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Cash ISA 2027 Cap Impact Calculator
Calculate the long-term wealth loss of the new £12,000 Cash ISA cap for under-65s compared to the legacy £20,000 limit.
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From 6 April 2027, an under-65 saver can put at most £12,000 of new money a year into cash ISAs, down from the full £20,000. The other £8,000 either goes into an investment ISA or sits outside the wrapper paying tax on interest. Enter your savings and rate, and this calculator shows what that squeeze costs you in tax over 10, 20, and 30 years, and how much the 2026-27 tax year, the last unrestricted one, is worth using.
What the 2027 reform actually changes
Announced in the Autumn Budget 2025, the change caps new CASH ISA subscriptions at £12,000 a year for savers under 65 from 6 April 2027. The overall £20,000 ISA allowance survives; the remaining £8,000 keeps its tax shelter only if it goes into stocks and shares or innovative finance ISAs. Savers 65 and over keep the full £20,000 cash option, and money already inside cash ISAs is untouched.
Why £8,000 a year of taxable cash adds up
Cash that can no longer fit in the wrapper earns interest that counts against your Personal Savings Allowance, then gets taxed at 20%, 40%, or 45%. One year of that is small; twenty years of redirected £8,000 chunks compounding at after-tax rates instead of gross rates is the real cost, and it lands hardest on higher-rate taxpayers whose PSA covers only £500.
What the numbers actually mean for you
Who actually pays tax on savings interest
The Personal Savings Allowance quietly decides this. A basic-rate taxpayer gets £1,000 of interest tax-free per year, a higher-rate taxpayer £500, an additional-rate taxpayer nothing. At 5% rates, a higher-rate saver crosses their PSA with just £10,000 in the bank. The thresholds are not indexed either, so every rate rise and every pay rise quietly pulls more savers over the line without a single rule changing.
That is the pain point this calculator measures: rates high enough to finally pay something turned millions of ordinary savers into interest taxpayers, many discovering it only when HMRC adjusted their tax code.
What actually changes in April 2027
The overall £20,000 ISA allowance survives. What changes is its composition: under-65s will be able to put at most £12,000 of each year's allowance into CASH; the balance has to go into investment ISAs or stay outside. Savers aged 65 and over keep the full £20,000 cash option.
Two things do not change, and both get misreported constantly: money already sitting in cash ISAs is completely unaffected, and transfers of existing ISA balances between providers remain unlimited. The cap only bites on new subscriptions from 6 April 2027.
The move that costs nothing before the cap lands
If you are under 65, hold significant taxable cash, and were planning to shelter it gradually, the arithmetic now favours front-loading: a couple can still move £40,000 into cash ISAs in 2026-27, but only £24,000 a year from 2027-28.
One warning that predates the cap and will outlive it: never withdraw ISA money to move it yourself. Cash that leaves an ISA loses its wrapper permanently, and re-depositing it burns fresh allowance. Every provider offers a formal ISA transfer that preserves the tax-free status; use it, especially once the cap makes allowance scarcer.
What to do with the squeezed £8,000
From 2027-28, an under-65 saver who wants to shelter the full £20,000 has to route £8,000 into a stocks and shares ISA. That is the policy's whole point, and it is not automatically bad: money-market funds inside an investment ISA behave much like cash, currently yield close to Bank Rate, and keep the tax wrapper. The trade is FSCS deposit protection swapped for investment-scheme protection and a day or two of settlement time.
For cash you refuse to move, the fallback order is unglamorous: max your PSA deliberately, consider Premium Bonds for higher-rate taxpayers (prizes are tax-free), and remember a spouse's allowances double everything. What has no defence is leaving £8,000 a year in a taxable account earning 5% while a higher-rate band takes £160 of every £400 of interest above the allowance.
Flexible ISAs matter more once allowance is scarce
A flexible cash ISA lets you withdraw and replace money within the same tax year without burning allowance: pull £5,000 out in June for a roof repair, put £5,000 back in February, and your subscription count is unchanged. Non-flexible ISAs treat the February deposit as new money.
Pre-cap, this distinction was a nicety. Post-cap, with only £12,000 of cash headroom a year, replacing a withdrawal could consume close to half of next year's cash allowance if your ISA is not flexible. Check the feature before you open the account, not after the roof leaks, because providers are not required to offer flexibility and many of the best-rate accounts do not.
Does an ISA still beat the Personal Savings Allowance?
For a basic-rate taxpayer with modest savings, sometimes not: the £1,000 PSA already shelters the interest on roughly £20,000 at 5%, so an ISA adds little until your balance or rate climbs past that. This is why the reform targets larger cash holdings, not ordinary savers.
The calculus flips hard for higher and additional-rate taxpayers. A higher-rate saver's PSA is only £500 and an additional-rate saver's is zero, so every pound of interest above those thresholds is taxed at 40% or 45%. For them the ISA wrapper is the difference between keeping the interest and handing HMRC nearly half of it, which is exactly the group the £12,000 cap constrains most.
How the ISA tax-saving math works
Outside an ISA, savings interest above your Personal Savings Allowance is taxed at your marginal income tax rate. Inside a cash ISA, the same interest is untouchable. The saving equals the interest that would have been taxable, multiplied by your band's rate.
The calculator also applies the rule change that gives this page its name: from 6 April 2027, the amount an under-65 saver can put into a CASH ISA each year is capped at £12,000, even though the overall £20,000 ISA allowance stays.
Calculation Steps:
- Enter the cash you plan to shelter and your interest rate.
- The calculator works out annual interest, then subtracts your Personal Savings Allowance: £1,000 for basic-rate taxpayers, £500 for higher-rate, £0 for additional-rate.
- The remaining taxable interest is multiplied by your marginal rate (20%, 40%, or 45%) to show the tax an ISA saves you.
- From the 2027-28 tax year, contributions above £12,000 are redirected in the model, because cash subscriptions beyond that will no longer be allowed for under-65s.
Worked example
Priya, a higher-rate taxpayer, holds £30,000 in a 5% easy-access account outside any ISA.
Interest is £1,500 a year. Her PSA covers £500, leaving £1,000 taxable at 40%: a £400 tax bill for doing nothing wrong except saving in the open.
The same £30,000 inside cash ISAs earns the identical £1,500 with zero tax, every year, forever. Over five years that is £2,000 kept.
From April 2027 she can only feed new cash into a cash ISA at £12,000 a year (the remaining £8,000 of her allowance can still go into a stocks and shares ISA). Existing cash ISA balances are untouched, which is exactly why moving money in before the cap lands matters.
Input definitions
Review the glossary of terms used in the calculation model below. Click on highlighted links to read more in-depth definitions in our financial glossary:
| Parameter | Definition & Context |
|---|---|
| Cash ISA Contribution | New money added this tax year. Capped by the £20,000 overall allowance now, and additionally by the £12,000 cash-specific cap for under-65s from April 2027. |
| Savings Rate | The annual rate on the account. Top cash ISA rates track Bank Rate and typically sit close to the best taxable easy-access rates. |
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