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

westv

eskbanker said:

Sea_Shell said:

eskbanker said:

westv said:

I imagine it'll be delayed and watered down.

It's announced for 2027, which gives a fair amount of time to design and implement the detail, but it's just human nature that there's frenzied speculation on here about what it'll look like beyond the headlines!

Because some of us want to plan and get ahead of the curve, rather than just wait for things to happen "out of the blue".

Fail to prepare....and all that😉

But what specifically needs to be planned at this stage?

Spreadsheets, more spreadsheets and even more spreadsheets for some LOL!

Notepad_Phil

LHW99 said:

The question also arises will over 65's be allowed the MMF's that under 65's are prohibited from using - or will platforms decide it is too much trouble and rule them out for everybody?

Once you look into the bare bones of the plans there seems to be more and more that will need ironing out in the next 18 months if the timetable is to be kept.

Well at the moment it would seem that over 65s will be allowed to continue holding MMFs etc - at least if you take https://www.gov.uk/government/publications/tax-free-savings-newsletter-19/tax-free-savings-newsletter-19-november-2025 as the direction of travel in that it says:

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.

DRS1

LHW99 said:

The question also arises will over 65's be allowed the MMF's that under 65's are prohibited from using - or will platforms decide it is too much trouble and rule them out for everybody?

Once you look into the bare bones of the plans there seems to be more and more that will need ironing out in the next 18 months if the timetable is to be kept.

I have a feeling you might get two forms of ISA an over 65 one and an under 65 one.  The over 65 one would have unrestricted investments in the S&S ISA and free transfers from S&S to cash ISAs while the under 65 one has no transfers between S&S and cash ISAs and restricted investments in the S&S ISA.  How the under 65s one will deal with uninvested cash such as dividends is a mystery but perhaps the simplest way would be to say you earn no interest on uninvested cash.  An encouragement to invest it!

When you get to 65 you would probably have to be able to transfer from an under 65 ISA to an over 65 ISA if the restrictions are built into the ISA terms for under 65s.

m_c_s

What makes all this ironic is that alongside the budget on Wednesday the Government announced a consultation which will examine the possibility of “expanding and deepening” the market for short term gilts - of less than one year in duration. This would be much more like the US in which a relatively large portion of the US debt is issued a treasury bills with a duration of less than 12 months. 
So we could have a situation where a lot more UK debt will be sold as "cash like". These very short duration single gilts, and one would assume a lot more very short duration gilt funds and ETFs, will be launched at a time when they are effectively discouraging their purchase for tax reasons in a S&S ISA.

Newbie_John

In 2027 all stocks will be penny stocks so nobody will be bothered with cash-like elements.

Jokes aside, I don't think it's doable, sure some are clear cash-like money markets, but some like Absolute Return or Junk Bonds they're hard to qualify.

Many people already avoid S&S as they may seem very complicated so adding another level of complication will only push people away even more.. they should've taxed Premium Bonds and leave ISA as they were.

Aretnap

Newbie_John said:

Many people already avoid S&S as they may seem very complicated so adding another level of complication will only push people away even more.. they should've taxed Premium Bonds and leave ISA as they were.

There will be no extra complication from the end user's perspective. You are not going to be personally responsible for deciding which investments are ISA eligible and which aren't - that's for HMRC and the ISA providers to argue about. From your point of view the menu of investments that appears when you click "buy" will just be slightly shorter.

Aretnap

LHW99 said:

The question also arises will over 65's be allowed the MMF's that under 65's are prohibited from using - or will platforms decide it is too much trouble and rule them out for everybody?

I imagine it will be down to the individual platforms to decide whether to update their IT systems to maintain separate lists of eligible investments for two different age groups.

It's already the case that not every ISA provider offers every ISA eligible investment to buy - but if there's enough demand someone will offer it.

HedgehogRulez

Does anyone’ know how to use an apostrophe’ anymore’?

dharm999

Well, it certainly makes life a bit more interesting!  We use MMF and gilt funds within an ISA as part of our monthly income, both are Vanguard funds, and the gilt fund has holdings within longer than 5 years on average to maturity, so not cash like

it will mean a bit of work for me next tax year to move money that is in a MMF within an ISA, to a cash ISA, albeit with the added complication that it’s a partial transfer and I need somewhere that pays monthly interest, which restricts the choice of ISAs I can transfer to.  OH is over 65, I’m not, so we will end up having different holdings, and in the overall scheme of things, it’s a bit of work, once a year to deal with, but not a major task. It will also mean, for me, having to make minor changes to other non ISA holdings to keep the equity/bond/cash/other investments proportions in line with what I want.

Shink

According to current plans, money invested in S&S ISA’s can NEVER be fully de-risked in the future, without removing them from the tax free ISA wrapper. i.e. you can’t ever transfer it to a cash ISA. That’s a massive disincentive to invest. Surely the normal arc is to convert S&S investments to cash as you get older?