For many years people have assumed that any cash held inside a stocks and shares ISA enjoys the same tax free treatment as the investments themselves. From April 2027 that will no longer be the case, and it is likely to catch many investors by surprise.
- Cash inside stocks and shares ISAs will face a new tax charge
Draft legislation confirms that interest earned on cash held within stocks and shares ISAs will be subject to a new charge for investors under the age of sixty five from April 2027. The intention is to prevent people using investment ISAs as a shelter for large amounts of uninvested cash. This marks a clear shift away from the long standing assumption that all ISA cash is automatically tax free.
- The charge is expected to mirror the basic rate on savings interest
The proposed charge is designed to bring the treatment of ISA cash closer to the rules that apply outside the ISA wrapper. Although the final detail is still being refined, the expectation is that interest on uninvested cash will be taxed at a rate similar to the basic rate that applies to ordinary savings. This would mean that cash held inside a stocks and shares ISA will no longer enjoy the same simple tax free status it has today.
Final thought
The introduction of a tax charge on cash inside stocks and shares ISAs may prompt investors to rethink how they manage risk and how they allocate money within their ISA accounts. In the next article we will take a deeper look at what this change could mean in practice and how it fits into the wider reform of the ISA system.
Published on: 03.07.2026
Contact: Daniel Sperber at Coleshill Wealth Management
T: 01675 622 445
E: daniel@coleshillwealthmanagement.co.uk
The information contained in this blog is for information purposes only and does not constitute advice. Please seek financial advice before making any decisions. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a guide to future returns.