The government recently updated the ISA rules, and the headlines have made it sound more alarming than it is. Yes, there's a 22% charge mentioned. But ISAs are still one of the best tax-free tools available to you. You just need to make sure your money is in the right place.
Here's everything you need to know about the ISA changes coming in April 2027.
Nothing changes for the current tax year. You can still save up to £20,000 tax-free, split however you like across Cash, Stocks & Shares, or Lifetime ISAs. The changes don't kick in until April 2027.
From April 2027, under-65s will only be able to put £12,000 of their £20,000 annual allowance into a Cash ISA. The overall £20,000 limit stays the same -- if you want to use your full allowance, the remaining £8,000 would need to go into a Stocks & Shares ISA.
If you're 65 or over, nothing changes. You keep the full £20,000 Cash ISA allowance -- and the government has confirmed this kicks in from the tax year in which you turn 65, not your actual birthday.
This is the bit that's caused the most confusion. From April 2027, if you sell investments inside a Stocks & Shares ISA and leave the money sitting in cash, a 22% charge will apply to any interest that cash earns. It also applies to Sharia-compliant alternative finance returns held in a non-cash ISA.
It doesn't affect your investments themselves – only cash left sitting idle inside a Stocks & Shares ISA.
The government's message is clear: they want you investing, not leaving money sitting in cash.
Lucy Wayment, co-founder, Welleness
"It's genuinely encouraging to see a cultural shift towards getting more people investing. Women in particular tend to have an over-dependency on cash savings -- often seeing cash as the safest option -- when in reality keeping too much in cash means quietly getting left behind as inflation erodes its value.
That said, the way the 22% charge has been communicated has created real confusion, and I worry it risks putting people off ISAs altogether -- which would be exactly the wrong outcome. The rules are changing, but the opportunity isn't going away. If anything, this is a nudge to start thinking about your money more actively -- and that's no bad thing."
Yes – Money Market Funds. The 22% charge won't apply to returns made on Money Market Funds. In simple terms, a Money Market Fund is a type of low-risk investment fund that pools money and invests it in very short-term, highly secure assets – think government bonds and bank deposits. They're designed to be stable and liquid, so they behave a bit like a savings account but sit within your Stocks & Shares ISA rather than a Cash ISA. They won't make you rich, but they're a sensible place to park cash temporarily while you decide what to invest in next.
However, from April 2027 you won't be able to hold all your Stocks & Shares ISA assets in Money Market Funds – you'll need at least some in other qualifying investments.
Short-dated gilts, a type of low-risk UK government bond used by some investors as an alternative to cash, will also be unaffected by the 22% charge.
From April 2027, under-65s won't be able to transfer money from a Stocks & Shares ISA into a Cash ISA. You can still move money the other way – from Cash into Stocks & Shares -- but not back again. This restriction lifts from the start of the tax year in which you turn 65.
If you have a Cash ISA, use as much of your £20,000 allowance as you can before April 2027. After that, the limit drops to £12,000 for under-65s.
If you have a Stocks & Shares ISA, don't leave cash sitting in it after April 2027 or you'll be charged on any interest it earns. Consider using Money Market Funds as a holding place instead.
And if you haven't seriously thought about ISAs yet – now is the time. You don't need to maximise them straight away. Just opening one is a great first step.
Not sure where you stand with your finances? Our free financial health check takes five minutes and gives you a complete picture – including whether you're making the most of your ISA allowance.
Welleness is a women-led business on a mission to close the gender finance gap for good. We offer women a clear, confident and caring pathway to financial health – zero jargon, no pressure.
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