HM Revenue & Customs (HMRC) is planning to introduce a charge for cash held in stocks and shares ISAs to prevent people from getting around the cash ISA allowance cut.
The taxman said a charge will be due “on any interest paid on cash held in a stocks and shares or innovative finance ISA”.
It is also planning to prevent transfers from stocks and shares ISAs and innovative finance ISAs into cash ISAs.
The UK government confirmed that the annual cash ISA allowance will be reduced to £12,000 per year for people under 65 from April 2027, as part of its autumn Budget earlier this week.
However, those over 65 will retain the full £20,000 limit for cash ISAs per year. The new rules preventing cash being held in investment accounts will also be restricted to under-65s.
Jason Hollands, managing director of Bestinvest by Evelyn Partners, said it is another “stealth tax” on UK savers and investors.
“The ‘tests to determine whether eligible investments are ‘cash like’ will throw doubt about access to money market funds within stocks & shares ISAs and could even bring short-dated bonds into question. More uncertainty lays ahead,” he added.
