UK Chancellor Rachel Reeves announced in last year's budget that individuals under 65 would be limited to depositing £12,000 annually into Cash ISAs starting April 2027, alongside a 22% tax on uninvested funds in Stocks and Shares ISAs. The policy changes, set to take effect in the 2027/28 tax year, aim to shift savers toward stock market investments that historically outpace inflation. However, £12 billion flowed into Cash ISAs in April 2026 alone — one of the highest monthly totals on record — as Brits rushed to maximize deposits under current £20,000 limits before restrictions begin. Financial experts describe this surge as an 'unintended consequence' of the tax reforms. The measures reflect government efforts to address inflation erosion of cash savings while encouraging long-term wealth building through equities.
Reeves Limits Cash ISA Deposits to £12,000 for Under-65s from April 2027
Chancellor Rachel Reeves confirmed in the previous year's budget that those under 65 would only be permitted to deposit £12,000 per year into Cash ISAs. Interest paid on uninvested funds in Stocks and Shares ISAs will be taxed at 22%, with both changes due to come into effect in the 2027/28 tax year. The Chancellor's stated objective is to motivate more people to invest their money in assets like stocks and shares, which historically yield better returns than cash. Keeping money in cash or in a Cash ISA often means it barely keeps pace with the current rate of inflation, eroding purchasing power.
£12 Billion Deposited into Cash ISAs in April 2026 Amid Rule Changes
Figures indicate that people are hurrying to open new Cash ISAs and inject as much money as possible into them, aware that the tax rules will change next year. Some £12 billion was funnelled into Cash ISAs in April 2026 — one of the highest monthly totals ever recorded. Cash ISA deposits remained elevated in May 2026, following the April surge. Savers were also moving into fixed rate accounts during May, as inflation expectations and market competition nudged rates higher while easy access rates stagnated. Mortgage approvals dropped in May 2026, as some of the enthusiasm from buyers in the early spring slowly seeped out of the market.
AJ Bell Expert Calls Savings Rush Unintended Policy Consequence
Sarah Coles, head of personal finance at AJ Bell, commented that 'this is hardly the result the government would have been hoping for', given the Chancellor's aspirations for increased investment. Coles stated: 'The dash for Cash ISAs in May, on the back of a £12 billion boost in April, lays bare the unintended consequences of cutting the Cash ISA allowance. This tax year is the last chance for under 65s to pay in up to £20,000 before their allowance is cut to £12,000 from April 6 2027. It means they're filling their boots while they can. For a policy that was intended to encourage people to move away from cash and towards investing, this is hardly the result the government would have been hoping for.'
Coles noted that cash plays a vital role in everyone's lives, and anyone of working age typically needs enough to cover three to six months' worth of essential spending in an easy access account — plus money for any planned one-off expenses in the next five years. However, beyond that, she suggested considering if a Stocks and Shares ISA could be a better home for a portion of portfolios. 'In the short term you may see the ups and downs of the stock market, but in the long run, it has a far better chance of beating inflation, so you can build a valuable nest egg,' Coles stated.
Coles added: 'Savers tend to keep too much of their savings in easy access accounts, because it makes them feel comfortable to have it close at hand. However, this is a valuable reminder of the benefits of considering how much of your savings you'll actually need to spend during the next year, and what you can tie up for longer, in order to make the most of your savings.'
FAQ
What did Rachel Reeves announce about Cash ISAs in last year's budget?
Chancellor Rachel Reeves announced that individuals under 65 would be limited to depositing £12,000 annually into Cash ISAs starting April 2027, down from the current £20,000 limit. Additionally, interest paid on uninvested funds in Stocks and Shares ISAs will be taxed at 22%, with both changes taking effect in the 2027/28 tax year.
How much money flowed into Cash ISAs in April 2026?
Some £12 billion was deposited into Cash ISAs in April 2026, marking one of the highest monthly totals ever recorded. This surge occurred as savers rushed to maximize deposits under the current £20,000 annual limit before the new £12,000 restriction takes effect in April 2027.
Why does Sarah Coles call the savings surge an unintended consequence?
Sarah Coles, head of personal finance at AJ Bell, stated that the policy was intended to encourage people to move away from cash and towards investing in stocks and shares. However, the £12 billion April 2026 Cash ISA surge demonstrates that savers are instead maximizing cash deposits before limits decrease — the opposite of the government's stated goal.
