Under the draft ISA regulations, from 6 April 2027 anyone under 65 will no longer be able to transfer a Stocks & Shares or Innovative Finance ISA into a Cash ISA, and a flat 22% charge will apply to interest paid on cash held inside non-Cash ISAs — collected automatically by your ISA manager, at every age and every tax band. If you plan to de-risk an investment ISA into cash the traditional way, the transfer must complete by 5 April 2027; after that, the only charge-free home for parked money inside a Stocks & Shares ISA is a money market fund.
What is being banned from 6 April 2027?
At Autumn Budget 2025 (26 November 2025), the government announced that from 6 April 2027 the annual Cash ISA subscription limit for savers under 65 falls to £12,000, while the overall ISA allowance stays at £20,000 — the full detail is in our Cash ISA cap 2027 guide. The obvious workaround was immediately spotted: subscribe £20,000 to a Stocks & Shares ISA, leave it in cash or transfer it straight into a Cash ISA. So HMRC published the ISA reform 2027: anti-circumvention rules factsheet (23 June 2026), which closes both routes.
On transfers, the factsheet is blunt: "Transfers from non Cash ISAs into Cash ISAs will not be permitted." That is the ban. The reverse direction survives — the same factsheet confirms "It will remain possible to transfer from a Cash ISA to a non Cash ISA" — because moving money out of cash and into investments is exactly what the policy wants to encourage.
There is one carve-out. Savers aged 65 or over escape the ban entirely: draft regulation 21(4ZA)(d) permits a transfer to a cash account "if the account investor is 65 or over at the end of the year". The age test works the same way as the cap itself — you get the exemption for the whole tax year in which you turn 65, from 6 April, even if your birthday is in March. The over-65 exemption guide covers exactly how that works.
Here is every transfer direction from 6 April 2027, under the draft rules:
| Transfer direction | Under 65 | 65 or over | Basis |
|---|---|---|---|
| Cash ISA → Cash ISA | Allowed | Allowed | Not restricted by the new rules — nothing announced touches cash-to-cash transfers |
| Cash ISA → S&S or IF ISA | Allowed | Allowed | Factsheet: "It will remain possible to transfer from a Cash ISA to a non Cash ISA" |
| S&S ISA → S&S ISA (and IF → IF) | Allowed | Allowed | Unchanged — same-type transfers are untouched |
| S&S or IF ISA → Cash ISA | Banned | Allowed | Factsheet ban; over-65 carve-out in draft reg 21(4ZA)(d) |
Note what the ban does not do: it does not stop you selling investments inside your Stocks & Shares ISA and holding the proceeds as cash within the same account. That remains perfectly legal — it is just no longer free, which is where the 22% charge comes in below.
When is the deadline to transfer the old way?
5 April 2027. Until the end of the 2026/27 tax year, transfers from a Stocks & Shares ISA to a Cash ISA remain allowed for everyone, at any age, under the current rules. From 6 April 2027, an under-65 loses that option — under the draft rules — until the start of the tax year they turn 65, when the route reopens.
This matters most for the classic de-risking move. If you are approaching a house purchase, retirement, or any known spending date, the standard playbook has always been to transfer your investment ISA into a Cash ISA a year or two out, locking in gains and removing market risk while keeping the tax wrapper intact. That playbook has a hard expiry date. The 2026/27 tax year is also the last one in which an under-65 can subscribe the full £20,000 to Cash ISAs — from 2027/28 the cash limit is £12,000.
Do not leave it until the first week of April. An ISA transfer is initiated by the receiving provider and providers are expected to complete it within 30 days under HMRC guidance; a Stocks & Shares to Cash transfer also involves selling investments before the cash moves. Realistically, instruct the transfer by early March 2027 to be confident it completes inside the 2026/27 tax year. Our ISA transfer rules guide walks through the mechanics step by step — how to instruct it, what the timescales are, and what to do if a provider drags its feet.
After 5 April 2027, an under-65 who wants out of the market but inside the wrapper has exactly two options:
- Sell down to cash inside the Stocks & Shares ISA. Legal, but the 22% charge then bites every pound of interest that cash earns, indefinitely.
