According to the Treasury regulations published via legislation.gov.uk and the accompanying HMRC consultation material, the ISA rulebook is being tightened again from 6 April 2027. The headline change is a new £12,000 Cash ISA subscription limit for savers under 65, while the overall annual ISA allowance remains £20,000. HMRC says the policy is designed to support retail investment and stop the lower cash cap being sidestepped through ISA structuring. (gov.uk) This is not a blanket cut to ISA allowances. A saver can still shelter up to £20,000 a year across ISA products, but under-65s will no longer be able to put more than £12,000 of that into cash. For Market Pulse UK readers, that is the practical dividing line: the wrapper remains generous, but the balance between cash and investment is being redrawn. (gov.uk)

For a 40-year-old, the new arithmetic is straightforward. From 6 April 2027, up to £12,000 can go into a Cash ISA, with the rest of the annual allowance needing to sit in a Stocks and Shares ISA, an Innovative Finance ISA, or a Lifetime ISA within its separate limits if the saver wants to use the full ISA shelter. (gov.uk) For a 67-year-old, nothing changes on the cash side: HMRC says savers aged 65 or over keep a £20,000 Cash ISA limit, and that entitlement applies from the start of the tax year in which a person turns 65. That makes age 65 a more meaningful planning point for cautious savers than it is now. (gov.uk)

Money market funds also get a more defined role. HMRC's draft legislation and factsheet say they will count as permitted Cash ISA investments, and they will be treated as the relevant cash-like holding for the new anti-circumvention rules in non-cash ISAs. In plain terms, ministers are trying to stop an investment ISA being used as a near-cash warehouse. (gov.uk) The rule is tighter than many savers may expect, but it is not a ban. A Stocks and Shares ISA can still hold money market funds, yet it cannot be made up entirely of them; HMRC also says diversified portfolios with some cash-like exposure remain allowed, while shares, ETFs, investment trusts and bonds, including gilts, are not treated as cash-like assets under this measure. (gov.uk)

The other major change sits in the tax detail. The new regulation 22A removes ISA tax relief from interest or alternative finance return earned on cash deposits held within a Stocks and Shares ISA or an Innovative Finance ISA, and requires the account manager to pay a flat-rate charge to HMRC on that income. (gov.uk) HMRC's June factsheet puts that charge at 22%, matching the savings basic rate planned from April 2027. Investors do not have to declare that ISA interest to HMRC themselves, but the policy signal is fairly direct: leaving large cash balances sitting uninvested inside a non-cash ISA will be less comfortable than it is under the current rules. (gov.uk)

Transfers are tightening as well. HMRC says savers below 65 will not be able to transfer from Stocks and Shares ISAs or Innovative Finance ISAs into Cash ISAs, although transfers from Cash ISAs into non-cash ISAs will still be allowed. The restriction is lifted from the tax year in which the saver turns 65. (gov.uk) That closes the cleanest workaround to the lower cash cap. If younger savers could simply subscribe to a non-cash ISA and move the money back into cash later, the £12,000 limit would not mean much in practice. The structure of the rules suggests the government is trying to change behaviour, not just tidy up the wording. (gov.uk)

For platforms and providers, the quieter shift is administrative. The regulations add reporting around money market fund holdings and the new charge on interest inside non-cash ISAs, so account managers will need tighter control over settlement cash, sweep arrangements and year-end returns. (gov.uk) For retail investors, the sensible response is early housekeeping rather than panic. Review how much of the annual allowance is being reserved for cash, check whether a Stocks and Shares ISA is being used as a holding pen for uninvested money, and expect providers to refresh terms before 6 April 2027. The Treasury is keeping the £20,000 ISA wrapper, but HMRC's own material makes clear that cash-heavy workarounds are the part being squeezed. (gov.uk)