ISA reform update

NoMore

Tax update 2026: simplification, modernisation and fairness summary - GOV.UK

ISA Reform

The government is confirming the anticircumvention rules to support reforms to ISAs announced at Budget 2025 as part of the government’s wider strategy to develop a retail investment culture. To prevent circumvention of the lower Cash ISA limit, the rules will introduce a 22% charge on interest paid on cash holdings held in Stocks & Shares and Innovative Finance ISAs (non Cash ISAs), prevent transfers from non Cash ISAs into Cash ISAs for the under 65s, and prevent holding 100% Money Market Funds in non Cash ISAs. Further details will be published in the next HMRC Tax Free Savings newsletter. 

NoMore

So willl 99.9% MMF be ok ? No mention of gilts but that might be in the detail to be published

NoMore

Ok the 100% MMF is referring to the fund/etf not the whole portfolio. So its not the amount you can hold in total but if any instrument is made up of 100% MMF.

Seems like there's an opportunity to create new funds that are only 99% MMF and 1% something else (ultrashort bonds/gilts?) that makes it comply.

eskbanker

I see that tax update also includes a cross-reference to the consultation for replacing LISA for first time buyers with a new FTB ISA product, will start a separate thread for that…

BreakingGlass

https://forums.moneysavingexpert.com/discussion/comment/82045088#Comment_82045088

And perhaps another one for the section entitled 'More Timely Payments for Income Tax Self Assessment (ITSA)' - this could well reform the 'Payments on Account' rules - potentially forcing payment of savings tax through PAYE in-year (i.e during the same Tax Year that the interest is paid.) Link to the consulation: https://www.gov.uk/government/consultations/timely-payments-in-income-tax-self-assessment

EDIT: I decided to start my own thread on this subject here:

https://forums.moneysavingexpert.com/discussion/6673658/government-consultation-more-timely-payments-for-income-tax-self-assessment-itsa

wmb194

https://forums.moneysavingexpert.com/discussion/comment/82045079#Comment_82045079

I don't think that would work as it'll still be, 'cash like.' Either longer duration bonds e.g., >5 years as with the old rules or some tiny percentage of equities. "Strategic" bond funds already exist that work along these lines e.g., Invesco Monthly Income Plus (10% equities).

https://www.fidelity.co.uk/factsheet-data/factsheet/GB00B8N45Q51-Invesco-Monthly-Inc-Plus-(UK)-Z-Inc/portfolio

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82045128#Comment_82045128

But surely the purpose of this consultation is to establish exactly which types of products are in or out - if there is any desire to actually use 'cash-like' as an overarching term then it will need to be clearly defined, and there doesn't appear to be any attempt to do so in the brief synopsis shared above, although obviously the devil will be in the detail once available…

pecunianonolet

HMRC poised to reveal tax charge in new Isa rules

Interest earned from cash held in stocks-and-shares Isas will face 22 per cent tax rate

Source: Financial Times

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82045164#Comment_82045164

No need to go to the FT for that, it was quoted straight from the horse's mouth (gov.uk) at the start of the thread!

kaMelo

I read something similar in the Telegraph at the end of last month, although they actually suggest as long as 1 pence of the total was invested it mattered not where the rest was. Whilst that would be welcome if true it just seems too simple.

Direct link

https://www.telegraph.co.uk/money/investing/isas/the-1p-loophole-that-kills-reeves-isa-reforms/

This is the link on the wayback machine, although I'm unable to actually get it to work, maybe someone else who is better than I.

https://web.archive.org/web/20260000000000*/https://www.telegraph.co.uk/money/investing/isas/the-1p-loophole-that-kills-reeves-isa-reforms/

friolento

https://forums.moneysavingexpert.com/discussion/6673641/isa-reform-update

Does the interest on cash in S&S ISAs also apply to the those 65 and over?

What about the other complications restrictions - xfer from S&S to cash, MMFs etc? Do these apply regardless of age of the holder?