Martin published his immediate reaction to the announcement on X:
Martin Lewis
MSE founder & chair
There’s logic in here based on the policy aims. While I would’ve preferred a carrot, not stick approach – this isn’t as bad as it could’ve been, £12,000 per year is still a reasonable whack for many people.
The stated aim was not to raise revenue, but to encourage young people to invest rather than save – both for the economy, but also because on average it outperforms.
When I met the Chancellor on this a few weeks ago, I pointed out that a blanket cut to the limit would be perverse; to cut cash ISA limits for older people to encourage younger people to invest wouldn’t work.
So, the carve out for over-64s makes total sense and I’m pleased she listened.
What needs to happen along with this is better investment education, easier access to guidance, and better investment incentives for young people.
The Government has long trailed its intention to reform cash ISAs. It’s previously said it recognises the importance of cash savings, but also wants to see consumers invest more. On 13 November, Martin wrote on X:
Martin Lewis
MSE founder & chair
If future cash ISA annual limits are to be cut as is being suggested to ‘help encourage young people to invest’ (I’m dubious that’ll work), at the very least there should be a carve out for older savers whom aren’t the target.
Prior to this Martin had expressed concerns about cuts to the cash ISA limit, saying it won’t do enough to encourage more people to invest. In July, when rumours of the cut first started to swirl, he said it’d be a mistake, adding: “This isn’t nudge economics, it’s likely just piss people off economics.”
In October, he explained his idea for an alternative solution to the cut in the form of a starter investment ISA.
Lifetime ISAs to be scrapped
No immediate changes to the Lifetime ISA (LISA) have been announced by the Chancellor in today’s Budget. But Rachel Reeves has revealed plans to consult on a new scheme for first-time buyers.
The Budget document says: “The government will publish a consultation in early 2026 on the implementation of a new, simpler ISA product to support first time buyers to buy a home. Once available, this new product will be offered in place of the Lifetime ISA.”
However, as part of this, we understand the Chancellor will look into increasing the LISA property price threshold for existing savers. Martin wrote on X:
Martin Lewis
MSE founder & chair
LISAs! Not in Budget, but in docs. #Budget2025
Consultation on replacing the Lifetime ISA (LISA) with a new first time buyers product will take place in early 2026 (so probably take longer for it to be launched).
And I have been promised by a very senior member of the Government, that this will include looking at increasing the £450,000 threshold of the existing LISA as the people who have those, cannot be left with a dead product.
I will also be lobbying that if the new product is better, people should be able to transfer all their LISA (and Help To Buy) money into it.
It had been hoped that today’s Budget would be an opportunity for the Government to address what Martin has called the “serious holes” in the LISA scheme.
LISAs are designed to help people aged 18 to 39 buy their first home or to save for retirement. Savers get a 25% Government boost when they use the funds to buy a qualifying first home. They’re a powerful product – still beneficial to many – which can give a huge boost to first-time buyers’ savings.
But the scheme’s £450,000 property price limit has remained frozen since LISAs launched in 2017, despite property prices rising significantly since then. This has left some first-time buyers unable to find a suitable property under the limit, and savers buying a home that no longer qualifies are then effectively charged a 6.25% penalty on their own money when withdrawing – something we’ve been campaigning to fix since January 2023.
Earlier this year, the cross-party Treasury Committee had also said the way LISAs work with Universal Credit (UC) needs looking at – though this wasn’t referenced by the Chancellor or detailed in the Budget document.
While people with over £6,000 saved start to lose their entitlement to UC (and by £16,000 don’t get any) – pension savings don’t count towards that, but LISA savings, even if for retirement, do. The Committee’s report said: “People saving for retirement using a LISA who might otherwise be eligible for UC are at a significant disadvantage compared with people using other pension products.”
Tax rates on savings, dividend and property income to increase
Separately, the Chancellor has also announced that the tax you pay on income earned from property, dividends and savings earned outside of an ISA will increase:
Savings income. Most people can earn up to £1,000 in savings interest each year without paying tax on it under the Personal Savings Allowance. But if you do pay tax on savings interest, what you pay will rise by 2 percentage points from April 2027. This means a rise from 20% to 22% at the basic rate, from 40% to 42%, at the higher rate, and from 45% to 47% at the additional rate.
Dividends income. If you earn income from dividends (payments for those with shares in companies), then most people will pay tax on anything earned above £500. From April 2026, the basic rate of dividend tax will increase from 8.75% to 10.75%, while the upper rate of dividend tax will increase from 33.75% to 35.75% (there’s no change to the additional rate of dividend tax).
Property income. Everybody can earn up to £1,000 of income from property tax-free – for example by renting their home out – but anything above this is taxed. From April 2027, the basic property tax rate will be increasing from 20% 22%, the higher property tax rate from 40% to 42%, and the additional property tax rate from 45% to 47%.