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ISA rules have been changing – and extra changes are coming. More flexible rules introduced in 2024 are now well established, but not all savers are aware of them. The next big shift will arrive in 2027, when a lower cash ISA cap for under-65s takes effect, with associated restrictions.
If you want to make the most of your tax-free savings, it’s worth understanding what’s different now and what’s on the horizon. Here’s what you need to know to stay ahead and avoid costly mistakes.
What’s on this page?
One of the most significant changes on the horizon is a cap on how much younger savers can put into cash ISAs. While the overall ISA allowance remains at £20,000 per tax year, from April 2027 anyone under 65 will only be able to place up to £12,000 of that allowance into cash ISAs. The remaining £8,000 can still be invested in other types of ISAs, such as stocks and shares or innovative finance ISAs.
This move is designed to encourage savers to invest, both to boost British businesses and because investing on average delivers higher returns over the long term compared with cash (although investment returns are not guaranteed).
For those aged 65 and over, nothing changes – you’ll still be able to use the full £20,000 allowance in cash ISAs if you prefer.
It’s worth noting that this restriction applies across all your cash ISAs combined, so if you open more than one, you’ll need to keep a close eye on your contributions. And while the rule doesn’t kick in until 2027, it’s sensible to start thinking now about how you’ll make the most of your allowance in future years.
To stop people trying to get around the lower cash ISA limit by treating stocks and shares ISAs as cash ISAs, these rules will apply to under-65s from 2027:
Jason Hollands, managing director of Bestinvest, says: “While it is no surprise they are going to take action – as we predicted this – levying a charge on cash held within stocks and shares ISAs is yet another stealth tax that will impact genuine investors who sometimes decide to park money in cash for a period of time awaiting investment, or because they are nervous about the market environment.
“The ‘tests to determine whether eligible investments are cash-like’ will throw doubt about access to money market funds within stocks NS shares ISAs and could even bring short-dated bonds into question. More uncertainty ahead.”
Lifetime ISAs (LISAs) have attracted criticism, with an increasing number of people paying penalties for withdrawing their money. For now, the annual allowance remains frozen at £4,000 until 2031. But this is likely to change. In the 2025 Budget, the government announced plans to consult on replacing the Lifetime ISA with a new product aimed solely at first-time buyers.
The proposed replacement would still include a government bonus when the money is used to buy a home, but is likely to remove the 25% withdrawal penalty that currently applies if you take the money out for any other reason (including to buy a home that is above the £450,000 cap). This change is designed to give savers more flexibility if their circumstances change.
If you already have a Lifetime ISA, you can keep using it as normal. But if you, or a family member, are considering opening one, it’s worth making sure you’re aware of the rules, and keeping an eye on developments in 2026, as the rules could look very different in the next couple of years.
There were other changes to ISA rules in 2024, designed to make the system simpler. These changes have now bedded in, but not all savers are aware of them. There used to be a confusing rule that meant you couldn’t pay into more than one ISA of the same type each financial year.
So, while you could put money into one cash ISA and one stocks and shares ISA, you couldn’t pay into two cash ISAs, for instance. “Luckily that rule has been scrapped [in 2024], so you can pay into as many of each type of ISA as you like each year,” says Laura Suter, director of personal finance at investment platform AJ Bell.
“This is particularly handy in the cash ISA market, as it means you can take out a cash ISA that has a good rate, but if the rate drops later in the year or a better one comes along, you can open that second account too.
“Likewise, you could now open one easy-access cash ISA and one fixed-term cash ISA in a year. Previously you were wedded to the first cash ISA account that you picked.”
While making it easier to pay into multiple pots simplifies ISA saving, it does not remove the confusion entirely, as people can still break the rules if they don’t track their contributions carefully.
“People may forget how much they have contributed to each ISA, putting them even more at risk of breaching the £20,000 allowance cap,” says Suter.
Some providers will have restrictions about how many ISAs you can open with that provider, so check your provider’s rules – but there’s nothing to stop you opening another one with a different provider.
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ISA transfers allow you to move money from one ISA to another. You might do this to access better savings rates or to switch to a cheaper investment platform. Alternatively, you might want to move money into a different type of ISA.
For example, you might choose to transfer money from a stocks and shares ISA into a cash ISA, to reduce risk and protect your income as you get older. Or if you decide you want to move your cash into a stocks and shares ISA for the chance of higher returns (although these are not guaranteed), that’s now easier too.
Because of the upcoming lower limit on cash ISAs for under-65s, restrictions will be introduced on transferring stocks and shares ISAs into cash ISAs, before the new limits come into effect in 2027. The government has said that these transfer restrictions will only apply to under-65s. At the moment, you can still transfer between types freely.
Other changes introduced in 2024 are helping people to manage their savings and investments more flexibly. Haine explains: “Under the old rules, savers wanting to transfer money paid into an ISA within the last financial year had to transfer the entire balance. However, they could transfer all or part of their savings from previous years.”
“Savers can now transfer part, or all, their ISA allowance to another provider - no matter when the contribution was made. It means people can move savings between ISA pots more easily.”
Sarah Coles, personal finance analyst at Hargreaves Lansdown, agrees: “The real benefit of this is that it means someone who wants to transfer some money from an ISA – and has paid into the same one for more than one year – no longer needs to do complex calculations to work out how much of it they can transfer.”
Since 2016, ISAs have been allowed to be 'flexible', meaning you can take money out and put it back in the same tax year without it affecting your allowance. Not all providers offer this, so check with your provider if this is something that interests you.
Up until 2024, if you opened an ISA and then didn’t pay into it for a year or more, it would be classed as ‘dormant’, says Suter.
“That means if you wanted to pay into it in a future year, you might have been asked to reapply for the account. Most of the time this would involve filling in a form and you wouldn’t be able to pay more money in until you’d completed this admin.”
If you’ve had to do this in the past, don’t worry – this rule doesn’t exist any more.
While ISA rules are somewhat simpler than before 2024, the changes from 2027 introduce a new set of rules, especially for savers under 65. Many financial experts believe the system is still too complicated.
Michael Summersgill, CEO of investment company AJ Bell, says: “Government should be focused squarely on simplifying the market to make it easier for ordinary people to navigate, providing flexibility for consumers, rather than adding friction in the form of new allowances and added complexity.
“Before it implements these latest proposals, government should ask two key questions. Firstly, handed a blank sheet of paper would any serious person design a system with umpteen ISA products all with different allowances?
“Secondly, is there even a shred of evidence to support the idea that this measure will encourage people to invest? The answer to both those questions is no. Government should go back to the drawing board and examine the evidence in earnest before these proposals move forward.”
Haine says: “The rules may be simpler, but savers still run the risk of paying too much in and exceeding the maximum annual subscription limit of £20,000. Plus, the current annual limit hasremained the same since April 2017.”
Suter agrees: “Investing can be simple and straightforward, and ISAs have been successful largely because they are relatively easy to understand.
“But...Brits are currently faced with a choice of six types of ISA when deciding where to invest for the future, with different rules and allowances further clouding the picture.”
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