- Move into money market funds inside the Stocks & Shares ISA. Exempt from the charge and the sanctioned route — with limits, covered below.
Is money already in your ISA before April 2027 exempt?
Two different questions hide here, with two different answers.
Existing Cash ISA balances: unaffected. The £12,000 cap is a limit on new subscriptions in a tax year, not a limit on what you can hold. Money already sitting in Cash ISAs before 6 April 2027 stays where it is, keeps earning tax-free interest, and does not need to move anywhere. That follows from the structure of the draft regulations — the cap amends the subscription limit, nothing else.
The transfer ban: no exemption for pre-2027 money has been published. Some savers have assumed that investments bought before April 2027 would keep a grandfathered right to transfer into cash later. Nothing in the factsheet, the draft statutory instrument, or Tax-free savings newsletter 22 creates one. The draft ban applies to the transfer itself, whenever the money was originally subscribed. To be precise about what we can and cannot say: the government has not confirmed that old money is caught in a single quotable sentence — but no carve-out for it appears anywhere in the published documents, and the draft wording contains none. Plan on the basis that pre-2027 investments are subject to the same ban as everything else, and if a grandfathering rule appears in the final regulations, treat it as a bonus.
What is the 22% charge on ISA cash interest?
The second anti-circumvention rule targets cash that never leaves the Stocks & Shares ISA at all. From 6 April 2027, per the factsheet, "a flat-rate charge (22%) will apply to any interest or alternative finance return paid on cash held within a non Cash ISA". Five things make this charge unusual:
- It applies at every age. Unlike the £12,000 cap and the transfer ban, there is no over-65 exemption. The factsheet states plainly: "The charge on interest earned on cash held in non Cash ISAs and the prohibition on 100% cash-like investments will remain in place" — including once you turn 65.
- It applies at every tax band — the same flat 22% whether you are a non-taxpayer or an additional-rate taxpayer.
- Your ISA manager collects it. The factsheet is explicit: "ISA managers will pay the charge to HMRC — individuals are not required to declare to HMRC any interest paid on an ISA". No Self Assessment entry, no bill — the deduction happens inside the platform.
- It is permanent — a standing feature of the regime, not a transitional measure.
- The rate is not arbitrary. Autumn Budget 2025 also raised tax rates on savings income by 2 percentage points from April 2027 — basic 20% to 22%, higher 40% to 42%, additional 45% to 47%, per the Budget 2025 OOTLAR. The flat ISA charge simply mirrors the new basic savings rate.
What has not been published: how the charge will be calculated and remitted in practice (accrual basis, payment timing, reporting between managers and HMRC). HMRC has deferred those administration mechanics to future guidance.
Worked example: £10,000 of parked cash at 4%
Take £10,000 earning 4% — £400 of interest a year — and put it in each possible home from 6 April 2027:
| Where the £10,000 sits | Interest at 4% | Charge / tax | You keep | Net rate |
|---|---|---|---|---|
| Cash ISA | £400 | £0 | £400 | 4.00% |
| Cash inside a S&S ISA (22% flat charge) | £400 | £88 | £312 | 3.12% |
| Taxable savings — basic rate, above the PSA (22%) | £400 | £88 | £312 | 3.12% |
| Taxable savings — higher rate, above the PSA (42%) | £400 | £168 | £232 | 2.32% |
| Taxable savings — additional rate, no PSA (47%) | £400 | £188 | £212 | 2.12% |
| Taxable savings — non-taxpayer, or interest within the PSA | £400 | £0 | £400 | 4.00% |
The arithmetic: £10,000 × 4% = £400; 22% of £400 = £88; £400 − £88 = £312, a net rate of 3.12%. For a basic-rate taxpayer, cash inside a Stocks & Shares ISA is now taxed exactly as if it sat outside the wrapper above the allowance.
Note the regressive twist in the last row. The Personal Savings Allowance survives unchanged at £1,000 for basic-rate, £500 for higher-rate and £0 for additional-rate taxpayers — see what the PSA is for the mechanics. A non-taxpayer, or anyone whose savings interest fits inside their PSA, pays 0% outside the wrapper but a flat 22% on cash inside a Stocks & Shares ISA. For modest sums of parked cash, the "tax-free" wrapper becomes the worst place a low earner can hold it. Run your own numbers with the savings interest tax calculator.
