What the Cash ISA changes mean for your savings

On the 26th of November, Chancellor of the Exchequer, Rachel Reeves, announced the Labour government’s Autumn Budget and with it a whole host of changes for the UK taxpayer. 

One change in particular affects savers around the country and warrants a closer look to see how you can make the most out of it.

Let’s go through the ISA changes together.

A look at the new rules

The headline news. From the 6th of April 2027, the annual Cash ISA allowance for those under 65 will drop from £20,000 to £12,000. The remaining £8,000 can be saved in stocks and shares ISAs.

A Cash ISA is a savings account where you don’t need to pay tax on the interest you earn. 

Read more: Understand key saving terms

The overall ISA limit will remain at £20,000. If you are on your way to the new ceiling of £12,000, which, with all the smart money moves you’re making, might be the case, you’re probably thinking: “Where can I keep anything extra I save?”

The government is angling to shelter some of your tax-free savings in a different wrapper. In other words, they’d like you to start investing if you save more than £12,000. 

Anything you save over £12,000, if you want to keep it tax-free, can be stashed away in a Stocks and Shares ISA. 

If this change makes you feel uncertain or pressured to ‘do something’ with your money, that’s completely understandable.

What it means for your savings

Rachel Reeves wants to get us investing.In a push to drive investment into British companies, the Chancellor has made the move to reduce the Cash ISA limit to invite people to move their savings around. 

By keeping the tax-free allowance the same but reducing the Cash ISA allowance, she will drive more people to move some of their savings over to a Stocks and Shares ISA. 

But what does that mean for you and your money? If you want to protect your contributions above £12,000 under the new rules, you need to put the excess into a different ISA type. When you separate your savings into different pots, it creates diversity. Diversity creates opportunities to make money on your savings, but it’s not that straightforward, and there are risks to consider, too.

Stocks and shares ISAs aren’t like Cash ISAs. They generate returns, and those returns can fluctuate. Setting one up might feel adventurous if you haven’t done it before.

There is risk, as it depends on investment performance. There might be a return, but there might be a loss, too. You don’t need to use a Stocks and Shares ISA if you’re not comfortable with that yet. There are other options to explore, depending on your circumstances. For example, you can save £1,000 tax-free in the Personal Savings Allowance, which might be perfect if you’re not planning to save much more than £12,000.

Or, you could use your savings to build your credit score.

Your next steps

Time to start thinking about your portfolio, then! If you save less than £12,000 a year, it’s business as usual. Your savings won’t be affected and you can carry on as you were. The real change happens if you save more than that a year or if your circumstances change and you do start saving more than £12,000. 

In this case, you’ll want to start reading up on your options. While the  choice the government is putting the spotlight on is to diversify your portfolio with a Stocks and Shares ISA, there could be other options for you. It’s always handy to get a lay of the land before jumping into something. Traditional investing, for example, could be an option or putting cash into various assets.

Do what’s right for you

Your savings are, of course, the priority here. We suggest taking the time to sit down and consider all your options. Lay them all on the table and think about the positives and negatives. Oh, and you can take your time! The rules don’t come into play until the 6th of April 2027. You’re in control.

If the new ISA limits for 2027 (£12k for cash and £8k for stocks and shares) are on your mind, but you’re not sure you’re ready to broaden your savings portfolio just yet, you’re not alone. Plenty of people want their money to feel steady, simple, and low-risk.

That’s where Loqbox comes in. Your Loqbox save isn’t an ISA, so it doesn’t come into these rules! Another great shout could be to increase your monthly savings in your Loqbox save. This means you’ll be boosting your credit score a little more every month and it’ll make staying below the magic number of £12,000 that little bit easier! That can feel like a win-win for some people. 

The point is, we back people who want confidence without complexity. Financial security isn’t one-size-fits-all, and you deserve saving options that grow with you, no pressure, no leap into investing before you’re ready.

This blog is for information purposes only and is not financial advice.