From April 2027, the annual cash ISA subscription limit will be cut to £12,000 from the current £20,000 for savers under the age of 65, to encourage use of stocks and shares ISAs, which have been frozen at a £20,000 limit until April 2031.

To prevent tax avoidance with people shifting money between ISAs, HMRC will ‘charge [tax] on any interest paid on cash held in a stocks and shares or innovative finance ISA’.

Michael Summersgill, CFO at AJ Bell said this ‘could potentially mean stocks and shares ISAs, which allow people to hold cash can no longer be marketed as “tax-free”, weakening the appeal of the most popular investment account in the UK market’. 

Summersgill said taxing uninvested cash would ‘punish retail investors for using the stocks and shares ISA the way it was designed to be used’. 

U