Treasury confirms 22% charge on cash interest inside stocks and shares ISAs from 2027

The Treasury has announced a new 22% levy on cash interest held within stocks and shares ISAs, forming part of draft cash ISA reforms published on 23 June. The rules—now open for consultation—will take effect from 6 April 2027.

Key points

• 22% flat‑rate charge on cash interest or alternative‑finance returns inside stocks and shares ISAs
• Non‑cash ISA portfolios made up entirely of cash‑like assets will be classed as non‑qualifying
• Transfers from non‑cash ISAs to cash ISAs will be banned
• Cash ISA allowance for under‑65s to fall from £20,000 to £12,000 from April 2027
• Regulations to be laid in autumn 2026

Treasury confirms new ISA charge

The Treasury has confirmed that a 22% levy will apply to any interest earned on cash held within a stocks and shares ISA, as part of a major overhaul of the ISA regime. The measure appears in draft rules for cash ISAs released today (23 June) and will now enter a consultation phase before being finalised later this year.

The charge applies to both traditional interest and alternative‑finance returns generated on cash balances held inside a non‑cash ISA wrapper. The government says the change is designed to ensure stocks and shares ISAs are used for investment purposes rather than as a substitute for cash ISAs.

Cash‑heavy portfolios to be disqualified

Under the draft rules, stocks and shares ISA portfolios made up of 100% cash‑like assets will be treated as non‑qualifying investments. This closes off a loophole that allowed savers to shelter large cash balances inside an investment ISA without using the dedicated cash ISA product.

Transfer rules tightened

The reforms also introduce new restrictions on ISA transfers. Moving money from a stocks and shares ISA into a cash ISA will no longer be permitted, although transfers in the opposite direction will still be allowed. The Treasury argues this will prevent savers from cycling funds between wrappers in ways that distort tax treatment.

Return of a scrapped tax

The 22% charge echoes the previous ISA regime, under which HMRC applied a 20% tax on cash interest inside investment ISAs. That levy was abolished in 2014 as part of a simplification drive. Reports in The Telegraph last month suggested the government was considering reinstating a similar mechanism.

Allowance changes from April 2027

Alongside the new charge, the Treasury confirmed that cash ISA allowances for savers under 65 will fall from £20,000 to £12,000 from 6 April 2027. The full £20,000 limit will remain available for stocks and shares ISAs, a move intended to encourage longer‑term investment.

Next steps

Draft regulations will be laid before Parliament in autumn 2026, with the full package of reforms scheduled to come into force on 6 April 2027. Providers, advisers, and consumer groups are now invited to respond to the consultation.

Comment

What an utter shambles.  Yet again, consumers are discouraged from saving.  Yet again, the public will lose money with no ability to 'cash park' in times of stock market volatility.  Does anybody in the Treasury actually understand how investing works or is it just about what can we tax next?