From 6 April 2027, savers under 65 can put at most £12,000 a year of new money into Cash ISAs under the draft rules. If you normally save more in cash, the rest is pushed into taxable accounts — and this calculator puts a £ figure on what that costs you, year by year.
Scope note: this calculator models the £12,000 Cash ISA subscription limit in the draft Individual Savings Account (Amendment) Regulations 2026 (in force 6 April 2027 if made), plus the 2027/28 savings-income tax rates of 22% / 42% / 47% announced at Autumn Budget 2025.
Quick answer: Under the draft rules, from 6 April 2027 new Cash ISA subscriptions are capped at £12,000 a year for anyone under 65, while the overall ISA allowance stays £20,000. If you keep saving £20,000 a year in cash, the displaced £8,000 a year lands in ordinary taxable accounts — at 4.5%…
Key points:
Under-65s: at most £12,000 a year into Cash ISAs from 6 April 2027 — £8,000 of a full £20,000 displaced
Five-year cost of the displaced cash at 4.5%: £290.40 basic rate, £1,276.80 higher, £2,538.00 additional (fresh PSA)
Under the draft rules, from 6 April 2027 new Cash ISA subscriptions are capped at £12,000 a year for anyone under 65, while the overall ISA allowance stays £20,000. If you keep saving £20,000 a year in cash, the displaced £8,000 a year lands in ordinary taxable accounts — at 4.5% interest that builds to £290.40 of extra tax over five years for a basic-rate taxpayer, £1,276.80 at higher rate and £2,538.00 at additional rate.
Your cash savings plan
Turn 65 at any point in 2027/28 and the draft rules give you the full £20,000 cash limit for the whole tax year, from 6 April.
How much you want to put into cash each year, up to the £20,000 overall ISA allowance.
Expected rate on the taxable account. Default 4.5%.
Savings rates from April 2027 after the Autumn Budget 2025 two-point rise.
Interest you already earn each year from other non-ISA savings. It uses up your Personal Savings Allowance first.
The cap applies to each year's new subscriptions from 2027/28, so the displaced money stacks up year after year.
Extra tax over 5 years under the £12,000 cap
£0.00Cash displaced into taxable savings: £8,000 a year
Displaced into taxable savings / yr£0Year-1 extra tax£0.00Total taxable-side interest£0.00Effective drag on that interest0%
Year
Taxable balance
Interest
Taxable after PSA
Extra tax
What this means
The displaced money stacks: each year another slice lands in taxable accounts, so the interest — and the tax on it — keeps climbing.
Prefer £0 tax? If you invested the displaced £8,000 a year in a stocks & shares ISA instead, there would be no tax cost at all — but that is investment risk, not a savings account. See how to choose between a Cash ISA, S&S ISA and LISA.
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From 6 April 2027, under the draft rules, savers under 65 can subscribe at most £12,000 of new money a year to Cash ISAs. The overall ISA allowance stays £20,000, and the Stocks & Shares and Innovative Finance limits stay £20,000 — so someone who wants to use the full allowance must put at least £8,000 a year somewhere other than a Cash ISA. The full guide to the 2027 Cash ISA cap covers every rule; this page does one job: it prices the cap for cash-first savers.
The calculator assumes you keep saving in cash anyway. Whatever the cap displaces goes into ordinary taxable savings accounts, where the interest is exposed to income tax once your Personal Savings Allowance runs out. It then projects the extra tax year by year for up to ten years. Money already inside your Cash ISAs before 6 April 2027 is unaffected — the cap limits new subscriptions, not existing balances.
How does the £12,000 cap create a tax cost?
The cap itself is not a tax. The cost appears one step later: the £8,000 a year that can no longer go into a Cash ISA earns interest in a taxable account instead. Interest there is covered by your Personal Savings Allowance first — £1,000 for basic-rate taxpayers, £500 for higher-rate, £0 for additional-rate — and anything above it is taxed.
The rates make it worse. The same Autumn Budget 2025 that introduced the cap also raised tax rates on savings income by two percentage points from April 2027: basic 20% becomes 22%, higher 40% becomes 42%, additional 45% becomes 47%. So the displaced money arrives in taxable accounts at exactly the moment savings tax gets more expensive.
What does the cap cost a basic-rate taxpayer?
Run the defaults: £20,000 a year into cash, 4.5% interest, basic rate, PSA untouched. The cap displaces £8,000 a year from 2027/28.
Year 1: £8,000 taxable balance earns £360. That is under the £1,000 PSA, so the tax is £0.
Year 2: the balance is £16,000, earning £720. Still under the PSA — £0 again. The cap feels free for two years.
