Savers may be able to exploit a 1p loophole to avoid a crackdown on cash held in ISAs, according to reports. The annual cash ISA limit for under-65s is being cut from £20,000 to £12,000 from April 2027, but the overall ISA allowance remains £20,000, allowing savers to split contributions between cash and stocks and shares ISAs.
From April 2027, a 22% charge is expected on interest earned from cash held in stocks and shares ISAs. However, the Telegraph reports that this charge will only apply if 100% of investable assets are held in cash-like investments, including money market funds. This means a saver could theoretically invest £12,000 in a cash ISA, £7,999.99 in cash within a stocks and shares ISA, and just 1p in the stock market to avoid the charge.
HMRC had previously stated that cash held in stocks and shares accounts would face a charge on interest, but the rate had not been confirmed. A Treasury spokesman said: 'We are reforming the cash Isa to encourage more people to invest in stocks and shares... These changes will make people better off and will not require anyone to move existing savings from their Cash ISA.'
In addition, the rate of tax on savings interest in non-ISA accounts will rise from April 2027. Basic-rate taxpayers will see their rate increase from 20% to 22%, higher-rate taxpayers from 40% to 42%, and additional-rate taxpayers from 45% to 47%. The tax-free allowances of £1,000 for basic-rate and £500 for higher-rate taxpayers remain unchanged.
