Cash in Stocks & Shares ISAs to be taxed at 20%?

Fermion

Interesting article in this weekends FT 
https://www.ft.com/content/0f972baa-f571-4f18-bbbd-b6382938c466

HedgehogRulez

When you say interesting….

artyboy

Is this news?

cfw1994

Paywalled.
Sounds like speculation on how HMRC will stop firms allowing cash-like ‘funds’ inside S&S ISAs?
Guess if Labour want to make the changes proposed in the budget, they need to find some way to enforce it…although that isn’t enforcing, but instead penalising.
Fairly futile, but hey, politicians like to muck around….

Emmia

cfw1994 said:

Paywalled.
Sounds like speculation on how HMRC will stop firms allowing cash-like ‘funds’ inside S&S ISAs?
Guess if Labour want to make the changes proposed in the budget, they need to find some way to enforce it…although that isn’t enforcing, but instead penalising.
Fairly futile, but hey, politicians like to muck around….

It's speculating that they'll reintroduce the 20% tax on cash in S&S ISAs which was apparently abolished in 2014 or that there will be no interest paid on cash held in a S&S ISA (presumably so people will only keep enough in there in cash to pay any fees), or that the cash level will be limited.

Ultimately this is speculation on government policy.

SVaz

If they were sensible ( fat chance of that)  then they could cap cash at a percentage of the whole and have a 3-6 month window for higher amounts.
Surely only the interest on the cash would be taxed, but some people can earn £6k in interest and pay no tax - I doubt they have a clue how it’s all going to work tbh. 

Mutton_Geoff

It is very frustrating that this is being headlined in this way, the same as people having to pay tax on their state pension or on Ebay/Vinted income.

The devil is in the detail. Why not just buy a money market fund in the ISA then it satisfies the new rule to invest and generally gives a better rate than almost all of the High Street offers at present.

Martin's page listing "Best Cash ISA" has the top rate of 4.52 (Trading 212) although this includes a newbies bonus of 0.67% for a year (real rate under 4%). The Royal London MM fund has returned 4.49% over the last 12 months.

In the real world, with basic rate savings allowance, you'd need over £22k in savings before an ISA had advantages. This exceeds the average of £16k saved in the UK. Even this number is skewed by high earners who will already most likely be investing rather than using cash. The "ISA millionaires" are more likely to be over 65 so not affected by changes ahead.

For 90% of people, the whole ISA story is really a non event as there aren't many people who can afford to save £34k a year (ie use up £12k cash ISA limit then use savings rate allowance for cash outside of a wrapper).

Anyone with the amounts of money likely to be affected would probably be advised not to hold so much in cash in any case since inflation will soon demolish any returns.

https://www.moneysavingexpert.com/savings/best-cash-isa/

https://www.money.co.uk/savings-accounts/savings-statistics

Alexland

Mutton_Geoff said:

The devil is in the detail. Why not just buy a money market fund in the ISA then it satisfies the new rule to invest and generally gives a better rate than almost all of the High Street offers at present.

Because they are looking to disqualify 'cash-like' investments from S&S ISAs for under 65s to show their deep commitment to being a PITA. This Cash ISA change is more damaging to S&S ISAs than most people seem aware.

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

I expect for simplicity some S&S ISA managers will just stop paying cash interest and apply the restrictions to everyone. This trend may also spread into the policies the platforms have on GIA, JISA and SIPP accounts.

If I am unable to hold short dated investments where I need them as part of my S&S ISA portfolio then it's going to cause me to hold more in Cash ISAs the complete opposite of what they intended.