How long can you hold cash in a stocks and shares ISA?

Elizabeth_Kelly

I have a stocks and shares ISA and currently hold cash in it rather than a fund. Can someone please tell me under HMRC rules how long am I allowed to do this? I hear that the money can be returned to you if not invested. Very hard to find an answer on this anywhere. You only get a vague comment from most places.

Thanks for the help.

xylophone

HMRC don't set a time limit but make it clear that any interest earned on cash held pending investment within a stocks and shares ISA will be subject to a 20% deduction.
http://www.hmrc.gov.uk/isa/faqs.htm#25

"Holding cash in the stocks and shares component
Cash may only be held in a stocks and shares ISA to invest in qualifying investments (see What can stocks and shares ISAs include?). This includes cash subscriptions, interest and dividends, and proceeds from disposals of qualifying investments that have not yet been reinvested.

The ISA manager may pay interest on this cash while it is held in the account. There is no Income Tax to pay on this interest, but the manager by law must deduct a flat rate 20 per cent charge before crediting it to the account. You do not have to declare this interest on a tax return."

jimjames

I'm not sure why you would hold it any longer than necessary. Rates are pitiful even compared to banks. You could move it into bonds or other less volatile funds rather than cash if it is for a significant time.

If you want to hold cash long term in a S&S ISA then it might not be the right vehicle to use.

grey_gym_sock

i'm pretty sure there's no official time limit. it's just that the money must be held for the purpose of future investment. but how can anybody tell what the purpose is?

i'd guess 2 or 3 years would be OK. 10 years might not be OK. i'm not sure about 5 years. these figures are all a complete stab in the dark, of course.

innovate

Surely you wouldn't want to hold cash in an S&S ISA for more than a very short period?

IronWolf

Most S&S ISAs dont pay interest on cash anyway so not sure there is a problem.

If you are worried about it you can put the money into a money market fund which invests in short term government bonds, hence is considered risk free. The downside of that is there are fees to buy/sell the fund though.