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?

What problem do you wish you had?

Well yes. They’re encouraging investment and using the S&S ISA as a stealth tax ISA would be avoiding tax.

The way the UK is now, the amount of people with uninvested cash in a stocks and shares ISA is probably pretty small. Nearly half the adult population has less than £1k in savings. So it is a fringe issue really.
https://www.finder.com/uk/savings-accounts/saving-statistics

Admin wise it’s going to be a pain though. Lots of platforms suggest you keep a sum uninvested to pay fees. I tend to have around £100 uninvested in cash. Now I do get some interest on that so say about £4 a year. She is more than welcome to take the 80p off me in tax but it’ll cost a hell of a lot more in admin if I need to suddenly start doing a tax return to pay it. I’m sure I can’t be the only one. For ease, I imagine they providers will have to more to paying no interest at all on invested cash as otherwise it’ll be such a ball-ache for everyone.

Oh go away with your facts and figures, it obvious the OP just wants a Daily Fail rant about how mean it is to expect money invested in a stocks and shares ISA to actually be invested in stocks and shares. By the way it's a crap way of investing cash, it uses up your ISA allowance and you can match the tax free interest rate with the rate from national savings bonds after tax. The only reason there should be cash in a s&s isa, is if it's waiting to be invested/paid out, or the small amounts held to pay fees and residuals from transactions

I am glad to see it. Good to stop the loopholes. We need investment in our NHS, schools, care sector and this is a justified way to it IMO.

Being cash rich is often a poor financial decision on a personal level too though.

At the moment cash is not too bad. Inflation is 2.8% and the best cash ISAs are paying ~4.7% so about 2% gain in real terms.

But all through the 2010s while inflation was low, interest rates were rock bottom. And then 2021-2023 although interest rates increased, inflation sky rocketed.

Any cash savings over the last 5, 10 or 20 years will almost certainly have reduced in real terms.

That's not to say that cash is not useful as a sort of personal insurance against financial shocks - such as job loss - or to pay for planned purchases, but it's not the way to build wealth in the long term.

I see. Thanks.

The full set of ISA changes announced by the chancellor are estimated to bring in £100 million. That’s about 4 hours of NHS spending for context

So what? Should we just let £100 million in tax go unclaimed? Because the NHS costs a lot of money?

I suppose with tax it’s the opportunity cost - if the 100m is invested in a company and encourages employment or allows the company to invest in new infrastructure and it leads to greater profits and work being given to smaller firms which leads to higher IT/CT/NI on an ongoing basis then that would be a better use

Any idea if Money Market Funds will count as cash? Given how useless bonds are I like to have a % of my portfolio in MMFs as a cushion to invest in advent of an eocnomic shock, it helps me sleep at night.

Anything thats not invested will be cash. If you want cash savings to help, you need to accept the limit then pay tax

I am not entirely clear whether MMFs count as investments or not though. It acts like cash but does invest in short term debt.

But aren't the govt reducing cash ISAs to encourage more investment in S&Ss ISAs?

I don't understand this proposal.

We're all being encouraged to move investment to S&S ISAs, but now the interest earned on a S&S ISA is going to be taxed at 22%?!

Am I understanding this right because it doesn't sound very appealing to savers.

No.

The interest earned on uninvested cash will be taxed.

The issue is that people will just circumvent the cash ISA rules by putting their cash in a S&S ISA and not actually investing it. This closes that loophole.

No - only the interest on cash held in an s&s isa will be taxable. The return on the S&s will not be

Hang on @EvangelicalAboutButteredToast you’re upset, understandably, about losing your job due to cuts, but are also pissed off at tax rises to fund government spending? You are like my DSD who is horrified that her Mum had to pay inheritance tax on her GM’s estate (well over £1m) but also is raging about her student loans. How the fuck does anyone think public spending is funded?!

This isn’t a revenue raising tax - it’s a tax to influence behaviour

It’s baffling.

My favourite is pensioners whining that the triple lock will take them over the personal allowance, while also wanting that and their WFA! Where do they think it comes from?!

Index linked Gilts would be the obvious choice for anyone who doesn’t want high risk investment within a Stocks ISA.
Not particularly exciting but they will keep up with inflation as long as you keep them until maturity and you are lending HM Govt your money, so you are investing in the UK.

Reeves should allow people to invest in bonds that go directly to the UK government at a good rate instead with a good guaranteed return and no tax. So incentivise people to do that. Use carrot not stick! When will she ever learn
If people have too much cash allegedly use it to pay off government debt and keep everyone incentivised.

Also, the stocks and shares ISA should allow a percentage of cash tax free but not above what could be in a cash only ISA. So let’s say your ISA is 20 years old there should be a max figure you can keep in cash bonds. Some people have invested into 5 year fixed cash bonds with banks when interest rates were high - she can’t exactly go tax them retrospectively. Would be a very bad call.

Being cash rich is great if you're approaching retirement.

We are cash rich. All our adult lives we have been advised to save for retirement (by the govt) so we did and there has been an inheritance too.
We now have enough to help out our children and see us both out.

I'm not massively impressed Labour and their new taxes.

Sounds fair enough really

Billionaires