A New Tax on ISAs? What's Actually Happening

追加: 2026-05-28

[00:00:00]According to sources close to the government, the Chancellor Rachel Reeves is soon set to announce a potential 22% charge on any interest you make inside your ISA. Now, before you panic and jump into the comments section, I want to make sure you have all of the details here and remind you that nothing has been made official just yet. And there's also new information that has just been released as I'm putting this video together. So, let me just break things down nice and simply without any of the scaremongering and explain to you exactly what's been reported and what this could mean for you and your money.

[00:00:29]So a few days ago, the Telegraph reported that the chancellor is soon set to announce a levy on any interest people make on their cash inside a stocks and shares Iser. That's a very specific thing. So don't get this confused with a cash iser or just having any amount of cash inside your stocks and shares Iser. This is specifically focused on any interest that is made inside a stocks and shares Iser. Now, the reason for this comes down to the fact that from April 2027, the limit that you can put into a cash is being reduced from £20,000 to £12,000 for anyone under the age of 65. And in order to make sure this policy works, the government is going to have to stop people from just putting their cash into a stocks and shares ISA and making interest that way. As many of you know, there are lots of stocks and shares providers who will pay you interest on your cash inside your account. So this is obviously a very easy loophole that they're just trying to look to close.

[00:01:22]Now firstly I just want to make clear that the Telegraph is the only source for this story and all of the other reporting references back to their scoop. There's been nothing officially released from the Treasury confirming any of these details. So anyone claiming that your cash is going to be taxed at 22% as if it's set in stone is just being dishonest. Stories like this one are often leaked to test the water just like we had before the autumn budget last year. Virtually every single change was already briefed to journalists. on the day nothing was really a surprise.

[00:01:48]However, because this is from a single source, we should always remain skeptical and avoid jumping to conclusions. That said, we were already made aware that the government was going to tax any interest made on cash inside a stocks and shares ISA published at the end of November 2025. This guidance from HMRC confirmed the following details. No transfers from stocks and shares and innovative finance ISIS to cash ISIS.

[00:02:10]Then test to determine whether an investment is eligible to be held in a stocks and shares ISA or is cashlike.

[00:02:17]And finally, a charge on any interest paid on cash held in stocks and shares or innovative finance ISIS. So all that is really new when it comes to this reporting is the specific 22% charge that is being mentioned here. Before now, we've not yet had these details, but we were already outlined them 6 months ago. Also, we're still in the dark about what they will be determined cash-like investments to be. There are lots of money market funds out there which are classed as investments that offer interest in a similar way that people might expect from a cash iser.

[00:02:49]Likewise, there are lots of bond funds out there that can range from having anything from a 3month expiry to multiple years. So, how they would determine whether one or the other is cashlike, we're still unsure of. Now, as I'm making this video, there's also been another article from the Telegraph which addresses this point exactly and potentially provides a loophole that is almost so ridiculous that it surely can't end up being real. This new reporting again from a source within the government is suggesting that so long as inside your stocks and shares is you hold some investments like shares, there won't be an issue with holding things like money market funds. The loophole suggests that in the most extreme scenario, you could have £19,999 in a money market fund and just £1 in a share of a company and then you'd manage to avoid this anti-ircumvention rule.

[00:03:36]It's only suggested that the government is wanting to avoid the situation that people have 100% of their stocks and shares is allowance inside cash-like investments. If this is true, then it will probably mean that for the vast majority of people, there's really nothing to worry about. But until this is confirmed, we have to remember this is just speculation right now. However, it's important to note that this still doesn't address the part of earning interest from any uninvested cash that some platforms offer very competitive rates on. Now, let's just deal with the details about where they're getting this 22% tax amount from the interest. As many of you might already know, from April 2027, the rates of tax on savings interest is being increased for all income tax brackets. For most people in the basic rate, you're moving from 20% to 22% and so on. For higher rate savers and additional rate savers, the top rate to pay on interest from savings is a whopping 47% making it almost pointless once you factor inflation. Remember that there is no tax from interest earned inside a cash iser and there are already allowances be given before any tax would have to be paid anyway. Also, things like premium bonds still remain a place to keep up to £50,000 per person if you truly want to avoid paying any tax at all on possible interest gained. At the moment, every person has a £1,000 allowance of savings interest on the basic rate, a £500 allowance for higher rate, but no allowances for additional rate taxpayers. Only once you've gone over that allowance would you be subject to tax and have to settle any bills with HMRC through a self assessment. Now this reporting doesn't have any details about whether this 22% charge will be part of your personal savings allowance or a separate levy. Also one thing that is not clear at all is whether the platforms themselves and the ICE providers will take the interest and apply the charge before you see it or force the burden on all of us to report this to HMRC. The feeling I'm getting is that I think this will be more like the pre204 rules where interest on cash inside a stocks and shares ISA was taxed by the platforms themselves. I actually never even knew this was a thing. So, it does have some precedent. And it's a reminder that ISIS have actually been taxed before, so it's not technically true to say that they've always been taxfree. Also, it was separate from the personal savings allowance. So, everyone paid the same amount regardless of their tax bracket. This will be a major headache for the platforms to sort out, but it will then make things easier from an investor standpoint, as you can imagine that you'd have millions of people having to submit a tax return to declare interest on cash of pennies or maybe just a few quid. Surely that makes no sense and ends up costing all of us taxpayers a lot more. But honestly, we have no idea how this will turn out.

