From April 2027, new ISA rules will introduce a 22% tax charge on interest earned from cash deposits held inside stocks and shares ISAs, payable to HMRC. Under-65s will also face a reduced cash ISA subscription limit of £12,000 per year, while those aged 65 and over retain the current £20,000 limit and the ability to transfer money from stocks and shares ISAs into cash ISAs.
Experts criticise age 65 cut-off
The changes, announced by former Chancellor Rachel Reeves in the November 2025 Budget, aim to encourage more investment in stocks and shares. However, financial advisers have described the rules as “a complete dog’s dinner”, highlighting inconsistencies with the State Pension age, which is now 67.
Scott Gallacher, director of Leicester-based Rowley Turton, said: “If the government had aligned the cut-off with State Pension age, it would at least have had some logic. Instead, it has chosen the outdated age of 65. The government is effectively saying you are too young to receive your State Pension, but old enough to receive preferential ISA treatment. If there is a clear policy rationale for selecting age 65 rather than State Pension age, the government has yet to explain it.”
Concerns over cash interest charge
Even those aged 65 and over will be subject to the 22% charge on cash interest within stocks and shares ISAs. The government says this is to prevent people from using investment ISAs primarily as cash savings accounts. Older savers can transfer those assets into a cash ISA to avoid the charge, but younger savers cannot. The published guidance also appears to contain no transitional provisions for investors with fixed-term cash deposits that mature after April 6, 2027.
David Stirling, an independent financial adviser at Belfast-based Mint Wealth, said the rules would cause “chaos”. He added: “The new ISA rules are a masterclass in government policy that sounds coherent in a press release and disintegrates on contact with reality. Under-65s get a £12,000 cash ISA allowance, over-65s get £20,000, and the cut-off is not the State Pension age of 67 but the apparently magic number of 65, selected for reasons the government has yet to share with anyone.”
Advisers warn of complexity
Rob Mansfield, an independent financial adviser at Tonbridge-based Rootes Wealth Management, said ISAs were becoming unnecessarily complicated. He added: “Given all the problems the country faces, is this really the best use of the government's time? There's the ominous promise of a list of cash-like investments that will incur these charges to follow. The whole beauty of the ISA was that it's a simple concept. Tax free savings up to a limit.”
Nouran Moustafa, practice principal and IFA at Roxton Wealth, said the age-65 line was difficult to defend. She added: “The age-65 line is difficult to defend because it has no clear relationship with retirement, income or financial need. Two savers with identical circumstances could face different limits and transfer rights purely because one had a birthday last week. The 22% charge is even more problematic.”
Impact on savers
Harvey Dhillon, founder and CEO at Zmartly, urged people to check what cash is in their stocks and shares ISA. He added: “The only money this tax touches is the cash you were keeping safe. Your provider pays it to HMRC. You cannot claim it back. Picture a woman of 68 living on a small pension. Outside an ISA her £400 of interest is tax-free, covered by allowances she is not using. Inside the ISA she loses £88 of it, the full 22 per cent, even though she pays no income tax at all.”
Evren Ergin, founder and developer at ValuQ, said the rules would nudge savers towards unnecessary risks, particularly first-time buyers. He added: “Under 65s are the people saving to buy. Over 65s are overwhelmingly already in a home, often mortgage-free. So the group still trying to get on the ladder has its cash allowance cut to £12,000, while the group that already owns keeps the full £20,000.”
Antonia Medlicott, founder and MD of London-based Investing Insiders, called for more clarity, especially for those with money locked away until after the new financial year. She added: “The government has overcomplicated ISAs to the point where people with little financial knowledge feel they are inaccessible. ISAs have traditionally been one of the UK's simplest financial products, but these changes risk undermining that simplicity.”
