Cash held in stocks and shares ISAs to be hit with 22% charge on interest from April 2027

Listen: Martin explains the upcoming ISA changes

Under-65s will only be allowed to save £12,000 in cash ISAs

Everyone in the UK aged 18 or over gets a £20,000 ISA allowance at the start of each tax year.

• Cash ISAs are savings accounts where the interest isn't taxable (and doesn't count towards other taxable allowances).

• Stocks and shares ISAs are investment accounts where you don't pay tax on the investment growth or, currently, on any income (and again, any gains made do not count towards other taxable allowances).

From April 2027, under-65s will only be allowed to have a maximum of £12,000 of the £20,000 annual limit in cash ISA savings, though they will be able to put the rest in shares ISAs if they choose. This is on the back of the Government trying to encourage younger people to invest more.

MoneySavingExpert.com's Martin Lewis says the aim to get people to invest more is a good one, but it should've been done by a "carrot, not stick" method.

The Government has just (on 23 June 2026) revealed more technical details of how this will work, which we run through below.

Separately, the Government has also announced (also on 23 June 2026), more information on its plans to replace the Lifetime ISA with a First-Time Buyer ISA.

Cash in stocks and shares ISAs will no longer be treated like cash ISA savings for all ages

From April 2027, you will be taxed on interest earned on cash held in a non-cash ISA, such as a stocks and shares ISA or innovative finance ISA.

The Government says this is to prevent people from using non-cash ISAs like cash ISAs once the cash ISA limit is reduced.

Under the plans:

• You'll be charged 22% on any interest you make on cash held in a non-cash ISA.

• This 22% charge will also apply to any "alternative finance returns", for example Sharia-compliant returns.

• The charge WON'T apply to returns made on Money Market Funds, which invest in short-term debt securities.

These rules will continue to apply even after you turn 65, meaning older savers will still face the 22% charge if they hold cash earning interest inside a non-cash ISA.

Your tax-free Personal Savings Allowance, which lets most people earn up to £1,000 in interest without paying tax on it, does not apply to any growth or interest paid in an ISA.

Under-65s WON'T be able to transfer money from shares ISAs to cash ISAs

From April 2027, under-65s won't be able to transfer money from non-cash ISAs to cash ISAs. However, you WILL still be able to do the reverse – moving money from cash ISAs into non-cash ISAs. This transfer restriction will be lifted from the start of the tax year in which you turn 65.

Money Market Funds won't be hit by the 22% charge – but there will be limitations on them

Money Market Funds are somewhat similar to a savings fund, but within the investment market. They can currently be held in shares ISAs. But from April 2027, you will no longer be able to hold ALL your shares ISA assets in Money Market Funds.

Yet the regulations don't prescribe a minimum or fixed percentage for other investments, so in theory it could be possible to invest 1p in another qualifying investment.

Short-dated gilts won't count as 'cash-like assets'

The Government has said "cash-like assets" will be defined as Money Market Funds only.

There had been speculation that short-dated gilts – UK government bonds held for a couple of years until maturity, which many use as a relatively safe way to earn interest while paying less tax than savings – would be included in this definition. But they haven't been.

We now know what 'age 65' means for cash ISAs

From 6 April 2027, the annual cash ISA limit will fall from £20,000 to £12,000 for under-65s specifically, as set out during last year's Autumn Budget.

The Government has now announced that the £20,000 cash ISA entitlement will start in the tax year in which you turn 65.

Martin had called for an allowance for older savers when plans to cut the cash ISA limit were mooted.

Martin had also suggested a 'starter investment ISA' as an alternative to cutting the cash ISA limit and in a bid to encourage people who've never invested to dip their toe in the water.

The annual limit on non-cash ISAs will remain at their current levels – so £20,000 for stocks and shares and innovative finance ISAs, and £4,000 for Lifetime ISAs. The overall annual ISA limit will also remain at £20,000.