For money you need within about five years, a Cash ISA is usually the better choice; for money you can leave invested for five years or more, a Stocks and Shares ISA has historically had a better chance of beating inflation, with the risk that its value can fall. In the 2026/27 tax year you can still put the whole £20,000 allowance into cash. From 6 April 2027 that changes: if you are under 65, only £12,000 a year can go into a Cash ISA, and the rest of your allowance can only be used in a Stocks and Shares, Innovative Finance or Lifetime ISA.
This guide focuses on that change: who it affects, how to plan your split now, and what to do if you are a cash-only saver. For a broader side-by-side of the two products, see our main Cash ISA vs Stocks and Shares ISA guide.
What changes on 6 April 2027
The rules below come from HMRC's technical note published in September 2026. The overall ISA allowance stays at £20,000 a year. What changes is how much of it can sit in cash.
| Rule | 2026/27 | From 6 April 2027 |
|---|---|---|
| Overall ISA allowance | £20,000 | £20,000 |
| Cash ISA limit, under 65 | £20,000 | £12,000 |
| Cash ISA limit, 65 and over | £20,000 | £20,000 |
| Lifetime ISA limit | £4,000 | £4,000 |
Two anti-avoidance rules come with it. Transfers from a Stocks and Shares or Innovative Finance ISA into a Cash ISA will be restricted, so you cannot pay into an investment ISA and then move the money to cash. And interest earned on cash held inside non-cash ISAs will face a 22% charge, to stop people using an investment ISA as a cash account.
- Money already in a Cash ISA stays tax-free: the cap is on new subscriptions each year, not on your existing balance.
- The Junior ISA limit of £9,000 is not part of this change.
- Lifetime ISA money counts towards your £20,000 overall limit as before.
Cash ISA or Stocks and Shares ISA: the core trade-off
The choice has not changed in principle. It comes down to when you need the money and how you would feel if its value dropped.
| Feature | Cash ISA | Stocks and Shares ISA |
|---|---|---|
| Value can fall | No | Yes |
| Returns | Interest rate, fixed or variable | Depends on markets |
| Protection | FSCS deposits up to £120,000 per firm | FSCS up to £85,000 if a firm fails, not market losses |
| Best for | Under 5 years, emergency fund | 5 years or more |
Cash ISA rates broadly track the Bank of England Bank Rate, which is 3.75% at the time of writing (October 2026). Over long periods cash has often struggled to beat inflation after the effect of rising prices, while a diversified fund has had periods of falling by 20% or more before recovering. Neither is right for every pound.
Who the £12,000 cap actually affects
Most savers will never notice. To be affected you need to be under 65 and want to put more than £12,000 of new money into cash ISAs in a single tax year. That mostly means:
- People moving a large lump sum, such as an inheritance, house sale proceeds or a bonus, into tax-free cash.
- Couples saving for a deposit who were planning to shelter more than £12,000 each in cash in one year.
- Higher and additional rate taxpayers, whose Personal Savings Allowance is only £500 or £0, so interest outside an ISA is taxed sooner.
- Savers who refill a Cash ISA every April with £20,000 as a matter of routine.
How to plan your split by timescale
Start with what each pot of money is for, then pick the wrapper. A simple way to think about it:
| When you need it | Sensible home | Notes |
|---|---|---|
| Any time (emergencies) | Easy access Cash ISA or savings account | 3 to 6 months of essentials |
| 1 to 5 years | Cash ISA, fixed or easy access | House deposit, car, wedding |
| 5 to 10 years | Mix of cash and investments | Shift to cash as the date nears |
| 10 years plus | Stocks and Shares ISA or pension | Diversified, low-cost funds |
Worked example: Priya, 34, can save £18,000 in 2027/28. She wants £10,000 for a deposit in three years and is happy to invest the rest for retirement. She puts £10,000 into a Cash ISA and £8,000 into a Stocks and Shares ISA. The cap does not bite at all. If instead she wanted all £18,000 in cash, £12,000 could go into a Cash ISA and £6,000 would go into an ordinary savings account, where interest is tax-free up to her £1,000 Personal Savings Allowance as a basic rate taxpayer.
What to do before 5 April 2027
2026/27 is the last tax year in which under-65s can put the full £20,000 into cash. If you have spare cash sitting in a taxable account and expect to want more than £12,000 a year in Cash ISAs in future, using your full cash allowance this year is a reasonable move.
- Check how much you have already paid into ISAs since 6 April 2026 using our ISA allowance tracker.
- Compare rates before you commit: a 1-year fix and an easy access account suit different plans. Our savings accounts guide explains how to compare.
- Do not wait until the last week: some providers stop accepting new money a few days before 5 April.
- If you want to move an old Cash ISA to a better rate, use the provider's ISA transfer process rather than withdrawing, or the money loses its ISA status. See our ISA transfer guide.
If you only want cash: your options from April 2027
If investing is not for you, the cap does not force you to buy shares. Your realistic options for savings above £12,000 a year are:
- Ordinary savings accounts: interest is tax-free up to your Personal Savings Allowance (£1,000 basic rate, £500 higher rate, £0 additional rate). Savings income tax rates are due to rise to 22%, 42% and 47% from 6 April 2027.
- Premium Bonds: prizes are tax-free and NS&I is backed by HM Treasury, though returns are not guaranteed. The prize fund rate is 4.35% at the time of writing.
- A Lifetime ISA, if you are 18 to 39 and buying a first home or saving for later life: up to £4,000 a year with a 25% government bonus, but withdrawal penalties apply for other uses.
- Spreading savings between partners: each person has their own £12,000 Cash ISA limit and Personal Savings Allowance.
Getting started with a Stocks and Shares ISA
If the change nudges you towards investing part of your allowance, keep it simple. A low-cost global index fund or a ready-made multi-asset fund is a common starting point. Watch platform fees and fund charges, because they come out every year whether markets rise or fall. Investing a fixed amount monthly smooths out the timing of market ups and downs. Our explainer on how a Stocks and Shares ISA works covers platforms and fees, and you can model long-term growth with the compound interest calculator.
Whichever split you choose, the habit matters more than the product. Setting aside a little every day with SYM and moving it into your ISA monthly is an easy way to make sure the allowance gets used.
Frequently asked questions
Can I still put £20,000 in a Cash ISA in 2026/27?
Will I lose money already in my Cash ISA when the limit changes?
Does the £12,000 Cash ISA limit apply if I am over 65?
Is a Stocks and Shares ISA safe?
Can I have a Cash ISA and a Stocks and Shares ISA in the same year?
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