Copy article

Cash Isas

Journalist: Callum Mason, i

ended 10. December 2025

The Government is intending to tax 'cash like' products held within stocks and shares ISAs as part of its cap on cash ISAs.

 

If it does so, should savers and investors should be able to hold cash for at least a temporary period of time, without having to face tax charges, to avoid people facing unnecessary charges e.g. when they buy a home and have to switch their investments to a more stable asset?

8 responses from the Newspage community

Copy all

Copy

Editor
Philly Ponniah
Chartered Wealth Manager and Financial Coach at Philly Financial
Capping cash ISAs at £12000 shows how little real life has been factored in. There are plenty of moments where holding cash is prudent. The FCA even recommends cash for any money needed within five years. I’m pro investment, but cash has a clear role for short term goals, house moves and financial safety. It makes no sense to punish people for keeping money safe during these periods. Savers should be able to hold cash inside an ISA without facing a charge, at least for a reasonable window. An ISA is meant to support good financial decisions, not force people into risk when stability is the right choice.
Copy

Editor
Antonia Medlicott
Founder & MD at Investing Insiders
I find it very hard to see how this will work in practice.

People keep uninvested cash for many different - legitimate - reasons. What if I decide to sell one of my stocks or funds, but haven't yet identified another investment opportunity I want to put the proceeds towards? What do I do? Is the government going to tell me there is a deadline by which time I must either invest my cash again or withdraw it? What if my ISA isn't a flexible ISA? Having to withdraw cash will have an impact on my annual allowance.

What about those long-term investors who only check their accounts once or twice a year? Will they be penalised for inadvertently accumulating cash from dividend payments? That would be grossly unfair.

There are so many unanswered questions at present.
Copy

Editor
Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
It's a sledgehammer to crack a walnut. The government is attempting to bully people into investing rather than educating on the merits and letting people decide what's right for them. It's created loopholes, which this measure looks to close. The argument would be that you should use the product as it's intended, i.e. for investment. If you need to hold cash temporarily, paying interest may be a small price to pay in the grand scheme of things.
Copy

Editor
Dariusz Karpowicz
Director at Albion Financial Advice
Forcing everyone into stocks and shares regardless of their risk appetite sounds less like financial nudging and more like the government deciding it knows your money better than you do. Cash ISAs exist for a reason. Not everyone wants to gamble their savings on markets, and that is a perfectly valid choice.
The FCA itself recommends cash for money needed within five years. So taxing cash held in a stocks and shares ISA, even temporarily, creates a bizarre contradiction. What happens when you sell a fund but have not found your next investment? Or when dividends build up while you are busy living your life? Punishing savers for being cautious is not clever policy. It is just confusing.
Copy

Editor
Scott Gallacher
Director at Rowley Turton
I did some work recently on Islamic investments and found that avoiding interest on ISA platforms was almost impossible even when there was a clear reason for doing so.

So, to tax investors because their Investment ISA holds some cash, which is unavoidable for anyone using a platform, making a fund switch or taking a withdrawal, is simply a tax grabbing matter. Pure and simple.

Sensible legislation to ignore interest of say, less than 0.5% per annum would be much fairer and more proportionate.
Copy

Editor
Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
This is another hair-brained way to raise tax revenue, which will be complicated and expensive to administer.
Copy

Premium
David Belle
Founder and Trader at Fink Money
What a savvy politician would do is take £8k from the cash ISA allowance and add it onto the stocks and shares ISA allowance, if incentive changes were the actual goal.

But of course, we do not have savvy politicians.

We have remedial politicians in charge, who do not understand incentives and so all we have now is a distorted system which doesn't apply any real benefit, but a mere reduction in desire to invest full stop.

I am anti Cash ISA, however I believe that nudging and small changes is the way to influence a very underinvested population.

What should actually happen is regulations need changing at the pension fund level to create a real money bid in UK equities, which would lead to more retail cash flowing in.

We have 2%! of pension fund allocation to domestic equities. Australia has 40% while commanding only 0.9% of the MSCI world index (the UK is at over 2%.

It is a complete shambles from top to bottom and the govt sits and wonders why people don't invest.
Copy

Premium
Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
These ill-conceived cash ISA rules raise many questions and may not survive contact with reality. For example, there is necessarily a small amount of cash held in stocks and shares ISAs for various reasons - will this be taxed? Similarly, all assets sit on a risk/return continuum, so trying to categorise 'cash-like' feels arbitrary. In practise, wherever the government decides to draw the line, it is likely there will be a simple work-around for those who can afford advice. More likely, an unintended consequence is that many ordinary people will decide it's all too confusing and not bother saving at all.