Last updated: 19 October 2026
From 6 April 2027, savers under 65 will no longer be able to transfer money from a stocks and shares ISA into a cash ISA. That rule is no longer a proposal. It sits in the Individual Savings Account (Amendment) (No. 2) Regulations 2026, which were made on 10 September and laid before Parliament on 14 September.
Most coverage of the ISA shake-up was written in June, when HMRC published its first factsheet. The final regulations differ in a few places, and they leave one gap that matters to anyone planning a transfer close to the deadline: there is no transitional rule for transfers still in progress on 6 April 2027.
This analysis sets out what the final rules say, who they catch, what the 22% charge costs in pounds, and what the transfer timetable means in practice.
Table of Contents
Contents
- What changes on 6 April 2027
- What changed between the June factsheet and the final regulations
- The transfer ban and the missing transitional rule
- The 22% charge on cash: worked numbers
- Money market funds: the 100% test
- The FSCS angle: platform cash vs a cash ISA
- Options before the deadline
- FAQ
What changes on 6 April 2027
The overall ISA allowance stays at £20,000 a year. What changes is how much of it can go into cash, and what happens to cash sitting inside investment ISAs.
HMRC’s anti-circumvention factsheet says the new rules are designed to stop three workarounds to the lower cash limit: parking up to £20,000 of cash in a stocks and shares ISA long term, paying into a stocks and shares ISA and then transferring to a cash ISA, and buying wholly cash-like investments inside a stocks and shares ISA.
| Rule from 6 April 2027 | Aged 64 or under at the end of the tax year | Aged 65 or over at the end of the tax year |
|---|---|---|
| Overall ISA allowance | £20,000 | £20,000 |
| Maximum paid into cash ISAs | £12,000 | £20,000 |
| Transfer from stocks and shares or Innovative Finance ISA to cash ISA | Not allowed | Allowed |
| Charge on interest from cash held in a stocks and shares ISA | Yes, at the savings basic rate (22%) | Yes, at the savings basic rate (22%) |
| Stocks and shares ISA invested 100% in money market funds | Not a qualifying ISA investment | Not a qualifying ISA investment |
| Transfer from cash ISA to stocks and shares ISA | Still allowed | Still allowed |
| Junior ISAs | Charge and money market fund test do not apply | n/a |
The age test in the regulations is worded as “64 or under at the end of that year”, meaning the tax year ending on 5 April. Someone who turns 65 at any point in a tax year is treated as 65 or over for that whole year, both for the £20,000 cash limit and for transfers.
Why the charge is 22%
The regulations never print a percentage. They set a “flat rate charge” at the savings basic rate. The Budget 2025 technical note on savings tax rates raises that rate from 20% to 22% from 6 April 2027, alongside 42% for higher-rate and 47% for additional-rate taxpayers. So the charge is 22% today, and it would move automatically if the savings basic rate changed again.
What changed between the June factsheet and the final regulations
HMRC consulted ISA providers on draft legislation over the summer. Its September 2026 tax-free savings newsletter lists the changes made after that consultation.
| Point | June 2026 factsheet / draft | Final regulations (September 2026) |
|---|---|---|
| Junior ISAs | Not addressed in the factsheet | Money market fund test and cash charge do not apply to Junior ISAs |
| “Purpose” rules for cash in investment ISAs | Proposed in the draft | Removed |
| Charge when an ISA is transferred | Old provider to tell the new provider about any outstanding charge | Dropped: the old provider is responsible for the charge up to the transfer date |
| Who pays the charge | ISA manager | ISA manager, within six months of the tax year end; no repayment to the investor |
| Money market fund definition | Money market funds only | Defined by reference to the money market fund regulation; HMRC says the definition remains under review |
Two points stand out for savers. First, the charge is taken by the provider, so nothing goes on a tax return and the Personal Savings Allowance cannot be set against it. Second, the regulations say no repayment of the charge can be made to the investor, so a non-taxpayer cannot reclaim it.
The transfer ban and the missing transitional rule
The new transfer rule (regulation 21(4ZA)) allows a transfer from a stocks and shares or Innovative Finance ISA into a cash ISA only if the investor is “65 or over at the end of the year”. For everyone younger, the route closes on 6 April 2027.