Year 3: £24,000 earns £1,080. Now £80 sits above the PSA, taxed at 22%: £17.60.
Year 4: £32,000 earns £1,440 — £440 taxable — £96.80.
Year 5: £40,000 earns £1,800 — £800 taxable — £176.00.
Total over five years: £290.40. The PSA shields the first two years completely, then the drag compounds — the year-5 bill alone is ten times the year-3 bill, and it keeps rising every year you stay a cash-first saver.
Who pays nothing under the cap?
Anyone 65 or over. Under draft regulation 4ZA(1C) the £12,000 limit only applies in a year where you are "64 or under at the end of that year". HMRC's factsheet confirms the full £20,000 cash entitlement applies from the start of the tax year in which you turn 65 — so if you were born on or before 5 April 1963, the cap never touches you in 2027/28. Details in our over-65 exemption guide.
Non-taxpayers. With no other income, the Personal Allowance, the £5,000 starting rate for savings and the PSA together shelter far more interest than £8,000 a year of displaced cash will generate for many years.
Anyone happy to invest the balance. £8,000 into a stocks & shares ISA is still completely tax-free — the cost is investment risk, not tax. The complete UK ISA guide walks through the options.
Why does the cost grow every year?
Because the cap bites every year, not once. Each April another £8,000 that would have gone into a Cash ISA lands in taxable accounts, so the taxable balance stacks: £8,000, £16,000, £24,000 and onwards. Once your PSA is fully used, every fresh £8,000 adds £360 of fully taxable interest at 4.5% — an extra £79.20 a year of tax at basic rate, £151.20 at higher rate, £169.20 at additional rate, on top of everything already accumulated. Run the projection to ten years and the curve is unmistakable.
How do the tax bands compare over five years?
At the defaults — £20,000 a year into cash, 4.5% interest, no PSA used elsewhere — the five-year bill by band looks like this:
Year
Basic (22%)
Higher (42%)
Additional (47%)
1
£0.00
£0.00
£169.20
2
£0.00
£92.40
£338.40
3
£17.60
£243.60
£507.60
4
£96.80
£394.80
£676.80
5
£176.00
£546.00
£846.00
Total
£290.40
£1,276.80
£2,538.00
All three scenarios earn the same £5,400 of taxable-side interest over five years. The basic-rate saver loses 5.4% of it, the higher-rate saver 23.6%, and the additional-rate saver — with no PSA at all — a full 47%.
What should you do before 6 April 2027?
Use 2026/27 in full. The current tax year, ending 5 April 2027, is the last one in which an under-65 can put the whole £20,000 into Cash ISAs. Our best savings accounts guide tracks where the top cash rates are.
De-risking? Watch the transfer deadline. From 6 April 2027 the draft rules prohibit transfers from Stocks & Shares or Innovative Finance ISAs into Cash ISAs for under-65s, and no exemption for pre-2027 money has been published. If you plan to move invested ISA money into cash, the transfer ban guide explains why 5 April 2027 is a real deadline. General mechanics are in the ISA transfer rules guide.
Consider investing the £8,000. The displaced slice is only taxed if it sits in taxable cash. Inside a stocks & shares ISA it stays tax-free — but note the draft rules also add a flat 22% charge on interest paid on cash held inside non-Cash ISAs, with no de minimis or "cash awaiting investment" exemption published, so parking it as cash in an S&S ISA is not an escape route.
Check the over-65 exemption if you were born on or before 5 April 1963 — the cap simply does not apply to you.
Watch for the final regulations. They are due in autumn 2026. If you use a flexible ISA, note that replacement-subscription mechanics under the cap are still unsettled — see the flexible ISA guide.
What does this calculator assume?
Deliberate simplifications, so you can sanity-check the arithmetic:
Interest is not compounded — we assume it is spent or swept elsewhere, so only the displaced deposits build the taxable balance.
You stay under 65 for every projected year — if you turn 65 during the projection, the cap stops applying from the start of that tax year, so your real cost would be lower than shown here.
The interest rate is constant across all projected years.
PSA and rules as drafted: £1,000 / £500 / £0 PSA, the £12,000 cap, and the 22% / 42% / 47% savings rates from April 2027, all per the draft regulations and Autumn Budget 2025.
The starting rate for savings is ignored. If your non-savings income is under £17,570 the £5,000 starting rate can shelter more — the full savings interest tax calculator models it properly.
Non-taxpayers show £0 because the Personal Allowance, starting rate and PSA cover typical cases at these interest levels.
These are draft rules: the consultation closed on 2 August 2026 and the final regulations are due to be laid in Parliament in autumn 2026, in force from 6 April 2027. This page is updated as the position changes.