A strategy involving a 1p loophole may be available for savers to evade a clampdown on funds kept in ISAs.
Starting April 2027, the yearly cash ISA limit for individuals under 65 will decrease from £20,000 to £12,000. Nonetheless, there will continue to be a total £20,000 ISA allowance for individuals under 65 – hence, one could potentially deposit £12,000 into a cash ISA and £8,000 into a stocks and shares ISA.
Alternatively, one could allocate the entire £20,000 allowance into stocks and shares. The intention is to prompt more individuals to invest and foster economic growth. Individuals over 65 will still have the option to deposit up to £20,000 into a cash ISA.
Recent reports indicate that savers might encounter a 22% charge on interest earned from cash within stocks and shares ISAs starting April 2027.
However, as per a recent update from the Telegraph, this charge will only be applicable if 100% of investable assets are in “cash-like” investments, such as money market funds.
In essence, it is possible for someone to invest £12,000 in a cash ISA, then allocate £7,999.99 in cash within a stocks and shares ISA, and the remaining 1p in the stock market.
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Previously, HMRC had indicated that individuals holding cash in stocks and shares accounts from that date would face an interest charge, but the specific rate had not been confirmed.</
