Chancellor Rachel Reeves is planning to tax interest on cash held in stocks and shares ISAs, according to newspaper reports.
The change will take place next April 2027, alongside the already announced cut in the tax-free cash ISA limit from £20,000 a year to £12,000 for under-65s, the reports say.
Interest on cash in stocks and shares ISAs would be set at 22% to match the savings interest tax rate due to take effect in April 2027, it is suggested.
The Treasury has been approached for a comment on the story.
The number of people paying tax on savings interest has risen sharply in recent years, increasing from 1.2m in 2022-23 to a forecast 2.8m by 2026-27.
In last Autumn’s Budget Rachel Reeves announced that the amount of cash savings under-65s can put into cash ISAs will be capped at £12,000 from April 2027, with the rest of the £20,000 allowance reserved for investments.
People aged over 65 will retain a £20,000 cash allowance, under the change.
The new rules only affect new money being invested in ISAs, from 6 April 2027, not existing savings.
At the time Andrew Tully, technical services director at Nucleus, warned: “We’re in danger that ISAs are becoming too difficult and complex for people to understand and, perhaps more importantly, many of the restrictions caused by having multiple different variants puts barriers in the way of customers and the ability for them to simply and easily move from one type of saving to another as their experience develops.”
Claire Exley, head of financial advice and guidance at JP Morgan Personal Investing, said: “Part of the appeal of the ISA regime when it launched was its simplicity. If there is to be success for consumers in using both cash and investment ISAs to meet their financial needs, the government and industry must ensure no unnecessary friction or complexity for people trying to save or invest for their future.”
Following the Budget, HMRC confirmed in a newsletter that "cash-like" investments held in stocks and shares ISAs would face restrictions.
That would hit holdings such as money market funds, which offer marginally better returns than cash with minimal risk and are often used by investors waiting to buy shares.
Cash ISAs had a record year in 2025, with £57bn of money paid into the accounts, according to Bank of England Money and Credit figures.
December saw £5.2bn paid into cash ISAs – a record for a non-tax year end month. The high inflows were prompted by Budget rumours and the decision to cut the cash ISA allowance from April 2027.