Cash ISA cut to go ahead in April

A cut to the tax-free amount savers can deposit in a cash ISA will go ahead next April, The i Paper has learned. Andy Burnham’s Government will press ahead with reforms to the cash ISA in the spring – but a major bank has warned that it is still awaiting key details needed to implement the changes in time. The amount savers under 65 can deposit into a cash ISA tax-free each year will fall from £20,000 to £12,000. Savers in that age bracket will still be able to invest a further £8,000 tax-free in a stocks and shares ISA or the rarely used innovative finance ISA. With less than seven months to go before the new rules take effect on 6 April 2027, the finance industry is demanding clarity on how the change will work – with some calling for a delay. The Treasury has insisted the Government will press ahead with the scheme, first announced by former chancellor Rachel Reeves in 2025, and said officials are working “at pace” to put the necessary rules in place ahead of its launch next April. Shorts People are allowed to deposit £20,000 a year and see their money grow tax-free. The two main products are the cash ISA – which pays interest – and the stocks and shares ISA, which invests in equities, bonds and other assets. Any interest earned on uninvested cash held inside stocks and shares ISAs will also face a new 22 per cent tax charge. Reeves decided to change the rules so that only £12,000 of the £20,000 annual ISA allowance could be held in cash, in a bid to encourage more people to invest in stocks and shares, which can offer higher long-term returns and boost businesses and the economy. ‘The sooner we have certainty, the better’ Savers will not be able to transfer money from a stocks and shares ISA to a cash ISA, in a bid to prevent people circumventing the rules. Yorkshire Building Society told The i Paper that the timetable for introducing the new rules was “challenging”, while others refused to say if they would be ready in time. A spokesperson for the building society said: “We are already assessing the changes required across our systems, products and customer journeys to support implementation of the proposed ISA reforms. “While the timetable is challenging, we have the right teams engaged and are working at pace to prepare for implementation in April 2027. “There are some areas where we would welcome further clarity, including aspects of the ISA transfer requirements. We will continue to review any additional guidance from HMRC and assess any future changes to the requirements or timetable as further details emerge.” A number of banks and savings providers including Lloyds, Virgin Money, Shawbrook Bank, HSBC, Barclays, and Nationwide, declined to comment on whether they would be ready for the changes. Rushing new rules ‘increases risk of things going wrong’ Tom Selby, director of public policy at AJ Bell, said: “These are substantial reforms requiring product changes, system adaptations and, crucially, additional communications to customers. “The sooner we have certainty, the better, as forcing firms to rush implementation increases the risk of things going wrong.” He added: “It is clearly far from ideal that with less than seven months to go until the government’s ISA changes go live, the industry is still waiting for final rules and guidance from the government on how the new regime should operate.” Dave Beaston, technical manager at The Investing and Saving Alliance, a membership organisation for the financial services industry, said the changes created “implementation and operational challenges for providers.” “One of the key challenges will be identifying cash held within a stocks & shares ISA, calculating the associated interest, and ensuring the 22 per cent flat charge is deducted and paid to HMRC after the end of the tax year,” he said. Bryan Byrnes, director of personal finance at savings provider Moneybox, said that customers were already confused about how the new rules will work. He added: “Helping customers navigate these changes will therefore be just as important as implementing them, and we will be supporting this through a programme of financial education.” Byrnes said the full implementation of policy should be delayed until ministers have at least a year of data showing how savers respond to the initial reforms before imposing further restrictions. A HM Treasury spokesperson said the reforms are designed to encourage more people to invest in stocks and shares, while retaining the “generous” £20,000 tax-free ISA allowance. They said most savers would continue to pay no tax on their savings, existing cash ISA balances would be unaffected, and that officials were working with the industry on the detailed rules. “We will keep engaging closely with the sector to ensure that we design the rules in a way that balances ease of implementation for providers and achieving the policy intention,” they said.