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Money Wise UK — Policy Update

ISA Reform 2027: The New 22% Charge on Cash in Stocks & Shares ISAs

From April 2027, the government is closing a loophole. Here's what's changing, and what it could cost you if you hold cash inside a non-cash ISA.

What's happening

At Autumn Budget 2025, the government announced that the Cash ISA allowance would fall to £12,000 from April 2027, while the Stocks and Shares ISA and Innovative Finance ISA limit stays at £20,000. The overall ISA allowance remains £20,000.

To stop savers simply routing cash through a Stocks and Shares ISA to dodge the lower Cash ISA limit, HMRC is introducing anti-circumvention rules. The headline measure: a flat 22% charge on interest earned on cash sitting inside a non-cash ISA.

Key facts

  • Cash ISA limit (under 65) from April 2027: £12,000
  • Overall ISA limit stays at £20,000
  • Cash ISA limit for those aged 65+: stays at £20,000
  • Start date: 6 April 2027
  • Charge on interest earned on cash in a non-cash ISA: 22%

Why it matters

Three behaviours are being targeted: parking up to £20,000 cash in a Stocks and Shares ISA long-term, subscribing £20,000 to a non-cash ISA then transferring it into a Cash ISA, and using non-cash ISA subscriptions to buy wholly cash-like investments.

From April 2027, transfers from a non-cash ISA into a Cash ISA will no longer be allowed (transfers the other way will still be fine). Non-cash ISA portfolios made up entirely of cash-like assets, defined as money market funds, will also become non-qualifying. Ordinary shares, funds, investment trusts, ETFs and bonds are unaffected by that rule.

Anyone turning 65 keeps the higher £20,000 Cash ISA limit and is exempt from the transfer restriction, though the 22% charge on interest and the cash-like asset rule still apply.

What it could cost you

Use the calculator below to see the effect of the 22% charge on interest from cash held inside a Stocks and Shares ISA or other non-cash ISA.

Non-Cash ISA Interest Charge Calculator

Estimate the 22% charge on interest earned from cash held in a Stocks and Shares or Innovative Finance ISA.

Annual interest earned
£0.00
22% charge due
£0.00
Net interest after charge
£0.00

Next steps

A technical consultation on the draft legislation is expected shortly, with regulations laid in Autumn 2026 ahead of the April 2027 start date. If you're holding meaningful cash inside a Stocks and Shares ISA, now is a sensible time to review whether that's still the right home for it.

Important information This article is for general information only and does not constitute financial advice. Tax rules can change, and how they affect you depends on your personal circumstances. The calculator above provides an illustrative estimate only and should not be relied upon for financial planning decisions. Always speak to a regulated financial adviser before making decisions about your ISA or wider financial plan.
Money Wise UK · Bristol