Should I use cash in my ISA or Cash Management Account to pay fees?

Q: Like many investors, I currently keep a small amount of my ISA investments in cash to cover the platform fees. From April 2027 this cash will be subject to tax on the interest accrued. I also have a SIPP, and the fees for both accounts can be taken from my Cash Management Account. This means I'll need sufficient funds to cover the fees for both. Would it be financially advantageous for me continue paying fees from the cash in my ISA, or would it be better to hold money in my Cash Management Account and pay the fees from there?

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A: This is a question many investors may be thinking about ahead of the planned ISA changes in April 2027.

So far, we know that the government plans to change some rules around ISAs from 6 April 2027. These include reducing the cash ISA allowance to £12,000 for under-65s, as well as plans to introduce a 22% charge on interest paid on uninvested cash held in stocks and shares ISAs.

The lower cash ISA limit will affect how some people save. However, your question concerns cash held within a stocks and shares ISA.

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What’s changing for cash held in stocks and shares ISAs?

First of all, it’s important to clarify that the overall stocks and shares ISA allowance will remain at £20,000 for everyone.

What is changing is how cash is treated inside a stocks and shares ISA. From 6 April 2027, the government plans to apply a 22% charge to interest paid on uninvested cash held in stocks and shares ISAs. This does not mean investors cannot hold cash in a stocks and shares ISA. But it does mean interest paid on that cash will be treated differently.

This is because the government essentially wants to prevent people using an investment ISA to store lots of cash and leaving it there for long periods earning tax-free interest.

So, should you use the Cash Management Account instead?

Holding money for fees in your Cash Management Account may be a practical choice, especially if you hold both an ISA and SIPP.

It allows fees for both accounts to be paid from one place. It can also reduce the need to take cash or sell investments to make up fees within those accounts.

Paying fees from your Cash Management Account can also help keep more money inside your ISA or SIPP. If fees are taken from either account, that money leaves the tax-efficient wrapper. Paying them from your Cash Management Account instead means your ISA and SIPP savings can remain in place.

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Is it financially better?

Not necessarily. This will depend on your circumstances.

It’s up to you whether you keep paying fees from cash in your ISA and SIPP or use your Cash Management Account instead. However, from 6 April 2027, interest paid on cash in a stocks and shares ISA will face a 22% charge. This means the change could affect you if you continue holding cash in your ISA to cover fees.

On the other hand moving that cash to your Cash Management Account does not automatically mean you will pay no tax. The account is not an ISA or pension, so any interest paid may also be taxable. This will depend on your personal tax position and any allowances available to you.

In short, using the Cash Management Account could be a sensible way to manage fees across both accounts as it can help keep more of your ISA and SIPP savings in place while making sure fees are collected smoothly.

But whether it’s financially better will depend on how much cash you hold, the interest paid, your tax position and how you want your ISA and SIPP invested.

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• Read: Cash ISA cut: what does it mean for savers?
• Read: ISA changes - your most popular questions answered
• Read: Can you pay into a Junior ISA and an adult ISA in the same year?

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). 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 of Fidelity’s advisers or an authorised financial adviser of your choice.