- Money
Guidance on the HM Revenue and Customs website said rules will be introduced ‘to avoid circumvention of the lower limit for cash Isas’.
Vicky ShawFriday 28 November 2025 14:24 GMT
open image in galleryThe Government announced in the Budget that, from April 2027, the annual adult cash Isa limit will be slashed to £12,000 (Dominic Lipinski/PA) (PA Archive)
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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.
But 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 Isas 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 Isas 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.
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The rules will apply to investors under the age of 65, HMRC said.
Industry will be consulted on the draft legislation, which will be made by amendments to the Isa regulations and laid before Parliament well ahead of April 2027, the guidance said.
It was also revealed in the Budget that a consultation will be published in early 2026 on the implementation of a “new, simpler” Isa product to support first-time buyers to buy a home.
Once available, this new product will be offered in place of the Lifetime Isa.
Lifetime Isas have been criticised for withdrawal penalties that can swallow up some of the cash savers have put in if they try to take out money for anything other than their first home or their retirement.
The HMRC guidance suggested that the new product will have more flexibility for savers.
It said: “The Government will consult on introducing a new, first-time buyer only product that will provide the bonus when a person uses it to buy a house, removing the need for a withdrawal charge and giving savers flexibility in case their circumstances change.”
Earlier this week, Jason Hollands, managing director of online investment platform Bestinvest by Evelyn Partners, raised concerns that there were “unanswered questions” about how the reduced cash Isa limit would work in practice.
He pointed out that under current flexible rules, it is possible to transfer a stocks and shares Isa into a cash Isa and vice versa.
Mr Hollands previously said another issue to consider was whether cash savers with more than £12,000 to shelter may open a stocks and shares Isa with the excess and leave their money parked in cash.
Speaking on Friday, in light of the HMRC guidance, Mr Hollands said: “While it is no surprise they are going to take action – as we predicted this – levying a charge on cash held within stocks and shares Isas is yet another stealth tax that will impact genuine investors who sometimes decide to park money in cash for a period of time awaiting investment, or because they are nervous about the market environment.”
He said the tests to determine whether eligible investments are cash like “will throw doubt about access to money market funds within stocks and shares Isas and could even bring short-dated bonds into question”.
Mr Hollands also raised concerns that while “we will have to wait for more details” about how exactly the rules would work, if fees ended up being levied on stocks and shares Isa managers, based on their total client cash balances, this “would clearly require them to pass on this cost as an account fee”.