Neither the regulations nor HMRC’s September newsletter says what happens to a transfer that has been requested before 6 April 2027 but not completed by then. That matters because of how ISA transfer deadlines work.
The transfer timetable: only cash-to-cash has a fixed deadline
HMRC’s guidance for ISA managers sets a 15 business day limit for transfers from one cash ISA to another. For every other type of transfer, including stocks and shares to cash, it sets no fixed deadline. Managers are told to complete them in line with their own terms and conditions.
| Transfer type | HMRC time limit | What it means near the deadline |
|---|---|---|
| Cash ISA to cash ISA | 15 business days from the instruction | Predictable; not affected by the 2027 ban |
| Stocks and shares ISA to cash ISA | None set by HMRC; provider terms apply | Could run past 6 April 2027 with no rule saying which side of the line it falls |
| Cash ISA to stocks and shares ISA | None set by HMRC; provider terms apply | Still allowed after April 2027 |
Investments also have to be sold to cash before they can move to a cash ISA, which adds settlement time. Anyone under 65 planning this kind of transfer has a clear reason not to leave it to the last weeks of the 2026/27 tax year. HMRC says it will publish updated ISA manager guidance before April 2027, which may close the gap. Until then, the safe reading is that the transfer needs to be complete, not just requested, before 6 April.
A real example from this week
A saver posting on the MoneySavingExpert forum on 17 October described exactly this situation: a Vanguard stocks and shares ISA held in a money market fund, to be moved into a fixed-rate cash ISA elsewhere. Replies pointed out that the fund has to be sold first, and that some fixed-rate cash ISAs only accept transferred money within a set window (30 days at some providers, 90 at others). One suggestion was to move into an easy-access cash ISA first, then move on to a fix under the faster cash-to-cash timetable.
The 22% charge on cash: worked numbers
The charge applies to interest paid on cash deposits held inside a stocks and shares or Innovative Finance ISA. It does not apply to growth or income from shares, funds, investment trusts, ETFs or bonds, including gilts.
The examples below assume a platform pays 4% a year on uninvested cash. Rates vary widely between providers, and many pay less.
| Cash held in a stocks and shares ISA | Interest at 4% | 22% charge | Interest kept |
|---|---|---|---|
| £10,000 | £400 | £88 | £312 |
| £20,000 | £800 | £176 | £624 |
Is cash in an ISA now worse than cash outside one?
For some savers, yes. The Personal Savings Allowance (£1,000 of savings interest tax-free for basic-rate taxpayers, £500 for higher-rate, nothing for additional-rate) does not apply inside an ISA. Outside one, it does.
Here is £800 of interest (£20,000 at 4%) in 2027/28, assuming no other savings income:
| Saver | Inside a stocks and shares ISA | Outside an ISA, allowance unused | Outside an ISA, allowance already used |
|---|---|---|---|
| Basic-rate taxpayer | £176 | £0 | £176 |
| Higher-rate taxpayer | £176 | £126 | £336 |
| Additional-rate taxpayer | £176 | £376 | £376 |
| Non-taxpayer | £176 (no repayment) | £0 | £0 |
The pattern is clear. For basic-rate and non-taxpayers with spare allowance, cash parked in a stocks and shares ISA is taxed more heavily than the same cash in an ordinary savings account. For additional-rate taxpayers, the 22% charge is still cheaper than 47%. A cash ISA beats all of these, because its interest stays tax-free, but under-65s can only pay £12,000 a year into one.
Short-term cash, such as dividends waiting to be reinvested or money between trades, will still be caught, but the sums are usually small. The charge bites hardest on people using a stocks and shares ISA as a savings account.
Money market funds: the 100% test
Money market funds become a named qualifying investment for stocks and shares ISAs, but with a condition. Under new regulation 7(10A), the non-cash investments in the ISA must not be 100% money market funds.
