Treasury officials have confirmed that crucial details about changes to ISA allowances will be released before summer, addressing what MPs described as 'serious confusion' over the new rules. The government is yet to publish specifics on how the tightened tax rules will work, including measures to prevent savers from holding 'cash-like' deposits in stocks and shares ISAs.
Background of ISA Changes
Labour announced at the Autumn Budget 2025 that the ISA allowance would be tightened. Under current rules, savers can deposit up to £20,000 per tax year into ISAs, splitting this between cash ISAs and stocks and shares ISAs. From April 2027, only £12,000 of the allowance will be freely available, while the remaining £8,000 will be restricted solely to investments and no longer accessible for cash deposits. Savers aged 65 and over will be exempt and retain the current allowance.
HMRC's Proposed Anti-Circumvention Measures
HMRC previously outlined rules to avoid circumvention of the lower cash ISA limit, including:
- No transfers from stocks and shares and Innovative Finance ISAs to cash ISAs
- Tests to determine whether an investment is eligible for a stocks and shares ISA or is 'cash like'
- A charge on interest paid on cash held in a stocks and shares or Innovative Finance ISA
However, specific details on how these will work have not yet been released.
Parliamentary Questions
During a Treasury Committee hearing, chair Meg Hillier pressed ministers for clarity. She said: 'There is now some serious confusion arising about what happens to the dividends from a stocks and shares ISA and, particularly, how you define the money held in cash-like investment ISAs. What is happening? It is very confusing. We are in June already and this is supposed to be coming in next April.'
Economic Secretary to the Treasury, Rachel Blake, responded: 'I recognise the problem. We will be coming to you soon with the next steps on this. I appreciate that is not what you want to hear and perhaps may not be sufficient.' Ms Hillier expressed dissatisfaction, questioning whether the government had foreseen the confusion before introducing the change.
Ms Blake assured that the issue had been anticipated and that more details were 'imminent'. Dan Rusbridge, deputy director of the personal finances and funds team at HM Treasury, added that the ISA allowance changes are part of a 'package of measures' to encourage UK savers to invest. Regarding 'cash-like' holdings, he said: 'In particular, there are questions about how we treat cash-like investments... Trying to square that circle has been a tricky policy challenge. We will be coming out with details on that very soon.'
Timeline for Announcement
When asked whether 'very soon' meant before summer or autumn, Mr Rusbridge confirmed: 'Certainly before that. It will be very soon.' Ms Hillier also raised concerns about reports suggesting a 22% tax rate could be imposed on cash-like deposits within a stocks and shares ISA. Ms Blake dismissed this as 'just rumours'. Mr Rusbridge reassured that the upcoming announcement would provide 'precise details' on all anti-circumvention rules so that ISA managers can prepare for the changes in April 2027.
