We want to make sure you have all the information you need regarding the significant changes announced by Rachel Reeves concerning the Individual Savings Account (ISA) allowances for the next tax year.
While the total annual limit for saving and investing remains at £20,000 across Cash ISAs and Stocks & Shares ISAs, the amount you can contribute to Cash ISA products is being reduced starting from 6 April 2027. The Treasury has indicated this policy is designed to shift the UK’s savings culture, encourage savers with solid cash savings to consider investing as a way of getting the most out of their money.
Here is a summary of the key announcements and what they could mean for your money.
General questions about the allowance
What is the new Cash ISA allowance for the 2027/28 tax year?
The new maximum amount you can deposit into all your Cash ISAs (across all providers) for the 2027/28 tax year will be £12,000. This is a reduction from the current £20,000 limit.
The overall annual ISA allowance (the total you can save across all types of ISAs, like Cash and Stocks & Shares) remains unchanged at £20,000.
This means that while the limit for Cash ISAs will be capped at £12,000 for the 2027/28 tax year, you can still deposit the full £20,000 allowance into your Stocks & Shares ISA if you wish to.
When does the new allowance come into effect?
The new £12,000 limit for Cash ISAs will come into effect at the start of the 2027/2028 tax year.
Please bear in mind that this does not affect the upcoming 2026/2027 tax year. The new limit applies from 6 April 2027.
Does this affect the current (2025/26) tax year and next tax year (2026/2027) allowance?
No, it doesn't. The new limit only applies to the 2027/28 tax year. For the current tax year and next tax year, your total allowance remains the current limit, and you can still deposit up to the current maximum in your Cash ISA.
Why has the government reduced the allowance?
The Chancellor hopes to encourage greater use of Stocks & Shares ISAs.
The Treasury has indicated this policy is designed to shift the UK’s savings culture, and encourage savers with solid cash savings to consider investing as a way of getting the most out of their money long-term.
Big piles of cash savings generally lose value to inflation over time, and investing can hold the keys to really growing that money. The Chancellor said in her speech “investing £1,000 a year in an average stocks and shares ISA every year since 1999 would have delivered a £50,000 better return than if it was invested in a cash ISA.”1
Special exemption for those aged 65 and over
Does the new £12,000 Cash ISA limit apply to all ages?
No, it doesn't. The Chancellor specifically announced an exemption for older savers. The new £12,000 Cash ISA deposit limit won’t apply to members aged 65 and over.
If you are 65 or older as of 6 April 2027, you will still be able to deposit the full £20,000 of your overall annual allowance into Cash ISAs.
Questions about existing ISAs
I already have money in my ISA, will this change affect my existing balance?
No, it won’t. This change only affects the new money you deposit from 6 April 2027 onwards. Any balance you have already built up from previous years is safe and remains tax-free.
Will I lose money or interest already earned if the allowance drops?
No, you won't. Your current balance and any interest you have already earned are completely unaffected by the allowance change. The money in your Cash ISA remains tax-free and continues to earn interest based on the current rates.
Does my current allowance get reduced too?
No. Your allowance for the current 2025/26 tax year remains the current maximum. Your allowance for the next tax year (2026/27) will also be unchanged.
Can I still top up to the current maximum before the change takes effect?
Yes, you can! If you still have allowance left for the current tax year, you can top up your Chip Cash ISA up to the full current limit before 6 April 2027. After that date, the new £12,000 limit for the 2027/28 tax year will apply.
Deposits, transfers, and limits
Can I deposit the full £20,000 before the change?
You can deposit up to your full current allowance (the maximum for the 2026/27 tax year) right up until 5 April 2027.
The money you deposit now stillcounts against this year's larger limit. It won't be retroactively reduced by the new £12,000 rule that starts on 6 April 2027. This gives you a final chance to maximise your tax-free cash savings.
If I’ve already deposited more than the new limit in the current tax year, do I need to withdraw funds?
No, you don't need to withdraw anything. The new limit is only for contributions made during the 2027/28 tax year and beyond. Your deposits made in the current (2025/26) and next (2026/27) tax year are compliant with the rules at the time you made them.
Does the reduction apply to transfers between ISAs?
The reduction applies to new deposits only.
ISA transfers from an ISA you held in a previous tax year do not count towards your new £12,000 annual allowance.
Moving money you deposited in the current tax year from a Cash ISA to a Stocks & Shares ISA (a 'current year subscription transfer') does use your total £20,000 annual allowance, but the amount originally deposited into the Cash ISA cannot exceed the new £12,000 Cash ISA limit after 6 April 2027 (unless you are 65 or over).
If I transfer from a previous year's ISA, does it count towards the new allowance?
No. Transfers of money saved in previous tax years (often called "prior year subscriptions") are specifically excluded from the new annual allowance limit. They remain separate and won't affect the new £12,000 deposit limit.
What happens if I try to deposit more than the new limit after it changes?
If you try to deposit more than the £12,000 Cash ISA limit (or the remaining part of your £20,000 overall limit) across all your ISA accounts after the change, your provider (including Chip) will reject the transaction to keep you compliant with HMRC rules.
Interest & benefits
Will this change affect my interest rate?
No. The interest rate you earn on your Chip Cash ISA is not affected by the change in the government's allowance rules.
Is there still a benefit in having a Cash ISA if the allowance is lower?
Absolutely! A Cash ISA still provides a valuable benefit: it protects the interest you earn from income tax. A Cash ISA is the ideal place to keep your emergency fund and any money you need in the short-term (typically within the next five years).
*When investing, your capital is at risk. Your Chip Cash ISA is a cash ISA provided by ClearBank Limited. Seccl Custody Limited is the ISA Manager for the Chip Stocks and Shares ISA. Fund management charges apply. ISA limits apply. Invest £20k per tax year.
Chip does not provide tax or financial advice. Tax treatment depends on individual circumstances and may be subject to change in the future.
Need further help?
If you have any further questions, get in touch with our support team using the in-app chat (this can be found in the Contact us section on the Profile tab) or by email at hello@getchip.uk for further help.