Money expert warns ‘risks’ in new ISA rules – What to do before April | Personal Finance | Finance
A series of rule changes are set to affect ISA holders in the coming year, with the latest update introducing a 22% tax on interest earned on cash held in stocks and shares ISAs. The move is designed to close a loophole in the Government’s push to encourage more Britons to invest their money rather than holding it as cash savings.
However, one expert has warned that the growing number of rule changes could leave Britons bewildered and worse off, with a potentially greater risk on the horizon. Kevin Mountford, personal finance expert and co-founder of Raisin UK, said: “Any change to ISA rules risks creating confusion for savers, particularly when many people are already trying to make their money work harder in a higher-tax environment.”
He outlined the “key point” that savers need to grasp before next April — that cash ISAs are not “suddenly being taxed”. He added: “The key point for consumers is that this does not mean cash ISAs are suddenly being taxed. A cash ISA is still designed to let people earn savings interest tax-free, within the usual ISA allowance.”
Rather, the new update targets cash held within other ISAs, such as stocks and shares ISAs. The expert explained: “That could be uninvested money held within an investment account, rather than money held in a dedicated cash ISA.
“Someone using a cash ISA for their savings should not panic, but anyone holding large cash balances inside a stocks and shares ISA may need to check how their provider treats that money from April 2027.
“If people do not understand what type of ISA they have, where their cash is held, or how interest is treated, they could miss out on tax-free savings opportunities.”
Mountford urged savers to verify what type of ISA they possess and where their money is actually being kept. If you discover you have cash in a stocks and shares ISA, he recommended contacting your ISA provider to understand how the rule changes might impact you.
He said: “For savers, the priority should be to check what type of ISA they have and where any cash is sitting.
“If you are holding cash inside a stocks and shares ISA, particularly for a long period rather than as a short-term step before investing, it may be worth speaking to your provider about how the upcoming rule changes could affect you.”
The expert noted: “With the personal savings allowance unchanged and savings tax rates due to rise from April 2027, more people could find themselves paying tax on interest held outside an ISA.
“Consumers should not feel rushed into investing because of rule changes, but they should take this as a reminder to review their savings, compare rates and make sure they are using tax-free allowances where possible.”
