Major ISA shake-up: what the Treasury’s new rules mean for your savings

Important changes to ISA rules announced by the Treasury

The Treasury has confirmed plans to introduce a 22% levy on cash interest held inside Stocks & Shares ISAs. These proposals form part of a new set of draft rules published on 23 June and are now open for consultation.

Under the draft rules, any interest or alternative finance return generated from cash held within a non‑cash ISA would be subject to a flat 22% charge. In addition, ISA portfolios made up entirely of cash‑like assets would no longer qualify as permitted ISA investments.

Restrictions on ISA transfers

• Transfers from Stocks & Shares ISAs into Cash ISAs will no longer be allowed
• Transfers from Cash ISAs into Stocks & Shares ISAs will still be permitted

These changes are expected to take effect from 6 April 2027, with final regulations due in the autumn.

The 22% levy mirrors the previous ISA regime, where cash interest inside a Stocks & Shares ISA was taxed at 20% before being abolished in 2014.

Cash ISA allowance changes

From 6 April 2027, savers under age 65 will see their annual Cash ISA allowance reduced from £20,000 to £12,000. The full £20,000 allowance will remain available for the Stocks & Shares ISA.

New ISA for first‑time buyers

The Treasury has also launched a consultation on a proposed “simpler ISA” aimed at supporting first‑time buyers. Further details are expected later in the year.

Industry reaction

Industry bodies have expressed concern that the reforms may add complexity rather than simplify the ISA landscape:

• PIMFA described the measures as “draconian anti‑avoidance rules” that risk discouraging new investors
• AJ Bell commented that the opportunity for meaningful simplification has been “missed”, warning that the changes may reduce flexibility and widen the divide between cash and investment ISAs

Many commentators fear that the reforms could prompt savers to move prematurely into cash before transfer restrictions take effect, potentially undermining long‑term investment planning.

Despite this, the Stocks & Shares ISA is still expected to remain a straightforward and effective option for long‑term investors, with the industry anticipating that practical issues will be ironed out over time.