ISA reforms: what clients need to know ahead of 2027

Significant ISA changes are on the horizon. From April 2027, the cash ISA limit for those under 65 will drop to £12,000, and transfers from stocks & shares ISAs to cash ISAs will no longer be allowed for under-65s. With allowances frozen until 2031, now is the time to review strategies to help clients make the most of current limits.

What’s changing from April 2027

The Chancellor’s Budget confirmed several reforms.

• Cash ISA subscription limit for under-65s reduces to £12,000.
• Transfers from stocks & shares and innovative finance ISAs to cash ISAs will end for under-65s.
• New eligibility tests will apply to stocks & shares ISA permitted investments, and a charge will be introduced on interest paid on cash held within them.

Further details published in Tax-free Savings Newsletter 19 outline several significant changes that will also come into effect from 6 April 2027.

Why this matters

For clients under 65, the lower cash ISA limit means less tax-free shelter for low-risk savings. To maintain the full £20,000 allowance, they will need to consider stocks & shares ISAs, investing those funds into markets. ISA managers will also need to monitor compliance with new investment eligibility rules and cash interest charges.

The longer-term impact

The freeze on ISA allowances until 2031 means the £20,000 limit set in 2017 will remain unchanged for 14 years. If inflation-linked, it would now be around £27,500. Over-65s retain the full £20,000 cash ISA limit, which could be valuable for retirement planning.

Lifetime ISA changes ahead

A consultation in early 2026 will explore replacing the lifetime ISA with a simpler product for first-time buyers. Existing lifetime ISAs are likely to remain available for a transition period.

Your next steps

• Consider whether it is appropriate for clients to make full use of their existing cash ISA allowances before April 2027.
• Review portfolio allocations for clients under 65 when the new permitted investments rules are published.
• Stay informed on consultations and draft legislation.