Budget 2025: ISA limit slashed to £12k
03/12/2025
The Chancellor has confirmed the widely leaked shake-up to Individual Savings Accounts (ISAs) that will take effect from 6 April 2027.
The Key Changes
- The overall annual ISA allowance stays at £20,000.
- A new split is introduced: – Maximum £12,000 can go into cash ISAs – £8,000 can go into stocks & shares ISAs as the remainder. There is no cap on a stocks and shares ISA but a cash ISA is capped at £12,000.
- Savers aged 65 and over will be able to continue using the full £20,000 limit in cash ISAs “at least initially” (the Government has not yet said when or if this concession will end).
- Lifetime ISA (£4,000) and Junior ISA/Child Trust Fund (£9,000) limits are unchanged until at least 5 April 2031.
Why the Change?
The Treasury wants more money flowing into the UK stock market to help fund British companies and boost economic growth. By reducing the cash ISA limit for most adults, the Government is gently nudging savers under 65 towards stocks & shares ISAs, which historically offer higher long-term returns (though with more risk).
What the Banks and Platforms Are Doing
Major providers including Hargreaves Lansdown, Barclays, Lloyds and others have already confirmed they will support the new split limits and make it simple to move money between cash and stocks & shares ISAs. Many plan guided journeys and educational tools to help customers consider investment options.
What Should You Do Now?
- If you’re under 65 and like the tax-free safety of cash ISAs, you have until 5 April 2027 to keep using the full £20,000 cash allowance each year.
- If you’re comfortable with some investment risk, it’s worth getting familiar with stocks & shares ISAs now – the new £8,000 slice is still very generous.
- If you’ll be 65 or over by April 2027, you currently keep the full £20,000 cash allowance, giving you extra flexibility.
These rules are now confirmed and will apply from the 2027/28 tax year. Start planning your ISA strategy early – three years will pass quickly!
