Finance has explained the significant changes coming inthat will reduce allowances, while over-65s remain exempt
Martin Lewis has revealed that anyone born before April 1962 will be exempt from major changes affecting those with an ISA. The money-saving expert has discussed a significant alteration impacting anyone under 65 with a cash ISA when new rules take effect in April 2027.
The financial guru explained how fresh regulations introduced by Chancellor Rachel Reeves will considerably affect the amount people can deposit into these popular savings accounts. Currently, savers can contribute up to £20,000 annually into these accounts without paying tax on any interest generated.
However, the November Budget saw Ms Reeves modify the rules for all those aged under 65 in 2027 – those born after April 1962.
Mr Lewis stated on his BBC Podcast previously: “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 have the £20,000 ISA allowance per tax year. And remember this only affects new money going in.”
In another clip, Mr Lewis provided further details about 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 declared that the cash ISA limit will be reduced to £12,000 per annum from April 2027. Ministers anticipate that this change – the first decrease in the cash ISA allowance since 2017 – will encourage more people to invest in the stock market.
New rules are due to be introduced to prevent savers from trying to bypass the new lower limit for cash ISAs, as announced by HM Revenue and Customs (HMRC).
Guidance published on the department’s website indicated that steps will be taken “to avoid circumvention of the lower limit for cash ISAs”.
These measures will include charges on interest earned from cash deposits held within stocks and shares ISAs, as well as checks to determine if funds are being kept in “cash like” accounts.
Currently, individuals can deposit up to £20,000 annually into cash ISAs, stocks and shares ISAs, or a mix of both. However, the Government disclosed in the Budget that from April 2027, the annual adult cash ISA limit will be lowered to £12,000.
Only those aged over 65 will retain the full £20,000 annual cash ISA allowance. The total yearly contribution limit for adult ISAs will remain at £20,000, potentially leading some savers who reach the £12,000 cash ISA limit to invest extra funds in stocks and shares.
The guidance suggested that rules intended to prevent evasion of the lowered cash threshold will forbid transfers from stocks and shares and Innovative Finance ISAs to cash ISAs.
Furthermore, evaluations will be conducted “to determine whether an investment is eligible to be held in a stocks and shares ISA or is ‘cash like’.”
Fees may also be levied on any interest earned from cash stored within a stocks and shares or Innovative Finance ISA. HMRC confirmed the regulations will apply to investors under 65 years of age.
