- Two fifths (40%) of Cash ISA savers said the impending cut to the Cash ISA allowance will make no difference in encouraging people to invest, according to new research from AJ Bell*
- A further fifth (19%) believe the changes will actively discourage people from investing, while a quarter (24%) believe people will be more likely to invest
- The government is currently drafting ISA rules to apply from April 2027 that will see under 65s’ Cash ISA allowance reduced from £20,000 to £12,000 – with the overall ISA allowance remaining at £20,000
- 38% of all Brits (not just Cash ISA account holders) believe the changes will make the ISA landscape more complex and confusing
- It is likely that government will need to implement a ban on transfers from Stocks and Shares ISAs to Cash ISAs to prevent people finding ways around the new rules, but it is also considering implementing a tax charge on cash and ‘cash-like’ investments held in investment ISAs for those under age 65
- Notably, one third (33%) of Brits said such stringent measures could deter them from using Stocks and Shares ISAs at all
- AJ Bell has described proposed anti-avoidance rules as ‘unwieldy’ and ‘doomed to fail’ when it comes to encouraging savers to invest for the long term
Rachel Vahey, head of public policy at AJ Bell, says:
“New research from AJ Bell lays bare the huge potential miscalculation by the government with its impending cut to the Cash ISA allowance from next April, echoing concerns expressed across the retail investing industry.
“Two-in-five Cash ISA holders said the changes would make no difference to the behaviour of savers when it comes to making that first step to invest for the long term, with an additional fifth believing they will actively deter people from investing. Although the chancellor might be keen to point to those who believe the changes will achieve the government’s stated aims, this cohort makes up just 24% overall – far from a vindication of the policy among cash savers.
“It illustrates the new rules will introduce massive complexity for virtually no benefit, with the number of people put off investing cancelling out those who think it might nudge them from saving to investing. And all of this after Labour said before the general election it wanted to simplify the ISA landscape.”
Proposed ‘anti-avoidance’ ISA measures risk deterring investors
“The government is currently drafting ISA rules to apply from April 2027 that will see under 65s’ Cash ISA allowance reduced from £20,000 to £12,000 – with the overall allowance remaining at £20,000. In order to prevent people finding ways around the new rules, it is likely that government will need to implement a ban on transfers from Stocks and Shares ISAs to Cash ISAs, but it is also considering implementing a tax charge on cash and ‘cash-like’ investments held in investment ISAs, for those under age 65.
“Needless to say, this additional complexity also proved unpopular, with a third of all Brits saying the proposed changes could deter them from using Stocks and Shares ISAs and 38% also believing the cut to the Cash ISA allowance will make the ISA landscape more complex and confusing.
“Cash and cash-like investments play a central role in retail investing through ISAs, so any move to drastically restrict either would risk weakening the very product the government wants to encourage more people to use. Creating a tax charge on cash and cash-like investments would also undermine the tax-free status of Stocks and Shares ISAs and risks penalising sensible investing behaviour. For example, a parent using a Stocks and Shares ISA to pay for their child’s university fees would likely want to reduce the risk in those investments as they approach the point of accessing the money. On top of this, it threatens to lump considerable administrative strain on providers who would be forced to implement this convoluted approach.”
‘Riddled with complexity’
“Fundamentally, the government is not going to encourage retail investing through new taxes, restriction of choice and more complexity. Allowing cash and cash-like investments to be held charge-free in ISAs, provided it is for the purpose of investing, would be a far more pragmatic approach from April 2027. HMRC can then monitor behaviour to make sure the reforms are working as intended.
“The data emphasises the potential drawbacks of government pursuing a route that is riddled with complexity, with the result that ultimately many savers could simply turn their noses up at investing altogether. It is essential that government listens to the concerns of ISA providers and instead chooses a lighter touch approach that does not directly contradict its entire rationale behind the policy.”
*Based on a nationally representative survey of 2,000 UK adults carried out online by Opinium on behalf of AJ Bell between 3 and 7 April 2026. Of this sample, 923 said they currently hold a Cash ISA.
