Government confirms three new ISA measures savers should know about before 2027

Major changes are being made to how ISAs work in the United Kingdom.

With the Cost of Living Crisis continuing to blight Britain, people are doing everything they can to make their money go further.

That's led to an increase in under-30s opting out of paying into workplace pensions, a move experts have warned against as thousands of people are leaving free money on the table.

Yet, everyone's need to have cash available now amid soaring prices for fuel, rent and groceries means some are turning away from saving.

It's little wonder a proposed plan to allow under 40s take a year's worth of their state pension early, a sum of £12,5000, was so popular.

Saving has become a luxury for many, but squirrelling money away for a house deposit, a rainy day or the future remains important when possible.

An ISA is a great way to do so, but the government has announced some new measures surrounding them that every money-savvy operator needs to be aware of.

Big changes are being made to ISAs in 2027. (Getty Stock)

Big changes being made to ISAs in 2027

Cash ISA's are savings accounts in which you don't have to pay tax on any accrued interest. Everyone over the age of 18 in the UK gets a yearly ISA allowance but, for some of us, that's being slashed next year.

The government announced in the 2025 Autumn budget that the annual cash ISA limit will fall a massive £8,000 in April 2027. Going from £20,000 to £12,000, but only for those under the age of 65.

Which sounds really fair for young people.

Now, as MoneySavingExpert reports, the government published a factsheet on June 23 with further information on the changes.

In some small relief, it has been confirmed that your ISA allowance will return to the higher £20,000 entitlement at the start of the tax year in which you turn 65.

Pop the champagne.

Elsewhere, the annual limit on non-cash ISAs - such as stocks and shares - will remain at £20,000 and a Lifetime ISA still sits at £4,000.

The overall limit will remain at £20,000, it has also been confirmed, so a saver could hold £12,000 in cash and make up the rest of their allowance in stocks and shares.

In fact, that's exactly what the government hopes you do, as they want to encourage people to start investing rather than just saving.

Meanwhile, under 65s won't be able to transfer money from non-cash ISAs into cash ISAs when the new measures come into effect, but will be able to send money in the opposite direction.

Once again, this restriction is lifted once you hit that magic 65 mark.

Finally, in order to prevent non-cash ISAs being used like cash ISAs, new rules have been proposed which would also apply when you turn 65.

They are:

• They will see a 22% charge in any interest made on cash that's held in a non-cash ISA
• Money Market Funds - which invest in short-term debt securities - can be held as long as they do not make up 100 per cent of the value of investments
• 'Cash-like assets will be defined as Money Market Funds only

The new measures remain subject to consultation.