Important information - investment values (and income from investments) can go down as well as up, so you may get back less than you invest.
ISAs are changing from April 2027. In a nutshell:
- The cash ISA limit will fall to £12,000 for under-65s
- Interest on cash held in stocks and shares ISAs will be charged at 22%
- Money market funds will not be allowed to represent 100% of an investment portfolio
We’ve received lots of questions about what this means for savers and investors. We tackle some of the most common ones below.
I already have money invested in a stocks and shares ISA which has performed well for me. After the rules change in 2027, if I sold all my investments and transferred the proceeds into a cash ISA, would I pay 22% tax on this money?
In short: no.
Selling investments within an ISA will not trigger a charge and, once the money has been transferred into your cash ISA, any interest it earns will still be tax free. The new 22% charge only applies to interest earned on uninvested cash held inside a stocks and shares ISA.
You need to pay attention to the small print, however. From April 2027, under-65s will no longer be able to transfer money from a stocks and shares ISA into a cash ISA. If you are under 65, this restriction could prevent you from carrying out the transfer.
At present I can earn up to £1,000 in interest before I need to pay tax. I have a stocks and shares ISA which, from time to time, has cash in it - dividend income waiting to be reinvested. Would any interest earned on my ISA be allowed without tax if taken within my £1,000 annual exemption?
Unfortunately not. The 22% charge is separate to the personal tax regime. In other words, your personal tax position and your savings allowance won’t matter. Everyone faces a flat 22% charge on interest from uninvested cash within a stocks and shares ISA.
I have a stocks and shares ISA, and I add a lump sum at the start of the tax year. Initially I invest it in money market funds and then every month, "drip feed" one twelfth of the amount into equities. Will I still be able to do this when the rules on what you can invest in your stocks and shares ISAs change?
You will indeed. From April next year, you will still be able to hold money market funds in your investment ISA, as long as they don’t represent 100% of your portfolio. From your question, it sounds like you will hold a mixture of equities and money market funds, which is fine.
Will my existing cash ISA, worth over £20,000 be affected by the ISA changes?
No. Any money already held in a cash ISA will remain sheltered from tax. The change relates to what people can contribute to cash ISAs going forward. From April 2027, the annual cash ISA allowance for people under 65 will fall to £12,000.
To prevent people getting around the new rules, under-65s will also be banned from transferring money from a stocks and shares ISA into a cash ISA.
Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one ofFidelity’s advisers or an authorised financial adviser of your choice.
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