The personal finance expert said new rules brought in by Chancellor Rachel Reeves will have a big impact on the amount of money people can put into the popular savings accounts
The personal finance expert said new rules brought in by Chancellor Rachel Reeves will have a big impact on the amount of money people can put into the popular savings accounts
Martin Lewis has said that anyone born before April 1962 will be exempt from major changes which will impact anyone else with an ISA. The money saving expert has spoken about a significant change affecting anyone under 65 with cash ISA when the new rules arrive in April 2027.
The money-saving expert explained how new regulations introduced by Chancellor Rachel Reeves will substantially impact the amount individuals can deposit into these widely-used savings accounts. At present, savers can contribute up to £20,000 annually into these accounts without paying tax on any interest earned. Nevertheless, the November Budget saw Ms Reeves alter the regulations for all those aged under 65 in 2027 – ie born before April 1962.
Mr Lewis said 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 a separate video, Mr Lewis elaborated regarding 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 announced the cash ISA threshold will drop to £12,000 annually from April 2027. Ministers believe this adjustment – marking the first reduction to the cash ISA allowance since 2017 – will motivate greater numbers to invest in the stock market instead.
Fresh regulations are set to be implemented preventing savers from attempting to circumvent the new reduced threshold for cash ISAs, HM Revenue and Customs (HMRC) has announced.
Guidance released on the department’s website stated that measures will be brought in “to avoid circumvention of the lower limit for cash ISAs”.
These measures will encompass charges on interest accrued from cash deposits held within stocks and shares ISAs, alongside assessments to establish whether funds are being stored in “cash like” accounts.
At present, individuals can contribute up to £20,000 each year into cash ISAs, stocks and shares ISAs, or a combination of the two. However, the Government revealed in the Budget that from April 2027, the annual adult cash ISA threshold will be reduced to £12,000.
Only those aged over 65 will maintain the full £20,000 yearly cash ISA allowance. The overall annual contribution cap for adult ISAs will stay at £20,000, potentially prompting some savers who hit the £12,000 cash ISA ceiling to invest additional funds in stocks and shares.
The guidance indicated that regulations designed to prevent circumvention of the reduced cash threshold will prohibit transfers from stocks and shares and Innovative Finance ISAs to cash ISAs.
Additionally, there will be assessments “to determine whether an investment is eligible to be held in a stocks and shares ISA or is ‘cash like’.”
Charges may also be imposed on any interest generated from cash held within a stocks and shares or Innovative Finance ISA. HMRC confirmed the regulations will be applicable to investors below 65 years of age.
