Key takeaways

  • The government has decided not to reduce the cash ISA limit, which stays at £20,000.
  • The overall ISA allowance is also £20,000 a year. Contributions to the new First Time Buyer ISA from 2029 count towards it.
  • Savings income will be taxed at 24%, 44% and 49% from 6 April 2027, so tax-free ISA interest becomes more valuable.
  • The government is working with industry on a new ISA incentive for people investing in a stocks and shares ISA for the first time. The design is not yet published.
  • The Personal Savings Allowance and starting rate for savings are unchanged.

The cash ISA limit stays at £20,000. Budget 2026 reversed the planned cut to the cash ISA allowance, so savers can continue to put the full ISA allowance into cash. The Treasury says it made the decision to keep providing generous support for savers. The Budget also raised the tax rates on savings income from April 2027, which makes the shelter more useful.

What the Budget says about ISAs

The Budget document states the government “has decided not to reduce the cash ISA limit, so that it remains at £20,000”. It adds that the government continues to support saving through ISAs, the Personal Savings Allowance (PSA) and the Starting Rate for Savings (SRS).

The Treasury gives a measure of the shelter. It says basic rate taxpayers would need over £25,000 in savings in addition to any ISA savings before paying tax. Those also eligible for the SRS could have up to £150,000 in savings in addition to their ISAs without paying tax.

The overall ISA allowance

The £20,000 figure is the total you can put into all ISAs in a tax year. You can split it between cash, stocks and shares, and Innovative Finance ISAs. The new First Time Buyer ISA will count towards the same £20,000 from April 2029, with a £4,000 yearly limit of its own.

The government confirmed in its First Time Buyer ISA response that it is retaining the annual cash ISA subscription limit at £20,000. As a result, it says anti-circumvention rules no longer need to be applied to the new product, including on transfers. Our post on the First Time Buyer ISA has the full design.

A new ISA incentive for first-time investors

The Budget says the government will work with the investment industry on a new ISA incentive for people investing in a stocks and shares ISA for the first time. It also welcomed the industry-led “Invest for the Future” campaign and says targeted support launched in April to help more people with investment decisions. The detailed design will be developed with industry, so no rate or amount has been published.

Why the tax shelter matters more from April 2027

From 6 April 2027, savings income is taxed at 24% for basic rate taxpayers, 44% for higher rate and 49% for additional rate. That is two percentage points more than the rates previously planned. The PSA stays at £1,000 for basic rate taxpayers, £500 for higher rate and nil for additional rate.

A worked example shows the effect. It ignores the starting rate for savings.

  • Basic rate: £2,000 of interest less the £1,000 allowance leaves £1,000 taxed at 24%, so £240.
  • Higher rate: £3,000 of interest less the £500 allowance leaves £2,500 taxed at 44%, so £1,100.
  • Additional rate: £3,000 of interest with no allowance is taxed at 49%, so £1,470.

Interest earned inside an ISA is outside this calculation altogether. Our guides to tax on savings interest and ISA allowances explain the allowances in detail.

What advisers should check

  • Review any client communications that quote a lower cash ISA limit. The cut will not happen.
  • Check ISA use before the end of the tax year. The £20,000 is a yearly allowance.
  • Model the 2027 rates for clients with large cash balances outside ISAs. Higher and additional rate taxpayers are most exposed.
  • Wait for the first-time investor incentive. The Treasury has not said how it will work.

For the broader savings and first-home picture, read Budget 2026 for savers and first-time buyers and our main post on savings and property income tax.

Frequently asked questions

What is the cash ISA limit in 2027?

It remains £20,000. The government decided not to reduce it, so the planned cut will not happen.

Is the total ISA allowance changing?

No. The overall ISA allowance is £20,000 a year. The First Time Buyer ISA, from April 2029, has a £4,000 yearly limit that counts towards it.

Will I pay more tax on cash savings from April 2027?

Possibly. Interest above your Personal Savings Allowance and starting rate is taxed at 24%, 44% or 49% from 6 April 2027. Interest inside an ISA is tax-free.

Is there a new ISA for first-time investors?

Not yet. The government says it will work with industry on an incentive for people investing in a stocks and shares ISA for the first time.

Sources

Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 1 November 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.