[00:06:05]Also, adding more administrative problems for the providers is another thing that will ultimately cost all of us more. We're quite lucky at the moment to have really good choices when it comes to socks, chairs, ice providers, and there's multiple free options or very low cost. This burden will add to their costs if they're forced to operate it and there is a risk that we start to see more fees creep in. So just to be very clear then at the moment there is no tax to pay inside any investments or cash that lives inside your ISIS. Once money is put into an ISER account saved as cash in a cash iser or parked into investments in a stocks and shares ISAER that money is free from taxation.

[00:06:38]There's nothing to declare or worry about and your only limit is being able to contribute up to £20,000 per tax year across all of your ISER accounts. That limit is currently shared between all of the types of ISER except the lifetime ISER which has a limit of £4,000 per tax year. What we do know is that from April 2027, the cash ISER allowance will be reduced to £12,000 for everyone under the age of 65. Those older will still be able to contribute up to £20,000 per tax year into a cash iser. And we do know that you won't be able to transfer money from a stocks and shares Iser or an innovative finance iser into a cash iser to try and get around that limit. Now, I do want to say that the vast majority of people will never be affected by these changes as most people don't even get close to putting in £12,000 a year into ISIS, regardless of whether that's saved into cash or put into investments. The ISA remains one of the best accounts in the world where you consider the amount of money that you can generate with no taxation. What we don't yet know are the details I've just covered in this video.

[00:07:36]How much will people have to pay from the interest earned on their cash inside their stocks and shares ISA? How will it be collected by the platform or submitted in a tax return? Will cash held for a short amount of time count or just long-term cash? What about people who put money in and drip feed it over a longer period? Are they going to get tax on interest gained or not? Will the loophole work as well as it's been reported that all you need to do is just have a tiny amount of investments and then you can use money market fund for the rest. What will be classed as a cash-like investment? Money market funds have risk even if it's small and there's no FCS protections. What about longer duration bond funds? What about people trying to d-risk their portfolio for retirement? What about using the money market to accumulate funds versus the distribution ones? I'm left with so many questions. I don't know about you guys.

[00:08:20]Anyway, here's my opinion for what it's worth. Just like the changes to the cash iser coming in the next financial year, I think all of this is just so poorly thought out and a total mess. The justification used for these changes is all around trying to encourage more people to invest than to save their money away. I could not be a bigger advocate for investing. I've made more than 400 videos that explain every aspect of it. I've had millions of people view my content and I passionately believe that we need to get more people in the UK invested and to engage with all of their personal finances. So, reducing the cash ISO allowance and then making things more confusing about what might be taxed and what you can or can't do with your ISA.

[00:08:59]Please tell me how exactly that helps people to invest. It doesn't. It just puts up more barriers, creates more fear, and makes even more confusion on a topic that very few people truly understand. There's been zero effort at all from the government to help explain investing to people and to make it easier. Now, I don't expect the government to necessarily be the ones doing this themselves, but they could help create an atmosphere that makes it easier. Adding layers of complexity is not the way to move forward. And in all honesty, I think there's a chance that none of these changes even make it through. We've all seen the results of the local elections. The writing's on the wall already for the current government, and there's every possibility that a new leader is in place before the end of next year. I said the same for the British Iser a while back. I could see it never making the light of day. It fails to address the underlying issues with UK investors.

[00:09:46]It all comes back to education and trying to help people understand the basics. Everything from how interest works, workplace pensions, ISAs, the state pension, mortgages, loans, you name it. education on these topics and all of us talking about them to make them normalized will solve the issue more than any changes to the products themselves. I know this will take years, probably many decades as this is a cultural thing in the UK, but we have to start somewhere and all of us are responsible for doing that. Anyway, as soon as I get more information on any of these changes, I'll of course keep you all updated. Please feel free to let me know your thoughts in the comments below and share this video with everyone who's worried about maybe what the changes might mean for them. Anyway, I will see you in the next video and as always, happy investing.