Investors are facing major changes to ISA rules from April 2027 as the government tries to foster a culture of investing in the UK.
The reforms, as confirmed in the 2025 Autumn Budget by chancellor Rachel Reeves, will see a new annual cash ISA limit of £12,000, down from the current £20,000 ISA allowance, for under 65s.
The £20,000 annual ISA allowance – which also covers stocks and shares, innovative finance ISAs and lifetime ISAs – will remain.
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A new 22% charge cash held within stocks and shares ISAs will also apply, while retail investors will be banned from having a stocks and shares ISA made up wholly of money market funds.
Under 65s will also not be allowed to transfer money from stocks and shares ISAs into cash ISAs.
However, how these new “anti-circumvention” rules apply to those aged 65 and over is more nuanced.
How will the new ISA rules apply to 65-year-olds and older?
Government guidance states that the 22% charge on interest earned on cash in a stocks and shares ISA will apply to those aged 65 and over.
Meanwhile, the prohibition on 100% cash-like investments (money market funds) will also remain in place for those aged 65 and over.
However, individuals aged 65 and over will be able to transfer money from stocks and shares ISAs into cash ISAs when the new rules come in from April 2027, unlike those aged under 65.
Jason Hollands, managing director at wealth management company Evelyn Partners, said the new rules were adding an unneeded layer of complexity for all investors and “undermine the tax-free promise”.
He added: “We've never had different rules applying to different people depending on age.”
Hollands welcomed that 65-year-olds and over will be able to transfer money from stocks and shares ISAs into cash ISAs when the new rules come into force, allowing them to free up more liquid cash and avoid paying tax on cash held within stocks and shares ISAs.
A HM Treasury spokesperson said: “Parking cash long term in a non-cash ISA to earn tax-free interest isn't investing. These changes will push more people towards investments that actually grow their money, and industry leaders including Nationwide and the Building Societies Association back us on this.
“Savers can still hold up to £12,000 in a cash ISA, and those 65 and over keep the full £20,000 allowance.”
How exactly do the new anti-circumnavigation rules apply?
The 22% charge on cash held within stocks and shares ISAs will apply to any interest paid on it.
A number of investment platforms such as Bestinvest, AJ Bell and interactive investor, pay interest on cash held within a stocks and shares ISA.
Individuals will not have to declare any interest paid to HMRC as it will be paid by investment brokers.
Cash-like assets, like money market funds, will be allowed within stocks and shares ISAs, so long as they don’t make up 100% of the portfolio.
Investments such as shares, funds, investment trusts, ETFs and bonds, including gilts, will not be treated as cash-like assets under the new rules.
Transfers from stocks and shares ISAs will not be allowed for investors aged under 65, although they will be able to transfer money from a cash ISA to a stocks and shares ISA. This rule doesn’t apply to investors aged 65 or over.
