They Delayed the 22% ISA Levy — But 12 Million UK Savers Aren't Safe Yetd

Ajouté : 2026-06-01

[00:00:00]So, as it turned out, Rachel Reeves plan to levy a 22% interest charge on cash ISAs for anyone who tried to circumvent the reduction of the cash ISA limit next year, well, that may not be going ahead.

[00:00:15]I want to talk about why that is in this video because I'm telling you right now, this This is music to my ears for obvious reasons, right? I think the government is on a mission right now to squeeze as much as they possibly can from the populace in by way of tax. And for the longest time, they have known that there is a huge amount of money in ISAs that they could not touch. And effectively, they want to put a stop to this. So, last year in the autumn statement, the it was framed as trying to get the country to invest more. We want more people to invest, so therefore, we're going to slash the cash ISA limit, but you get your £20,000 ISA limit if you invest in a stocks and shares ISA. BS.

[00:01:02]Because if you wanted to incentivize a nation to invest, there's plenty of other things that you could have done.

[00:01:08]Make no mistake, this was a tax grab, okay? This is a way to basically ensure that as people are saving money into their ISAs, you limit how much they're saving, and you then have a levy that will kick in to give you a little bit more tax revenue. That's what this was all about. But today, let's jump into the article. It's at Telegraph. This is the headline.

[00:01:28]Treasury delays ISA tax walls after Telegraph exposes flaw. Thank you, Telegraph. It says here, "Full details of savings crackdown postponed as experts warn policy will backfire." Now, let's actually have a look at what's going on. This is the loophole. There is a 1p loop loophole that kills the Reeves ISA reforms. Holding just a single penny in stocks could help save it avoid 22% penalty on cash.

[00:01:57]Now, I don't know whether I should be happy that this uh loophole has come to light. You tell me whether we should be happy about this. I would have much preferred that they just let this through and then everybody exploited the loophole in the first place once everything had passed. But hey, we are where we are. But let's learn a little bit more about how this loophole works.

[00:02:18]So, this gives a little bit of background as well.

[00:02:20]Under the reforms to take effect next April, savers under the age 65 will have their cash ISA limit down to just £12,000.

[00:02:29]Although they will retain their full £20,000 annual ISA allowance via a stocks and shares ISA.

[00:02:35]Now, [clears throat] while savers will still be able to hold cash in stocks and shares ISAs under the changes, this is expected to be subject to a 22% charge on interest in a bid to discourage people from doing so.

[00:02:47]Good on the say, but the Telegraph understands that savers will be able to take advantage of a loophole for just 1p that will allow them to mimic cash savings in their stocks and shares ISAs and swerve the charge. These cash-like investments include money market funds which use low-risk assets such as cash deposits and gilts to gilts to offer returns similar to a cash savings account. They are often used by investors to inflation-proof their cash while seeking new investment opportunities.

[00:03:16]While the new rules will ban savers from holding 100% of their investable assets in these products, solicitors have told the Telegraph that investors would be able to circumvent this by holding just a penny's worth of stock. If a saver were to max out their cash ISA allowance of £12,000, this means they could put the remaining 7,999 like 99p of their annual ISA allowance into money market funds in a stocks and shares ISA and just 1p into the stock market, allowing them to avoid the tax charge on interest. In fact, if they chose to a saver could put 19,999 pounds 99p into a money market fund each year, meaning the extra penny will go into just a normal stocks and shares. Now, technically it wouldn't work like that because I'm sure there'll be minimums and stuff, but there is that's that is the loophole. Now, we have to talk about what Rachel Reeves potentially does off the back of this because what does she do? I mean, my fear would be that they completely ban, potentially, um particular products in wrappers like ISAs. I mean, would they go as far to ban or introduce a rule that limits the use of money market funds?

[00:04:43]I don't know.

[00:04:45]But, thinking about this just high-level right now, I'm sure that it would be an option that they would be considering as being on the table if it meant that they could close this loophole and still be able to levy a 22% interest charge on money sitting cash. The interesting thing to know when and this is what I don't know right now is from a forecast, and I'm sure they've done this exercise, they would have forecast how much they think a 22% levy on cash interest in a cash ISA would generate the government. I'd love to see that number.

[00:05:24]Cuz I'm sure it'll be in the billions somewhere. So, the question is if um closing the loophole allows them to generate X amount in billions in tax receipts via the ISAs, would they actually really consider restricting money market funds or similar funds like this to get this through. I don't know. I really don't know.

[00:05:53]And I suppose we've got to kind of like watch this space to see whether or not she's I don't want to say mad enough, but brave enough to do this.

[00:06:04]I don't know. You tell me what you think in the comments section down below.

[00:06:07]Overall, I think this is a good thing. I think this is a win for ordinary people, right? Because at the end of the day the ISA was the last semblance of an account that you had that meant that you could just put money away and you didn't have to worry about declaring stuff to HMRC. It was just tax-free and you could have it with with ease really to be honest.

[00:06:30]They're putting an end to this.

[00:06:32]And the question is how much further can they go in future budgets to extend this um limitation or impose more taxes in this tax wrapper.

[00:06:49]We already know that they're looking to replace the lifetime ISA with something that isn't going to be anywhere near as generous.

[00:06:57]ISA limits have been stagnant for years now. There's no sign of those ISA limits increasing in any way, shape or form.

[00:07:03]So, how much further can they push? And I think the autumn statement this year is going to be very, very interesting to to watch and to see what comes out, to see what else they need to do in order to increase revenues. There is this There is this fallacy that we're paying less tax than most that we're paying more tax than most of Europe. No, we're not. I mean, if you compare us to the Nordic Nordic states, we are behind. And a lot of economists for years have been saying we need to pay more taxes to support the kind of society that we want.

[00:07:33]But how far does that actually go? And here's the thing that I kind of want to end on, right? If you think about the last 6 years, we still have a cost of living crisis in 2026, right?

[00:07:41]And we have all of these external factors. We've got the Strait of Hormuz, we've got inflation, which is directly impacted by the Strait of Hormuz. If you think food prices have been expensive, energy prices and fuel prices have been expensive, you just wait until this stuff kicks off because I don't think anyone's prepared for what's coming down the track at the back end of this year in the UK.

[00:08:01]So, you got all of the external factors that if you're at home looking at your wallet, those things are putting pressure on whatever disposable income you had if you were lucky enough to have a disposable income, right? And then simultaneously you have a government that is actively plotting to close and exert extract more tax from a tax haven that you've been able to enjoy for the past good number of decades.

[00:08:27]It doesn't feel as though the government is on your side, right?

[00:08:33]And I don't think that's an understatement in any way, shape or form.

[00:08:37]Ah.

[00:08:37]Let me know what you think in the comment section down below. I think this is good news. I hope they take a very, very long time to figure this out ultimately.

[00:08:45]But um it will be interesting to watch this space to see what happens from here on out with this and how this develops.

[00:08:51]But I appreciate you for watching. Thank you so much. Enjoy your weekend. I'll catch you in the next one. Cheers.