The UK tax authority (HMRC) announces reforms to ISAs that introduce a new tax charge on cash interest held within stocks and shares ISAs. Under the plans, interest earned on cash inside these accounts would be taxed at a 22% rate. The changes are designed to address potential tax advantages being used to shelter cash returns within investment ISAs, particularly in light of new rules taking effect in 2027.
Alongside the tax on cash interest, the government also promises an additional ISA for first-time buyers. This proposed first-time buyer ISA would be available without an upper age limit, reflecting an argument that the typical age at which people buy their first home is rising. Current ISA rules allow individuals to invest up to £20,000 per tax year, with ISA structures enabling certain returns to be exempt from tax.
The announcements set out the broad policy direction for how future ISA accounts will treat cash held within stocks and shares wrappers and how eligibility for a new first-time buyer product would operate.
