New ISA rules – how it may affect you

The way you invest in ISAs is changing from April 2027.

Individuals aged 18 or over will still be able to invest up to £20,000 per annum in an ISA but those under 65 will be restricted to a maximum of £12,000 into a cash ISA.  They will still be able to invest the balance of £8,000 in a stocks and shares ISA to reach the maximum of £20,000 per annum.  The Government think this will encourage young people into investing.

• Cash ISA – savings accounts where the interest is not taxable.
• Stocks and shares ISA – investment accounts where you do not pay either capital gains tax on any share growth or currently, income tax on any income.

Those investors over 65 can continue to invest the full annual allowance of £20,000 into a cash ISA after April 2027.

In addition to the above changes, on 23 June the Government announced further changes to interest earned in non-cash ISAs (such as stocks and shares ISA).

From April 27 interest earned from any cash held in a stocks and shares ISA will subject to a 22% charge.  This is to prevent investors using non-cash ISAs like the cash ISA once the new ISA limits come into effect (i.e. leaving cash sitting in a stocks and shares ISA rather than investing the funds).

The rules apply to all ages including those over 65.

HMRC have confirmed that you will not be able to off set your personal savings allowance (currently £1,000 per annum for basic rate taxpayers and £500 for higher rate taxpayers) against the charge.  Your ISA provider will pay the charge directly to HMRC.

The new rules also prevent investors from transferring money from a stocks and shares ISA into a cash ISA.  Again, this only applies to those investors under 65 years of age and comes into effect from April 27.  The restriction is lifted during the tax year in which the investor turns 65.

Please contact us if you need any further information.