Hold onto your hats, rumours swirling that Rachel Reeves is looking into ANOTHER tax and if you have savings .. she might be coming for you.

[EvangelicalAboutButteredToast]

Yep, it’s another Labour tax! I know everyone felt very positive about the last one I posted: proposed tourist tax to make your staycations potentially more expensive on top of her also targeting holidays abroad by increasing air passenger duty plans to charge 20 per cent VAT on the fees airports charge airlines for using runways and terminals which will of course be passed onto customers.

Now for the savers.

Rumours are circulating that Chancellor of the Exchequer Rachel Reeves is planning to impose a new 22% charge on interest earned from cash held in a Stocks and Shares ISA from April 2027.
While nothing has been confirmed yet, here’s what could change and what it could mean for you.
What is the proposed 22% charge on cash in a Stocks and Shares ISA?
Currently, any cash you hold inside a Stocks and Shares ISA, whether that’s uninvested money sitting on the side or interest earned from cash-like products, is completely tax-free.
But now that could be about to change.
Reeves is reportedly planning to impose a 22% tax charge on any interest earned from cash held inside a Stocks and Shares ISA, starting from April 2027.
Following the Cash ISA allowance cut from April 2027, announced in the 2025 Autumn Budget, the government wants to stop savvy savers from parking their cash inside a Stocks and Shares ISA to dodge the new Cash ISA limits (more on those below).
However, this isn’t entirely new ground.
Before 2014, a 20% charge applied to cash interest inside Stocks and Shares ISAs. The new proposal would bring that back — only this time at 22%, in line with the incoming savings interest tax rate change from April 2027.
Why is Rachel Reeves changing the ISA rules?
The government thinks the UK general public saves too much and invests too little.
Compared to other G7 nations, British households have historically kept a much larger portion of their money in cash savings rather than putting it to work in the stock market.
Reeves wants to change that and turn us into a nation of investors, rather than savers.
And she’s hoping that with more retail investors, it will mean more money flowing into UK businesses, driving growth and boosting tax receipts.

https://blog.investengine.com/rachel-reeves-tax-cash-in-stocks-and-shares-isa/

Was also being discussed on LBC This morning. Everyone still happy?

Reeves wants to change that and turn us into a nation of investors, rather than savers.
And she’s hoping that with more retail investors, it will mean more money flowing into UK businesses, driving growth and boosting tax receipts.

If Labour want us to invest like the Americans invest. Something needs to change at London Stock Exchange, their levy is higher than New York. Brokers are charging higher commission rates. Also a big part of the cost of a deal is Stamp Duty, will the government remove this?
We trade on New York with an American Broker with no commission. Almost Free, a few cents only.

I fear you may be right.
They are the most incompetent Labour Govt. of my lifetime and I go back to Harold Wilson's first government.

Well they’re more likely to Introduce a financial transaction tax to completely kill it off!!

I doubt many do have a 'load of cash parked' in a S&S ISA, as the interest rates are generally much lower than can be obtained elsewhere. They would just put it in the cash ISA paying the best rate. My current S&S ISA pays 1.75% interest on any cash in there; much higher rates are available in cash ISAs.

I currently have a chunk of cash in my S&S ISA as I have just topped it up and I’m still researching what I want to buy with it. Dividends also mount up and there is no point investing them until you have a decent amount as the fees etc make it uneconomical.

This latest tax grab from Labour will just make administrating S&S ISAs more expensive and those costs will be passed onto us, the customers, so it’s a double whammy.

I wish I had this problem.

Some keep a small cash balance from which any fees are deducted - saves the platform selling off some assets to cover your fees which may not always be a timely sale.

This is just to stop people getting round the new lower cash ISA limit by using a S&S ISA for cash. Just use a money market fund or buy short-dated gilts if you want low risk.

I agree S&S not the right vehicle for cash. However, there are legitimate reasons for holding cash on your account, such as paying platform fees, waiting for right investment opportunity, or starting to de-risk before a large purchase such as a house or retirement.

My issue with it, is yet more complexity. We want people to invest but marketing the S&S Isa as a tax free wrapper becomes impossible when there are carve outs. It's also off putting when alot of the public are very nervous about investing and how complex it is.

And really how much cash will this raise? Feels like tinkering around the edges. We're surely heading towards raising income tax to pay for the government's massive debt bill, so maybe just get on and do it.

You can put £12k per year in a cash ISA (£20k if over 65)

Why do over 65s have a higher rate?

Because investing in s&s is a long term strategy and not advised for short term - and once you get to 65….

@BeardySchnauzer but you can chose low risk S&S investments and life expectancy is still early 80s

Sure but they are trying to support saving for retirement.

it would be interesting to see the statistics on how much people save pa into an isa of either variety

I'm as despairing about the economic literacy of this government as the next person, but this move seems entirely logical to me. You used to be able to put £20k into an ISA, either cash or stocks/shares (or a combination). When they reduced the cash limit to £12k, which again makes sense if you want to encourage longer term investing, it was inevitable that some people (and investment platforms) would see an opportunity to hold cash type investments/savings in a stocks and shares ISA to still get the £20k allowance. Making interest on cash held in stocks and shares ISAs makes perfect sense to close that loophole.

I am actually surprised, and slightly bewildered, that they didn't go further and introduce lifetime allowances on both cash and stocks and shares ISAs. It seems unnecessarily generous to allow someone to build up seven figure sums in tax free savings, and even the new lower £12k cash limit could easily mean that someone, over a working life, could shelter half a million in cash from tax. Sure, encourage saving, but the focus has to be on getting low/mid earners to save more, not allow high earners to shelter more. And I say that as someone who would have definitely been disadvantaged had lifetime limits been introduced. I think £250k held in cash ISAs, and perhaps £500k invested in S&S ISAs, would be an entirely reasonable tax free limit. It's way beyond the amount someone on average earning will ever save from post tax income I think.

And to cover the desire by some to de-risk by switching from equities to cash in old age (although when one could be retired for 40 years that itself is risky IMO) then you just allow anyone over 60/65/70 or whatever to move money in a S&S ISA to a cash one

@BeardySchnauzer I just think they should be encouraging people under 65 to save for retirement too since many pensions are crap these days.

If you are over 65 you can move funds from S&S to cash ISAs.

Yes but for younger people they will be better off saving in s&s

ultimately we need better financial literacy in this country so people can make good decisions for their future

It shouldn't. Cash isn't a stock or share.

Those 10,000,000 immigrants need their housing and benefits paid for somehow.

GOOD.

Rich people need to pay more tax.

It's actually currently £20k for everyone. The £12k cap on cash ISAs for adults under 65 starts for the 2027/28 tax year.

I don't necessarily disagree with the over 65s retaining the higher cap (when you're drawing down from a pension it is wise to keep more cash to avoid having to make withdrawals when the stock market drops) BUT given the reaction when the Winter Fuel Payment was due to be income assessed or the lack of discussion by politicians around removing the pension triple lock, I would imagine that appeasing the retired vote was also a decision.

Sadly no politician is going to remove the triple lock and that’s what’s going to bankrupt the country. Or lead to means tested state pensions

Is there much difference in the wider economy?
If I put money in a cash ISA surely the bank invests it somewhere anyway?

They will remove it just not for current pensioners

I follow this stuff closely and I predicted the Lizz Truss interest rate jump, we were able to fix for five years just before, on my insistence, DP was going to ride the variable rate which would have been disastrous.

They don’t want people to be cash rich. They want to try and corrale people into investing their money as the economy is stalling and the only reason we’re not officially in recession is because they cook the figures at the beginning of every year.

Definition of ‘rich people’ please.