Cash ISA allowance reduced to £12,000 for under 65s

The Chancellor took aim at cash ISAs in her Budget, and is reducing the amount that can be put into a cash ISA from £20,000 to £12,000, with the remaining £8,000 being eligible for investment ISAs. These changes, which will apply from April 6, 2027, will not affect those over age 65, who will still be able to put the full £20,000 into a cash ISA each year if they prefer. The move is designed to encourage people who have typically chosen the cash ISA in preference to investment ISAs to broaden their portfolio into investment products, which traditionally have delivered better returns over the long term. Michael Summersgill, CEO of AJ Bell CEO, said: “The Chancellor clearly recognises the huge benefit of long-term investing and the boost it can provide to people’s finances, but today’s announcement is a missed opportunity to reshape ISAs with the consumer in mind.”

Does this increase the complexity of ISA investing?

The move increases the complexity of ISA investing, at a time when experts are calling for more simplicity and flexibility for individuals, who already often find it difficult to navigate the investment landscape more widely. Mr Summersgill said: “Government should be focused squarely on simplifying the market to make it easier for ordinary people to navigate, providing flexibility for consumers, rather than adding friction in the form of new allowances and added complexity.” He would like to see the Government ask itself “two key questions” before implementing these proposals. The first is whether any serious person would design a system with “umpteen ISA products all with different allowances”. The second is whether there is any evidence at all that this measure will encourage people to invest. Mr Summersgill added: “The answer to both those questions is no. Government should go back to the drawing board and examine the evidence in earnest before these proposals move forward.”

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