You may have seen in the media recently that the Government is introducing a 22% tax on cash held within Stocks and Shares ISAs. The move, announced on Tuesday 23 June, comes into force on 6 April 2027.
According to Money Saving Expert, the new tax will be used to discourage savers from holding cash in Stocks and Shares ISAs to dodge the lower ISA limits coming into force next year. As from April 2027, under 65s will only be able to place £12,000 a tax year into a Cash ISA, down from the current £20,000.
However, in 2026/27, you’ll be able to invest up to £20,000 into a Stocks and Shares ISA or Innovative Finance ISA, as the Chancellor wants to encourage Britons to invest more. To stop savers from investing up to £20,000 in ‘cash like’ investment funds to earn tax-free interest, the Treasury has introduced the 22% tax on cash held within Stocks and Shares ISAs.
Furthermore, the Government has introduced new rules that will prevent people from circumventing the rules by placing £20,000 in a non-cash ISA and then transferring the funds to a cash ISA.
With all this in mind, if you’re a client of AFH Wealth Management, you might be wondering what this means for your investments.
For AFH clients, the effects of the tax are likely to be small
If you’re a client on an AFH investment service, there is good news, as the impact of the new tax will typically be negligible.
“The potential tax liability will be extremely small for clients who are on an investment service with us,” explained Stephanie Holmes, AFH’s Head of Investment Research.
“We only hold a small amount of cash, which is used to cover fees, as this ensures the portfolio maximises the benefits of being within a Stocks and Shares ISA. This is why we invest in ‘non-cash funds’ as they provide greater potential returns.
“As this is already in line with the Government’s aims, the impact of the tax will be minimal.”
A new first-time buyer ISA is also being consulted on
When the new tax was announced, the Government also launched a consultation on a new first-time buyer ISA that will replace the Lifetime ISA (LISA). Unlike the LISA, which has an upper age limit of 40 for new savers, the proposed first-time buyer ISA will be available to anyone aged 18 or over.
This, the Treasury said, is because it recognises that “the age at which a first home is bought is rising”.
While the new ISA will continue to offer a government bonus of 25% of the sum saved, it will only be paid when a property is bought, instead of annually. As such, the potential returns of the new ISA could be much lower than a LISA.
There will not be a 25% penalty if money is withdrawn from the first-time buyer ISA for any other reason than buying a first home, unlike the LISA.
Get in touch
If you are a client and would like to discuss the new tax, please contact your AFH Independent Financial Adviser, who will be happy to discuss it with you. Alternatively, please call us on 0333 010 0008 and we would be pleased to answer any questions you may have.
29 June 2026