Personal finance expert said anyone under a certain age will be hit by new restriction
Martin Lewis has explained a major change for anyone under the age of 65 who has cash ISAs. The personal finance expert said new rules brought in by Chancellor Rachel Reeves will have a big impact on the amount of money people can put into the popular savings accounts.
Currently, people can put up to £20,000 extra each year into the account and not be taxed on any interest. However, in last week’s Budget, Ms Reeves changed the rules for anyone under the age of 65.
Mr Lewis said: “There are big changes coming to savings. All of these happen in April 2027. The big one is that the cash ISA threshold will be cut from you being allowed to put in £20,000 per tax year to you being allowed to only put in £12,000 per tax year.
“The shares ISA will stay at £20,000, which will mean from that point you’ll be able to put £12,000 into a cash is and the remaining £8,000 into shares. Remember, this is only for new money.
“Any money in there is not affected by this one. There is a carve out though and I had a conversation with the chancellor about this. The reason she’s cutting this is not to raise revenue. They’re cutting it because they want to encourage younger people to invest. So when I was in with her a couple of weeks ago, I said, ‘But that’s ridiculous. If you cut this for everyone, that means older people that you don’t want to invest are going to be punished.’
“Well, what they’ve said is over 65s will not have the cut. So they will still continue to have the £20,000 per tax year ISA allowance. And remember this only affects new money going in.”
In another video Mr Lewis added in terms of the shares ISA: ”The ISA limit is £20,000 and will remain £20,000 even for under 65s after 2027, which means you could put £20,000 in a shares ISA. You could also choose to put some in cash. So, let’s say you put a grand in cash.
“Well, that reduces the amount you can put in shares by a grand because it still has to total £20,000. And you can do that all the way up from 2027 to £12,000.
“So you could have £12,000 in cash and £8,000 in shares. But of course you don’t have to put the money in shares. So you can just from that point have £12,000 in cash. That’s how it works. That’s how the new rules work. £20,000 total, maximum £12,000.
“An ISA is simply a savings account where you never pay tax on the interest you earn. Currently, you are able to contribute up to £20,000 each tax year into a cash ISA (or you can split this allowance between other types of ISA).”
The Chancellor has confirmed the cash ISA limit will be reduced to £12,000 a year from April 2027. The Government hopes the change – the first cut to the cash ISA allowance since 2017 – will encourage more people to invest in stocks and shares instead.
New rules will be introduced to stop savers trying to get around the new lower limit for cash ISAs, according to HM Revenue and Customs (HMRC).
Guidance published on its website said rules will be introduced “to avoid circumvention of the lower limit for cash ISAs”.
The rules will include charges on interest paid on cash held in stocks and shares ISAs and tests to determine whether money is being held in “cash like” accounts.
Currently, people can newly save up to £20,000 annually in cash ISAs, stocks and shares ISAs, or a mix of both. ut the Government announced in the Budget that, from April 2027, the annual adult cash ISA limit will be slashed to £12,000.
Only over-65s will retain the full £20,000 annual cash ISA allowance. The annual overall contribution limit into adult ISA will remain at £20,000, potentially encouraging some savers who reach the £12,000 cash ISA limit to put more money in stocks and shares.
The guidance said rules to avoid circumvention of the lower cash limit will include no transfers from stocks and shares and Innovative Finance ISA to cash ISAs.
There will also be tests “to determine whether an investment is eligible to be held in a stocks and shares ISA or is ‘cash like’.” Charges could also be applied on any interest paid on cash held in a stocks and shares or Innovative Finance ISA.
The rules will apply to investors under the age of 65, HMRC said.
