The Government has abandoned plans to reduce the annual Cash ISA allowance for millions of savers, confirming that the existing £20,000 tax-free subscription limit will remain in place from April 2027.
The reversal was announced in the Budget on 28 October 2026. The previous policy would have reduced the amount adults under 65 could subscribe to Cash ISAs each tax year from £20,000 to £12,000, while those aged 65 and over would have retained the full allowance.
Chancellor reverses earlier savings policy
The reduction was announced in the November 2025 Budget as part of efforts to encourage more people to invest in stocks and shares. The Treasury has now confirmed that the planned reduction will not proceed.
Official tax documents published in September 2026 had described the lower limit and associated anti-circumvention provisions, including restrictions on certain ISA transfers. The October Budget supersedes the planned £12,000 Cash ISA limit.
What the decision means for savers
Eligible adults will continue to be able to subscribe up to £20,000 to Cash ISAs annually, subject to the overall ISA subscription allowance. The £20,000 limit applies to new subscriptions in a tax year, not to the total value accumulated in an ISA over previous years.
The overall annual ISA subscription allowance remains £20,000 across relevant ISA types; it is not a separate £20,000 allowance for each type of account. Interest earned within a qualifying Cash ISA remains exempt from UK Income Tax.
New incentive for first-time investors being explored
The Treasury says it will work with the investment industry to explore a new incentive for people investing in a Stocks and Shares ISA for the first time. The Chancellor referred to a potential Starter ISA in the Budget speech, but detailed eligibility rules, benefits and a launch date have not been announced.
Savings income tax rates set to increase
Separately, the Government plans to increase the Income Tax rates on taxable savings income by two percentage points from 6 April 2027, producing basic, higher and additional savings rates of 24%, 44% and 49%. These changes apply to taxable savings income outside ISAs and are subject to legislation.
The Cash ISA reversal preserves the ability of savers of all adult ages to use the full £20,000 annual Cash ISA allowance, while the Government pursues incentives rather than a lower cash limit to encourage investment.