Autumn Budget: Cash ISA limit cut to £12,000 a year

eskbanker

singhini said:

eskbanker said:

Cash ISA limit cut to £12,000 a year

[...]

How much you can save into your cash ISA each year will be cut from £20,000 to £12,000 from April 2027, the Chancellor Rachel Reeves has confirmed...

Not according to the published document, which states that the new limit relates to cash in ISAs, rather than 'cash ISAs' as such:

4.228 ISA Reform – From 6 April 2027 the annual ISA cash limit will be set at £12,000, within the overall annual ISA limit of £20,000

https://assets.publishing.service.gov.uk/media/6926eb102a37784b16ecf525/E03444720_Budget_2025_Web_Accessible.pdf

i just got a mailer/email from Vanguard and they too confirm what your saying i.e. the ISA limit remains £20k but max £12k into cash ISA

Wording cut and pasted from the Vanguard document:

Has the ISA allowance changed?

The overall ISA allowance remains unchanged at £20,000. However, for those aged 65 and under, the amount you can put into cash ISAs will be capped at £12,000 a year from 6 April 2027, with the rest of the allowance reserved for investments. People aged over 65 will still be able to put up to £20,000 into cash ISAs.

No, that's not confirming what I'm saying, it's saying much the same as the MSE article I was challenging!  It may technically be true to say that it won't be possible (for under 65s) to subscribe more than £12K into cash ISAs but it doesn't capture the distinction that the new limit will apply to cash in all ISA types, i.e. those contributing £12K into a cash ISA can't also pay £8K into a S&S ISA and leave it as cash, or for that matter those choosing to pay £12K into a S&S ISA, and leaving it as cash, can't then pay into a cash ISA too (in the same tax year).

(It's anticipated that there'll be restrictions on cash-like products within S&S ISAs anyway, but that's a separate point).

singhini

eskbanker said:

No, that's not confirming what I'm saying, it's saying much the same as the MSE article I was challenging!  It may technically be true to say that it won't be possible (for under 65s) to subscribe more than £12K into cash ISAs but it doesn't capture the distinction that the new limit will apply to cash in all ISA types, i.e. those contributing £12K into a cash ISA can't also pay £8K into a S&S ISA and leave it as cash, or for that matter those choosing to pay £12K into a S&S ISA, and leaving it as cash, can't then pay into a cash ISA too (in the same tax year).

(It's anticipated that there'll be restrictions on cash-like products within S&S ISAs anyway, but that's a separate point).

That's  going to get too complicated. 

What's stopping me putting £20k into a S&S ISA and after a relatively short time period i.e. a few weeks selling the investment and holding cash -----> she can't force me to hold an investment -----> her whole plan of encouraging savings in S&S will back fire if there are too many restrictions. 

4.228 ISA Reform – From 6 April 2027 the annual ISA cash limit will be set at £12,000, within the overall annual ISA limit of £20,000. Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2031. Savers over the age of 65 will continue to be able to save up to £20,000 in a cash ISA each year. In addition, financial services firms will be providing new, easily navigable ways for people to find the right UK investment for them.

I'm not going to invest in just "the right UK investment" -----> what tie up my money in such a small part of the total global markets. 

In going to stick £12k in cash and £8k in global funds (which might have some UK stocks) -----> shes nuts if shes got other ideas!

eskbanker

singhini said:

eskbanker said:
No, that's not confirming what I'm saying, it's saying much the same as the MSE article I was challenging!  It may technically be true to say that it won't be possible (for under 65s) to subscribe more than £12K into cash ISAs but it doesn't capture the distinction that the new limit will apply to cash in all ISA types, i.e. those contributing £12K into a cash ISA can't also pay £8K into a S&S ISA and leave it as cash, or for that matter those choosing to pay £12K into a S&S ISA, and leaving it as cash, can't then pay into a cash ISA too (in the same tax year).

(It's anticipated that there'll be restrictions on cash-like products within S&S ISAs anyway, but that's a separate point).

That's  going to get too complicated. 

What's stopping me putting £20k into a S&S ISA and after a relatively short time period i.e. a few weeks selling the investment and holding cash -----> she can't force me to hold an investment -----> her whole plan of encouraging savings in S&S will back fire if there are too many restrictions. 

Not sure what specifically is going to get too complicated, I was simply explaining how the new rule, as documented today, doesn't just restrict contributions to cash ISAs, which is how it seems to have been reported?

However, to your main point, it's widely anticipated that the detailed design will include closure of potential loopholes like the one you refer to, and it's been pointed out that restrictions on cash in S&S ISAs were in place many years ago:

https://forums.moneysavingexpert.com/discussion/comment/81758725/#Comment_81758725

GMeeg

I'm 63 now, when I'm 65 will my cash ISA allowance go back up to £20k?

Ceejay3000

GMeeg said:

I'm 63 now, when I'm 65 will my cash ISA allowance go back up to £20k?

This starts in April 2027. So next tax year your limit is still £20k. Then it depends when you turn 65. If before 5/4/27 then your limit will never drop from £20k. If later in the year you may find you can only invest £12k before your birthday, but can then Invest another £8k after your birthday.

clueless87

Will you be able to open 2 ISAs £12k in a cash and £8k in stocks and shares? As posted above I’d then like to sell the stocks and move to cash within an ISA if possible at a later date to de-risk. 

Vitor

The more Reeves tries to enforce £12K cash limit, the more innovative investments for S&S ISAs will come out which perform the same as cash in terms of risk/reward. 

Funds holding exclusively UK Treasury bills maturing inside three months would make them almost indistinguishable from a savings product. People who value safety will simply choose the closest available safe product that can go into an S&S ISA.

The unintended consequence is predictable: capital flows into low-risk investment funds rather than genuinely productive investment.

Ceejay3000

You can already invest in Government Bonds - why the need to rely on cash to derisk?

Swipe

So how would one go about paying in £20K from a GIA to an ISA in Vanguard? It can only be done via cash (move money) at the moment. Sounds like you'll be made to withdraw it to your bank account and then pull it back in like you have to with a GIA to SIPP.

eskbanker

Vitor said:

The more Reeves tries to enforce £12K cash limit, the more innovative investments for S&S ISAs will come out which perform the same as cash in terms of risk/reward. 

Funds holding exclusively UK Treasury bills maturing inside three months would make them almost indistinguishable from a savings product. People who value safety will simply choose the closest available safe product that can go into an S&S ISA.

The unintended consequence is predictable: capital flows into low-risk investment funds rather than genuinely productive investment.

There was plenty of chat in pre-budget speculation threads about how such low-risk investments would effectively be regarded as cash for the purpose of enforcing the new rules, as they were in the old PEP days (although obviously the line still has to be drawn somewhere), but it'll naturally all come down to the detail of exactly how it'll be designed and implemented, whereas we're still in headline soundbite territory at the moment.