What ISA reforms were previously announced?
In the Autumn Budget in October 2025, chancellor Rachel Reeves announced a major reform to ISAs, a lower cap on Cash ISA allowance for under 65s. The £20,000 Cash ISA allowance will be available to over 65s, but for those under the allowance will drop to £12,000 from 6th April 2027. There are no changes to the ISA allowance for a Stocks and Shares ISA, the total allowance across all ISAs remains at £20,000 per annum.
New rules – subject to technical consultation
The new rules announced on 23rd June 2026, investors will be charged a flat-rate of 22% on all cash interest received in Stocks & Shares ISAs, regardless of how much cash is held.
If 100% of a Stocks & Shares ISA is held as cash, or cash-equivalent funds, it will be deemed a non-qualifying investment, losing the tax benefits associated with an ISA.
The cash interest loophole
Following this announcement, there was talk of how investors could navigate these rule changes primarily contributing the full £20,000 allowance to a Stocks and Shares ISA but leaving it uninvested, in cash.
HMRC response to the loophole
As such, HM Revenue and Customs have plans to ensure that savers will not try to bypass the announced changes by removing the ability to transfer from Stocks and Shares ISAs to Cash ISAs for under 65s.
There will be a short technical consultation, followed by the final legislation later in the year.
