MSE News: Cash held in stocks and shares ISAs to be hit with 22% charge on interest from April 2027

MSE_Abby

Savers who hold cash inside stocks and shares ISAs will be charged 22% on any interest earned on that cash from 6 April 2027, the Government has confirmed. The charge is designed to stop people using investment ISAs as a workaround to hold cash when the cash ISA limit is cut from £20,000 to £12,000 a year for under-65s from the same date.

https://www.moneysavingexpert.com/news/2026/06/cash-investment-isa-reforms/

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[thread title updated to reflect updates to the article since original publication]

Exodi

I suspect the devil will be in the detail.

You'll be charged 22% on any interest you make on cash that's held in a non-cash ISA. This 22% charge will also apply to any 'alternative finance returns' – which are typically treated in the same way as regular interest.

Is it specifically 22%, or at your nominal tax rate like other savings interest? If the former then it would still make sense for higher or additional rate tax payers to hold cash (or STMMF's) in a non-cash ISA's and pay 22% tax on the interest (or returns), instead of paying 42% or 47% in a non-ISA account.

You won't be able to hold ALL of your non-cash ISA in Money Market Funds. These cash-like assets, which invest in short-term debt securities, will only be able to be held charge-free alongside investments such as individual shares, funds, investment trusts, exchange-traded funds and corporate and government bonds, including UK gilts.

What will the split be? It would be an obvious loophole if it was just 'not all' - e.g. just invest £1 in any share/fund and then put the rest in a STMMF. If it's percentage based (e.g.if a certain percentage or more of your portfolio must be non-STMFF's, then they'll need to think about how market movements (e.g. if non-STMFF assets decline), could accidently push people over the thresholds if they aren't regularly re-balancing their portfolios).

Sorry, these are rhetorical questions, I appreciate much of this detail is still to be thrashed out… naturally HMRC will be keen to prevent any obvious loopholes like the above.

InvesterJones

Is the non-cash-like stipulation per portfolio or per fund? It would be bonkers per portfolio as trivial to circumvent.. and a nightmare to verify given portfolios could range across many platforms etc.

I think MSE have mis-interpreted - perhaps the guidance is simply saying that you'll no longer be able to hold 100% MMF in a S&S ISA.

PennysIntoPounds

Does this also apply to LISAs? I have no idea how my S&S LISA works and would rather take it out and lose the benefit than get taxed 22% on my paltry amount saved

Alfredi

This sounds ok (albeit a petty rule by the chancellor) if we can hold unlimited short dated gilts in our stocks and shares ISAs, as they behave in a similar manner to short term deposits, except you’re lending to the Gov rather than a bank (with a Gov guarantee).

masonic

https://forums.moneysavingexpert.com/discussion/comment/82045452#Comment_82045452

Are you planning to hold any investments (other than MMF) in your S&S LISA? If so, the charge wouldn't apply even if LISAs are included.

Dolcetta

Apologies if I have misunderstood, but I see two conflicting statements - see BOLD/italics

The first under the Cash ISA summary:

"From 6 April 2027, this limit will decrease to £12,000 for cash ISAs for under-65s specifically, as set out during last year's Autumn Budget. It will remain at £20,000 for everyone else saving in a cash ISA.

On this change, the Government has today confirmed that the higher £20,000 cash ISA entitlement will apply from the start of the tax year in which you turn 65. From that point onwards, you will also be able to transfer money from non-cash ISAs to your cash ISA as you please."

The second under the non-CASH ISA summary:

" You'll be charged 22% on any interest you make on cash that's held in a non-cash ISA. This 22% charge will also apply to any 'alternative finance returns' – which are typically treated in the same way as regular interest.

• You won't be able to hold ALL of your non-cash ISA in Money Market Funds. These cash-like assets, which invest in short-term debt securities, will only be able to be held charge-free alongside investments such as individual shares, funds, investment trusts, exchange-traded funds and corporate and government bonds, including UK gilts.
• You won't be able to transfer money from non-cash ISAs to cash ISAs. However, you WILL still be able to do the reverse."

Could anyone advise please?

wmb194

https://forums.moneysavingexpert.com/discussion/comment/82045830#Comment_82045830

Different rules for under 65s and over 65s.

jimjames

Savers will be charged for holding cash in stocks and shares ISAs from April 2027

This is quite misleading. There is no charge for holding cash, the only charge will be on interest earned. I get no interest on cash from my S&S ISA with iWeb so will not have any impact from this change but from the headline it would read as if I will.

MSE_Helen_K

Thanks for the helpful feedback/ pointers all. We'd been awaiting further detail from HMT/ HMRC, but we've now updated the story, which addresses some of the points raised here.

We suspect a lot of the detail will be in the consultation to come…

SlipperySwede

Hi,

I have some 1/year fixed cash ISAs that will mature in May and June 2027. As these were taken out in this financial year, will they remain tax free upon maturity? Or will the interest be taxed? Or will the interest earned post-06 April 2027 be taxed?

Very grateful if someone can explain this to me!