HMRC will stop cash-like investments in S&S ISAs

Pat38493

Updating this with the official note from HMRC

https://www.gov.uk/government/publications/tax-free-savings-newsletter-19/tax-free-savings-newsletter-19-november-2025

I mentioned this on an ISA thread, but it's relevant to a lot of pensioners as well.

According to the FT today, as part of the ISA changes, HMRC is going to disallow "cash-like" investments in ISA S&S wrappers.  

It's not clear whether this will also include short term gilts and bonds which would also count as savings interest today, but if that's the case, S&S ISAs will only be useful for equities (to which I suppose you could say the clue is in the name!).

Question is - will they then force sell the inestments of anyone who is not aware of this once this comes into force or how will that be managed?

I am assuming this is true as the FT is reporting it as fact, but we might have to wait till it's more widely reported.

"From April (presumably 2027), tests will also be carried out to determine whether an investment is eligible to be held in a stocks-and-shares Isa or if it is too “cash like”.

Consumers will face a charge on any interest paid on cash held in a stocks-and-shares Isa."

The FT article can be read if you sign up for a free account (at least it worked for me):

https://www.ftadviser.com/isas/2025/11/28/clients-to-be-charged-for-cash-like-investments-in-stocks-and-shares-isas/#:~:text=Nov 28 2025-,Clients to be charged for 'cash-like' investments,in stocks-and-shares Isas&text=People will not be able,lower limit for cash Isas.

onomatopoeia99

So, back to where we were a decade or so back then and pretty much inevitable now the cash / S&S division has been re-introduced.

No great hardship, there is no human right to tax free savings and you won't find many other developed economies offering anything like the same options.  Plus you've got over a year to transfer anything currently in an S&S ISA in cash or cash-like investments over to an actual cash ISA.

Exodi

I'd imagine it's mainly referring to Short-Term Money Market funds. It seemed an obvious loophole, so not surprising they would seek to address it.

Pat38493 said:

Question is - will they then force sell the inestments of anyone who is not aware of this once this comes into force or how will that be managed?

Almost certainly not. Most likely as you later quoted:

Pat38493 said:
Consumers will face a charge on any interest paid on cash held in a stocks-and-shares Isa.

I just assume it will apply to 'cash or cash-equivalent investments' (as defined by their test conclusions) held in a S&S ISA.

Sea_Shell

I wonder what the changes will do to the business models of platforms like Trading 212?

At the moment you can seemlessly move cash between their accounts and earn interest on uninvested cash, via QMMFs

What about "old" money?

Will they allow, old money to be transferred into the Cash ISA part?

dunstonh

It's not clear whether this will also include short term gilts and bonds which would also count as savings interest today, but if that's the case, S&S ISAs will only be useful for equities (to which I suppose you could say the clue is in the name!).

When cash investments were originally banned from PEPs and ISAs, it was provider cash and money markets.
When cash was allowed but not granted tax free status, it was taxed internally.

So, it looks like we are going back to the internal taxation on cash within the S&S ISA, if that is correct.

Question is - will they then force sell the inestments of anyone who is not aware of this once this comes into force or how will that be managed?

No.  It will just be taxed.

My bet is that you will see more platforms offering cash ISAs.    So, when investing, you will effectively have the S&S ISA for equities and bonds and Cash ISA for cash/money markets.

It will be a pain because many people use platform cash and STMMs in an income strategy for ISAs, but it will be manageable for many.  You can move £12k from S&S ISA to Cash ISA to keep your cash float topped up. 
However, larger withdrawals from larger balances may not be able to do that.

m_c_s

The actual bulletin rather than someones interpretation:
https://www.gov.uk/government/publications/tax-free-savings-newsletter-19/tax-free-savings-newsletter-19-november-2025

The following rules will be introduced to avoid circumvention of the lower limit for cash ISAs:

• no transfers from stocks and shares and Innovative Finance ISAs to cash ISAs
• tests to determine whether an investment is eligible to be held in a stocks and shares ISA or is ‘cash like’
• a charge on any interest paid on cash held in a stocks and shares or Innovative Finance ISA

These rules will apply to investors under the age of 65. Cue another 2 tier policy.
This is all subject to consultation though so nothing set in stone.

Pat38493

m_c_s said:

The actual bulletin rather than someones interpretation:
https://www.gov.uk/government/publications/tax-free-savings-newsletter-19/tax-free-savings-newsletter-19-november-2025

The following rules will be introduced to avoid circumvention of the lower limit for cash ISAs:

• no transfers from stocks and shares and Innovative Finance ISAs to cash ISAs
• tests to determine whether an investment is eligible to be held in a stocks and shares ISA or is ‘cash like’
• a charge on any interest paid on cash held in a stocks and shares or Innovative Finance ISA

These rules will apply to investors under the age of 65. Cue another 2 tier policy.
This is all subject to consultation though so nothing set in stone.

Surely they can’t be saying that investments in your S&S ISA will be allowed or disallowed based on age?  Wouldn’t that be a nightmare to administer.   I suspect it will end up as just the first bullet point is age specific 

Also in the short term until 2027, this could produce the opposite effect to intended as people rush to transfer their S&S ISA into a cash ISA if they are using it for the purpose DunstonH described.

m_c_s

Yes they are saying that their current position is that the rules will not apply to anyone above 65. Why 65 and not 67, the state pension age then?
I suspect you maybe right and many people will now not invest (stocks and shares), so promoting anti-growth, and instead just put money into Cash ISAs when interest rates are falling in preparation for 2027. I hope this madness is somehow stopped or watered down by the industry, just like fractional shares. I suspect it won't be stopped though.
There is simply no strategy here other than to grab more tax from savings. 

SnowMan

Thanks for spotting that Pat38493, had you not done so I wouldn't have searched for the HMRC original document and posted it up on the other thread.

You might want to change your thread title to 'HMRC will stop cash-like investments in S&S ISAs' and edit into the opening post a link to the official document, as I am guessing most of us prefer to see (or at least also see) the official source than someone's second hand spin of the official source, which requires a log in in any case.  

Pat38493

SnowMan said:

Thanks for spotting that Pat38493, had you not done so I wouldn't have searched for the HMRC original document and posted it up on the other thread.

You might want to change your thread title to 'HMRC will stop cash-like investments in S&S ISAs' and edit into the opening post a link to the official document, as I am guessing most of us prefer to see (or at least also see) the official source than someone's second hand spin of the official source, which requires a log in in any case.  

Thanks I have done that.  I actually saw the article linked on a retirement facebook group.

In that HMRC page there does not seem to be any mention of forestalling before April 2027, so it seems like there is nothing to stop anyone from transfer all their S&S ISA holdings to cash ISA before then.

Cobbler_tone

I heard it was £12k in a cash ISA and £8k on black or red.