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

Alexland

SVaz said:

What happens if you have a Gilt ladder set up in an ISA?   It could be set up to not start collapsing until 10/15 years time.  

Are they going to start forcing people to sell them, potentially at a loss?  

They might force the sale of shorter dated gilts if they declare them cash-like.

But then will they have to keep doing that as older ones get closer to redemption, etc?

Or maybe they will just apply the restriction on what you can buy and accept investments get more cash-like over time? But then if they do get cash-like nearer redemption will they want to apply a penalty on them?

It's such a ghastly intrusion into people's freedoms to make/run sensible investments.

And this initiative was purported to encourage people to invest more in S&S ISAs!!

In recent weeks it feels like both my ISA and pension options have been ruined.

SVaz

According to Google,  because they are considered Govt. Debt,  it will be ok to hold them, if they are at least 5 years out.
Not surprising really,  they’d be cutting their own throats.  

wmb194

Alexland said:

SVaz said:

What happens if you have a Gilt ladder set up in an ISA?   It could be set up to not start collapsing until 10/15 years time.  

Are they going to start forcing people to sell them, potentially at a loss?  

They might force the sale of shorter dated gilts if they declare them cash-like.

But then will they have to keep doing that as older ones get closer to redemption, etc?

Or maybe they will just apply the restriction on what you can buy and accept investments get more cash-like over time? But then if they do get cash-like nearer redemption will they want to apply a penalty on them?

It's such a ghastly intrusion into people's freedoms to make/run sensible investments.

And this initiative was purported to encourage people to invest more in S&S ISAs!!

In recent weeks it feels like both my ISA and pension options have been ruined.

From what I can gather of the pre-2014 rules 'cash like' and the 5% test was only determined at the time of purchase and sales weren't later forced.

Alexland

wmb194 said:

From what I can gather of the pre-2014 rules 'cash like' and the 5% test was only determined at the time of purchase and sales weren't later forced.

Hope they do the same as the better of 2 evils,

Still stopping people from gradually de-risking an increasing proportion of their S&S ISA as they get closer to withdrawal is a big problem as they are basically forcing people to 'time their exit' from the market, use a future date derisking fund (eg Vanguard Target Retirement which they would have to buy before it becomes cash-like), pay penalties on the account cash balance or withdraw proportions from the S&S ISA to waste some of their ISA contribution allowance moving some of the money to a Cash ISA.

I wonder how many S&S ISA providers won't bother implementing different rules for age 65 and just force the new qualifying investment restrictions and stop paying account interest for everyone as part of their T&Cs.

It's just an awful situation. Doesn't seem to be much media coverage yet.

jimjames

Jordan72 said:

So if I receive dividends in my S&S ISAs (currently about 50 payments per year worth maybe £40K) I'm going to have to reinvest them immediately to avoid being penalised? This is utterly ludicrous and unworkable. 

No that's not the case at all. This was the situation prior to 2014 and there was no penalty for holding cash awaiting investment

MeteredOut

jimjames said:

Jordan72 said:

So if I receive dividends in my S&S ISAs (currently about 50 payments per year worth maybe £40K) I'm going to have to reinvest them immediately to avoid being penalised? This is utterly ludicrous and unworkable. 

No that's not the case at all. This was the situation prior to 2014 and there was no penalty for holding cash awaiting investment

The rules have not been defined yet so you can't say for sure that will not be the case, just because that was the case in 2014.

They could give x days to reinvest without any charge, or they could simply decide that any interest earned on cash-like assets in a S&S ISA is reportable to HMRC and taxable.

Alexland

MeteredOut said:

The rules have not been defined yet so you can't say for sure

My brain makes me think it would make sense to just charge tax on the cash interest and stop people making new cash-like investments as that would be the most sensible way of delivering these restrictions but then this whole idea is nonsense so it's not really safe to assume they will choose sensible options.

I really hope these ISA changes don't happen.

I don't think anyone in the treasury has considered the impact to S&S ISA investment strategies.

Nobody was asking for this and I suspect it will cause more harm than good.

If they wanted to do something useful they could have killed IFISAs as they are so dangerous looking like a high interest cash rate but with upto 100% unrecoverable loss potential.

Alexland

ISA changes are ‘absolutely bonkers’, says AJ Bell boss

https://www.telegraph.co.uk/business/2025/12/04/labours-isa-changes-are-bonkers-says-aj-bell-boss/

I'm proud to be an AJ Bell customer, sorry it's behind a paywall but here are a few quotes from the article:

Mr Summersgill said: “It’s absolutely bonkers. We’re looking for simplification to remove all of the barriers and complexities that stop people from investing and we’ve got the complete opposite to that."

“The aim was correct. So how we’ve ended up at completely the opposite end of the spectrum, how they’ve got this lost along the way, I’ve got absolutely no idea.”

"Mr Summersgill said the charge on interest paid on cash in stocks and shares Isas would act as a deterrent to investment, rather than encourage people to put more into stocks and shares. It’s basically a tax which is unprecedented. Nobody’s ever done that before and I see that as incredibly unhelpful complexity"

easysaver

I've been trying to think how the majority of people (i.e. not those who frequent places like this!) will react.

The added complication will put people off investing even more. I suspect they'll hold even more as cash and just accept the increased tax burden.

I thought the same with reduced CGT allowances. If you want simple affairs as PAYE then don't invest in a GIA because £3k is such a low exemption above which you need to report stuff.

The changes to salary sacrifice will also result in less money going to pensions and therefore shares so that's even more money to cash.

The_Green_Hornet

easysaver said:

I've been trying to think how the majority of people (i.e. not those who frequent places like this!) will react.

The majority of people don't have a stocks and shares ISA.