Because the test looks at investments “other than cash”, an ISA holding only cash and money market funds fails it, whatever the split between the two. An ISA with even a small holding in a share or ordinary fund passes. If an ISA fails, HMRC’s factsheet says it becomes a non-qualifying investment, so it loses its ISA tax treatment.
The 22% charge in the regulations applies to interest on cash deposits; it does not mention returns from money market funds held in a qualifying ISA. HMRC says it will keep the definition under review, so this is an area that could change.
The saver in the forum example above held only a money market fund. From April 2027, that ISA would fail the 100% test unless something else were added, and the transfer route to a cash ISA would be closed for an under-65.
The FSCS angle: platform cash vs a cash ISA
Where the cash sits also changes how it is protected. Cash held on an investment platform is client money, generally covered by the Financial Services Compensation Scheme up to £85,000 if the platform fails and money is missing. A cash ISA with a bank or building society is a deposit, covered up to £120,000 per person per banking licence.
We covered how platform failures play out in practice in our piece on Jarvis Investment Management’s special administration, where client accounts were frozen while the administrators reconciled holdings. And if you hold savings with banks that share a licence, the £120,000 limit is per licence, not per brand, as we explained in Halifax moving to Lloyds.
Options before the deadline
This is general information, not personal advice. Which option suits you depends on your age, tax band, other savings and how long you need the money for.
| Situation | What the rules allow before 6 April 2027 | What changes after |
|---|---|---|
| Under 65, cash or money market funds in a stocks and shares ISA, want it in cash long term | Transfer to a cash ISA (sell first; allow time) | Transfer no longer possible; cash interest charged at 22% |
| Under 65, want to keep investing with some cash | No action needed | Interest on the cash portion charged at 22% |
| Stocks and shares ISA invested only in money market funds | No restriction yet | Fails the 100% test unless other investments are added |
| 65 or over by 5 April 2028 | Transfers allowed | Transfers still allowed; £20,000 cash limit |
| Junior ISA with cash | No change | No change: the charge and money market fund test do not apply |
The FCA’s new targeted support regime is partly aimed at people holding large cash balances who might benefit from investing. Banks and platforms can now send group-level suggestions without giving full advice, as we set out in our report on the FCA’s targeted support regime. Some ISA providers may use it to contact customers about these changes before April.
Worth checking with your provider now: how it will apply the charge, whether it will move uninvested cash automatically, and how long a stocks and shares to cash ISA transfer currently takes.
FAQ
Can I still transfer a stocks and shares ISA to a cash ISA?
Yes, until 5 April 2027. From 6 April 2027 it is only allowed if you are 65 or over at the end of the tax year.
What happens if my transfer is still in progress on 6 April 2027?
The regulations and HMRC’s September 2026 newsletter do not say. HMRC plans updated ISA manager guidance before April 2027. Until it appears, aim to have the transfer completed before 6 April.
Is the 22% charge a tax I have to declare?
No. Your ISA provider pays it to HMRC from the interest. You do not report it, and you cannot reclaim it.
Does the 22% charge apply to my cash ISA?
No. It applies only to interest on cash held inside stocks and shares and Innovative Finance ISAs. Cash ISA interest stays tax-free.
Are gilts and bond funds treated as cash?
No. HMRC’s factsheet says shares, funds, investment trusts, ETFs, and corporate and government bonds, including gilts, are not cash-like. Only money market funds count.
Do Junior ISAs face the charge?
No. The final regulations exclude Junior ISAs from both the cash charge and the money market fund test.
I turn 65 in August 2027. Which rules apply to me in 2027/28?
The test is your age at the end of the tax year. If you are 65 by 5 April 2028, you can pay up to £20,000 into cash ISAs and transfer from a stocks and shares ISA to a cash ISA at any point in 2027/28.
Sources: The Individual Savings Account (Amendment) (No. 2) Regulations 2026 (SI 2026/1018); HMRC, ISA reform 2027: anti-circumvention rules factsheet (23 June 2026); HMRC, Tax-free savings newsletter 23 (September 2026); HMRC, Transfer an ISA if you’re an ISA manager; HM Treasury/HMRC, Change to tax rates for property, savings and dividend income: technical note (26 November 2025); FSCS.
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