S&S vs Cash ISAs

[PrimSec]

So from what I can tell, you’re allowed to transfer S&S isas into Cash isas and vice versa.

So what is the point of the new cap on the Cash portion? Can’t you just get around it by putting the extra 8k into a S&S ISA and then transferring it back to Cash?

Are they just relying on the fact that people don’t really understand their options? Which might be a reasonable strategy, given the number of people who seem confused about the difference between the yearly allowance and the total already invested…

No, you won’t be allowed to transfer money from a S&S ISA into a cash one.

The official line is that they want us investing in S&S ISA’s.

But I suspect they believe that the majority of cash ISA savers are risk averse and will be putting the money that can’t be put into a cash ISA’s into savings accounts, therefore there’s more potential for them to gain revenue from tax on interest.

But they haven’t mentioned that you can’t move money from S&S to Cash. At least I haven’t heard anything about it? As that’s currently allowed, that would be a major change.

I read that on MSE. I guess there was a document published with more details.

https://www.moneysavingexpert.com/news/2025/11/cash-isa-limit-cut-martin-lewis-budget/

Ah, yes, then that changes things. I hadn’t seen it anywhere, but makes sense. So now we’ve lost that flexibility.

Perversely it’s making me a bit wary of putting the rest of my allowance (the 12k bit) into a S&S if that means I’ll never be able to get it back into cash if I wanted to!

But hopefully it will be a successful policy and drive more investment. We need to start seeing some growth somewhere.

Trading shares with other investors is not going to benefit the companies whose shares are being traded.

For that you would have to invest directly into the company. One of the vehicles designed to do that are venture capital trusts. Because of their high risk they provided income tax relief. RR has just cut this tax relief by a third!

Many investment firms like Trading 212 and HL let you earn interest and save cash as ‘cash in super low risk money markets’ in a Stocks and Shares ISA.Some companies will even guarantee that cash as a ‘deposit’ so you would get all of it back in the event of bankruptcy. I suspect that’s what they want risk averse people to do.

No, there will be rules to stop people using stocks and shares ISAs to hold cash or cash-like investments such as money market funds
https://news.sky.com/story/holders-of-cash-isas-face-new-rules-and-charges-as-government-lowers-annual-limit-13476735

How are they going to police that?

Apart from the fact that there will always need to be some cash to pay fees and charges, particularly on that most expensive platform that was plugged by Reeves during her budget speech, if you trade in stocks and shares you will need to sell into cash first. Is someone going to count how many days you are in cash?

Are they going to tell fund managers they can from now on only offer high risk funds because any lower risk level funds will contain a proportion of cash and cash like?

The same way they did for most of the history of ISAs. From 1999 until 2014, the maximum you could invest each year into a cash ISA was less than half of what you were allowed to invest into a stocks and shares ISAs. E.g. in 1999 you could invest £7k into a S&S ISA but only £3K into a cash ISA, and in 2013 you could invest £11K into a S&S ISA but only £5K into a cash ISA.

There were rules to prevent people opening a stocks and shares ISA for the higher allowance and just using it to hold cash or cash equivalents. There are various ways to do this. You could just say ISA providers are no longer allowed to pay interest on cash balances in a S&S ISA, or require them to declare any interest paid so that it would be subject to tax (just like banks report your savings interest to HMRC so you pay tax on your savings). They could make money market funds and short-dated gilts non-qualifying investment so that they cannot be held in a stocks and shares ISA.

WTF? So no one can use Money Market Funds? These are a legitimate funds within S&S ISA’s and many ppl use them to keep money ‘safer’ before they need it for a house deposit or a buffer for retirement. Are they also banning the use of Bond & Gilts too then? That really doesn’t make any sense and will prevent ppl from investing if they can’t move it into ‘safer’ funds.

You can hold cash in a S&S ISA but will face a charge on any interest earned, with the charge equivalent to the tax you would have paid outside the ISA wrapper. This would not affect many people.

You might hold cash for a house purchase for at most a few months, and you are not going to be purchasing a new home every year or two so it won't be a frequent issue. Paying tax for a few months worth of interest earned on cash in a S&S ISA is not going to stop anyone investing.

If you are approaching retirement you will naturally move away from stocks into bonds, which you can do in the S&S ISA

Lots of people approaching retirement move some of their S&S into MMF and short term gilts for around 5 years to help reduce the risk of SORR.

S&S are for investments 5yrs plus so any money you’re considering using within 5yrs is risky in S&S - and a LOT of ppl move it into cash prior to needing for several years not just a month or two. The devil is in the details and maybe existing sums after several years will be permitted to be moved into cash like funds (gilts, MMF, bonds etc). If not it will absolutely put ppl off investing in the first place.

No, you don’t hold cash for only a few months for a big purchase.

The FCA says if your timeframe is under 5 years you should not be investing.

So existing cash ISAs will not be impacted. Does that mean that existing S&S Isas that are in money market funds will also not be impacted? I don’t see how it is possible unless you have a completely new Isa product going forward to distinguish between existing and new contributions.

If The rules are going to be applied to existing s&s isas , people are going to switch into cash Isas while they still can.