HMRC To Soften Rules On Taxing Cash In Stocks And Shares ISAs

In November 2025, the government revealed plans to reform ISA rules, with a focus on addressing the way cash is held within stocks-and-shares ISAs. The Labour Party Chancellor, Rachel Reeves, introduced a new £12,000 limit for cash ISAs for those under 65 during the most recent Budget.

The changes were designed to encourage longer-term investment and reduce strategies that could circumvent the new cap. Proposed policies included banning transfers from other ISAs into cash ISAs, defining investments that are

'cash-like' within stocks-and-shares ISAs, and introducing a charge on interest earned on cash held in these accounts. HMRC stated the measures were to 'prevent circumvention of the new lower cash ISA limit'.

Industry response to initial plans

The proposals led to concern among investment platforms, who argued that the changes could complicate ISA offerings and burden retail investors.

Industry representatives highlighted that stocks-and-shares ISAs often contain some cash for transactional purposes, and penalising this could deter customers or reduce participation in the retail investment sector.

Michael Healy, UK and Ireland managing director at IG Group, noted that platforms already track cash balances and interest payments within ISAs, which could enable proportionate oversight. 'Rules should distinguish between everyday transactional cash and long-term idle balances,' Healy said.

Government and industry discussions

Following meetings between investment platforms and government officials, there was growing optimism that HMRC would reconsider the initial approach.

According to reports from senior executives at leading platforms, feedback from the sector was taken onboard and officials 'showed more willingness to wait and see,' one said.

Another large provider reported feeling 'a lot more confident [HMRC is] coming around than we were this time two weeks ago,' suggesting a shift towards moderation in policy implementation.

Perspectives from investment platforms

Some industry experts argued that overly strict measures could harm the appeal of stocks-and-shares ISAs. Tom Selby, public policy director at AJ Bell, commented that 'a heavy handed approach to anti-avoidance measures' could undermine government ambitions to boost UK retail investment.

Meanwhile, Alex Campbell, Freetrade’s head of external affairs, stated, 'Cash-like securities are a perfect stepping stone into investing,' emphasising the role of cash holdings in encouraging new investors to use ISAs.

Concerns over anti-avoidance measures

While investment platforms largely called for greater flexibility, representatives from saver groups stressed the need for effective oversight. Isobel Gordon, savings policy manager at the Building Societies Association, warned,

'There must be clear safeguards to ensure this does not create a workaround to the lower cash ISA limit, which could undermine the reform’s objectives and blur the distinction between products.'

Government officials acknowledged these issues, reiterating that any changes would seek to 'encourage greater investment in stocks and shares,' while still 'preventing circumvention of the new lower cash ISA limit'.

Next steps for ISA rule changes

The government has stated that they are collaborating closely with industry experts as revised ISA guidance is prepared.

Final regulatory details are expected to be published before the rules come into force. Until then, industry stakeholders and savers alike await further clarification.