Chancellor Rachel Reeves has come under fire from financial experts over newly announced ISA reforms, with critics arguing the changes will have the opposite effect to what the Government intends. The plans, confirmed by HM Revenue & Customs (HMRC) on June 23, 2026, introduce a 22% charge on interest earned on cash savings held within non-cash ISAs, including stocks and shares ISAs, effective from April 2027.
New 22% Charge on Investment ISAs
The charge applies to all investment ISA holders regardless of age. This follows the Government's earlier decision to reduce the tax-free Cash ISA allowance from £20,000 to £12,000 from next year, except for savers over 65. The policy is designed to prevent savers from using investment ISAs as a cash storage vehicle once the Cash ISA limit is lowered.
However, experts say the move will likely deter investment rather than encourage it. Wander Rutgers, UK CEO of investment platform Lightyear, told Investment Week: "The government is selling these ISA reforms as a way to get more people investing, but they will do the opposite. The single biggest reason people do not invest is that it feels complicated, and these rules pile on more complexity, not less."
Complexity Deters Investors
Anna Macdonald, investment strategy director at Hargreaves Lansdown, echoed this sentiment, stating: "It is hard to see how adding this level of complexity will encourage more people to invest in stocks and shares." She added that the new rule makes investing even harder to understand, potentially intimidating savers.
Kevin Mountford, personal finance expert and co-founder of Raisin UK, warned: "Any change to ISA rules risks creating confusion for savers, particularly when many people are already trying to make their money work harder in a higher-tax environment." He advised savers with cash in a Stocks & Shares ISA to check with their provider how the money will be treated from April 2027.
Advice for Savers
Mountford recommended: "For savers, the priority should be to check what type of ISA they have and where any cash is sitting. If you are holding cash inside a stocks and shares ISA, particularly for a long period rather than as a short-term step before investing, it may be worth speaking to your provider about how the upcoming rule changes could affect you." He cautioned against rushing into investments due to rule changes, but urged savers to review their savings, compare rates, and make use of tax-free allowances where possible.
