Upcoming ISA changes that may affect your finances

Recently, the government have announced changes to Individual Savings Accounts (ISAs), which are due to take effect from 6 April 2027. Whilst some of these changes have yet to be confirmed, we’ve outlined below what these plans are and the impact they may have on your finances. 

How does an ISA work?

An ISA is a tax-efficient product designed to protect the money held in them from UK Income Tax and Capital Gains Tax.

Currently UK residents over the age of 18 have a £20,000 ISA allowance that can be utilised across different ISA products including both Stocks and Shares or Cash ISAs. This allowance refreshes at the start of each tax year and you cannot carry over unused allowances across tax years.

The maximum you can invest or save through multiple ISAs is £20,000, so for example you could invest £10,000 in a Cash ISA and £10,000 in a Stocks and Shares ISA. Currently you can also invest your entire allowance in either a Cash or Stocks and Shares ISA.

What is changing?

From 6 April 2027 the following ISA changes are due to come into force;

• The maximum amount you can invest in a Cash ISA for those under 65 is being reduced to £12,000 per tax year. 
• For those over 65, the full £20,000 Cash ISA allowance is reinstated in the tax year that you turn 65.
• You won’t be able to transfer money from a Stocks and Shares ISA to a Cash ISA if you are under 65.
• Any interest gained on cash that is held in a Stocks and Shares ISA will be taxed at 22%.
• Money Market Funds (a cash-like, low risk fund) cannot comprise 100% of your assets in a Stocks and Shares ISA.

What ISA rules remain?

The core features of an ISA remain as they currently are;

• You will still have a £20,000 allowance each tax year to invest in ISAs (the Cash ISA limit for those under 65 will be £12,000, the remaining £8,000 can be invested into a Stocks and Shares ISA).
• Investments held within a Cash ISA or Stocks and Shares ISA are free from UK Income Tax and Capital Gains Tax.
• If you are over 65 when the changes take effect, the ISA changes will have no impact on your Cash ISA limit.
• If you are over 65 you can still transfer your funds from a Stocks and Shares to a Cash ISA.

The changes are designed to encourage greater use of Stocks and Shares ISAs, which offer the potential for long-term investment growth (ideally 5+ years). No new types of ISAs are being introduced in 2027; rather, the ISA changes refine how existing products are used.

What does this mean for me?

What this means for you will depend upon your age and what kind of ISA you use. We’ve outlined some examples below.

It is the 2027/28 tax year and I am:

• 65 years old
• I have £20,000 to invest in an ISA
• I have not used any of my ISA allowance
• I currently hold both a Stocks and Shares and a Cash ISA

I could invest the entire allowance into my current Cash ISA or the Stocks and Shares ISA, or set up a new Cash or Stocks and Shares ISA and split my allowance across all of my plans.

It is the 2027/28 tax year and I am:

• 55 years old
• I have £20,000 to invest in an ISA
• I have not used any of my ISA allowance
• I currently hold only a Cash ISA

I could invest the entire £20,000 into a new Stocks and Shares ISA

or

I could invest a maximum of £12,000 into my existing, or new Cash ISA, and the remaining £8,000 could be invested into a new Stocks and Shares ISA.

If you’re unsure about the best choices available to you and where to begin or how to make the best use of your money, consider speaking with an NFU Mutual Financial Adviser. Our Financial Advisers can provide personalised advice tailored to your goals and financial situation.