ISA rules
Cash inside a stocks and shares ISA: the 22 % charge from 2027
Enter the cash waiting in your investment ISA and the interest rate paid on it. The tool shows the charge in 2026/27 and 2027/28 and what interest is left.
The 22 % charge on cash inside a stocks and shares ISA
Charge in 2027/28
£46.20
| Interest on the cash | £210.00 |
| Charge in 2026/27 | £0.00 |
| Interest kept from April 2027 | £163.80 |
The ISA manager pays the charge out of the account; it is not reclaimable and the Personal Savings Allowance does not apply.
Until 5 April 2027, interest earned on uninvested cash inside a stocks and shares ISA is as tax free as everything else in the account. From 6 April 2027, a new regulation 22A, inserted by SI 2026/1018, makes the ISA manager pay HMRC a flat charge of 22 % on any interest paid or credited on cash deposits held in a stocks and shares or innovative finance ISA. The rate is described as representative of the basic savings rate for 2027/28. It is taken whatever your age and tax band, and your Personal Savings Allowance plays no part, because the charge falls on the account, not on your tax return. On £6,000 of cash earning 3.5 %, that is £46.20 of a £210.00 interest payment. The same reform makes money market funds eligible for a stocks and shares ISA but forbids them from forming 100 % of its non-cash investments. Junior ISAs are excluded from the charge.
Sums checked by Radif Partners · Editorial policy · How the sums are done
Why the charge exists
From 2027/28, savers under 65 can put only £12,000 a year into cash ISAs. Without another rule, the remaining £8,000 could be paid into a stocks and shares ISA and simply left in cash, earning interest that no one taxes. The explanatory memorandum to SI 2026/1018 names large cash balances in non-cash ISAs as one of the ways the lower limit could be avoided, and the flat charge is the answer. The HMRC newsletter of June 2026 announced it alongside the ban on transfers from investment ISAs into cash.
The charge against ordinary tax
| Cash held | Interest at 3.5 % | Charge 2026/27 | Charge 2027/28 | Tax in a taxable account, £30,000 income | Same, £60,000 income |
|---|---|---|---|---|---|
| £2,000 | £70.00 | £0.00 | £15.40 | £0.00 | £0.00 |
| £6,000 | £210.00 | £0.00 | £46.20 | £0.00 | £0.00 |
| £15,000 | £525.00 | £0.00 | £115.50 | £0.00 | £10.50 |
| £40,000 | £1,400.00 | £0.00 | £308.00 | £88.00 | £378.00 |
The comparison shows an odd result for small balances. On £2,000 or £6,000 of cash, a basic rate taxpayer would pay nothing if the same interest arrived in an ordinary savings account, because it sits inside the £1,000 Personal Savings Allowance. Inside the ISA, the flat 22 % applies from the first penny. For a higher rate taxpayer the charge is lower than the 42 % they would pay on interest above a £500 allowance once the balance grows. None of this changes the fact that a cash ISA, within its own ceiling, carries no charge at all.
Who it reaches
The charge applies to stocks and shares ISAs and innovative finance ISAs, at every age. A saver aged 70, who could pay £20,000 into a cash ISA, still sees it on cash left inside an investment ISA. Junior ISAs are taken out of it: the amended regulation 2D of the ISA Regulations 1998 lists regulation 22A among the rules that do not apply to them. Cash ISAs themselves are unaffected.
Money market funds
Money market funds are the investment closest to cash, which is why the explanatory memorandum calls them cash-like. From April 2027 they are named as qualifying investments for stocks and shares ISAs, but the regulations bar them from making up 100 % of the value of the non-cash investments in an account. Managers will report to HMRC the value held in such funds. The 22 % charge deals with cash deposits; the 100 % test deals with portfolios that would otherwise be cash in all but name.
Related rules
The full list of changes is on the page on the April 2027 reform. The ceiling that sits behind all of this is on the cash ISA limit page, and the limits on moving money between ISA types are on the transfer page.