Autumn Budget reverses planned ISA changes

Last year’s Autumn Budget brought with it some major changes to ISAs. It was initially announced that from April 2027, anyone under 65 would see their annual cash ISA allowance cut from £20,000 to £12,000, and additional charges and restrictions designed to stop savvy savers using a stocks and shares ISA to hold cash as a workaround. 

That all changed in the 2026 Autumn Budget, as the government has confirmed that it will keep the annual cash ISA allowance at £20,000 for adults of all ages from 6 April 2027, and will not implement the planned restrictions and charges on cash or cash-like investments held within a stocks and shares ISA.  

The original change was intended to encourage more people to invest through a stocks and shares ISA. With the proposed reduction withdrawn, you can continue to put your full annual ISA allowance into cash, or divide it between different types of ISA, depending on your needs and plans. 

Stocks and Shares ISA restrictions also withdrawn 

The Government has also withdrawn the proposed restrictions on cash held in stocks and shares ISAs. These included a 22% charge on interest earned on cash in the account and rules limiting how money market funds (investment funds made up of cash-like assets) could be held. 

The measures were intended to prevent people from using a stocks and shares ISA as a way to get around the planned reduction in the cash ISA allowance. Cash held in a stocks and shares ISA will therefore remain tax-free, and the proposed money market fund restrictions will not go ahead. 

What does this mean for your ISA allowance? 

Your overall annual ISA allowance remains £20,000. The decision to reverse the cash ISA changes does not increase the amount you can pay into ISAs each year. Instead, it means the planned £12,000 cap on cash ISA subscriptions for people under 65 will not be introduced. You will still be able to use the full £20,000 allowance for cash savings if that suits your circumstances.  

That flexibility may be important if you are saving for something you expect to pay for in the next few years or building a tax-free accessible reserve. Tax treatment is subject to change and dependent on individual circumstances.  

While cash doesn’t experience volatility in the same way as investments such as stocks and shares, you should also consider the effect of inflation. If the interest you earn is lower than the rate at which prices rise, your savings may lose spending power over time, even if the balance in your account increases. The interest rate available on your cash ISA can also change, so you may want to review whether your account continues to meet your needs. 

If you are saving towards a longer-term goal, you may also want to consider whether a stocks and shares ISA is appropriate for you, as the long-term returns can be higher than cash interest. Investments can rise and fall in value, and you could get back less than you invest. The value of an investment ISA can be affected by market movements, so it may be less suitable if you expect to need access to your money soon. Your choice will depend on your goals, your timescale and how comfortable you are with investment risk. 

A possible incentive for first-time investors 

Although the cash ISA reduction has been withdrawn, the government still wants to encourage more people to invest. It has said it will work with the investment industry to explore a new ISA incentive for people investing in a stocks and shares ISA for the first time. 

The details have not yet been developed, but it is something to monitor over the coming months.