Is there a "cash awaiting investment" exemption?
No. This is the question every platform user asks first, so it deserves a blunt answer: no exemption for cash awaiting investment, and no de minimis threshold, appears in any published document — not the factsheet, not the draft statutory instrument, not the newsletters.
On the published wording, the charge applies to "any interest… paid on cash held within a non Cash ISA". That catches dividends swept to your dealing account, cash from a fund sale sitting overnight before you rebuy, monthly contributions queued for your next regular investment, and the float platforms hold between trades. There is no published carve-out for short holding periods, small balances, or cash that is demonstrably in transit between investments.
It is possible the final regulations or subsequent guidance will soften this — industry commentary pressed exactly this point while the consultation was open, and HMRC has explicitly deferred the administration detail (how managers calculate and remit the charge) to future guidance. But nothing softened has been published, and this page does not report rules that do not exist yet. As drafted: if it is cash, inside a Stocks & Shares or Innovative Finance ISA, earning interest, the 22% comes off.
What about money market funds?
Money market funds are the sanctioned route for parked cash — the one the factsheet deliberately leaves open. MMFs are exempt from the 22% charge and remain qualifying investments inside a Stocks & Shares ISA. In practice their returns are fund distributions rather than interest paid on cash — consistent with the factsheet exempting them, though the government has not published the legal mechanics.
But the draft rules block the obvious next workaround — running your entire Stocks & Shares ISA as a de facto savings account made of MMFs. The factsheet: "Non Cash ISA portfolios made up of 100% cash-like assets will be non-qualifying investments." The list of what counts as "cash-like" will be set in legislation, and initially "this will be limited to Money Market Funds". So an all-MMF portfolio breaks the qualifying rules; MMFs as a partial allocation are fine.
Practical reading for an under-65 after April 2027:
- Holding 20%, 50%, even most of a portfolio in MMFs while the rest sits in equities or bonds: permitted under the draft rules, and charge-free.
- Holding 100% cash-like assets: non-qualifying. Where exactly the line sits between "mostly" and "100%" — and how managers will police it — is one of the details the final regulations need to settle.
- Remember MMFs are investments, not deposits: a low but non-zero risk of loss, fund fees, and no bank-style deposit protection. For genuinely short-dated money that must not wobble, a Cash ISA (within the new limits) or an ordinary savings account may still fit better — compare rates in the best UK savings accounts guide.
Who does this actually hit?
Three savers, three very different sizes of problem.
1. The de-risker approaching retirement or a house purchase
Hit hardest. Suppose you are 58 with £150,000 in a Stocks & Shares ISA and you planned to shift it into cash during 2028 ahead of retirement. Under the draft rules you cannot transfer it to a Cash ISA until the tax year you turn 65. Sell down to cash inside the wrapper instead and, at 4.5%, £150,000 generates £6,750 of interest — and a £1,485 annual charge (22% of £6,750), leaving £5,265. Your realistic options: complete the transfer before 5 April 2027, use money market funds as the cash-like allocation, or hold the de-risked money outside the ISA and accept ordinary savings taxation. Deciding which wrapper suits which job is exactly what our Cash ISA vs Stocks & Shares ISA vs LISA guide is for.
2. The platform-cash hoarder
Plenty of investors hold five-figure cash balances on their investment platform for months or years — dry powder waiting for a dip. £30,000 at 4% earns £1,200 a year; from April 2027 the charge takes £264 of it, every year. If that money has no near-term investment purpose, moving it to a Cash ISA (before the deadline by transfer, or afterwards via new subscriptions within the £12,000 limit) or into MMFs saves the charge entirely. The Cash ISA cap calculator shows how much cash headroom you personally have from 2027/28.
3. The ordinary S&S ISA holder with incidental cash
Mostly noise. If you keep £500 of dividends and loose change in your dealing account at 4%, that is £20 of interest a year and a charge of £4.40. Annoying on principle, irrelevant in practice. Do not restructure a portfolio to dodge a £4.40 charge — just keep sweeping cash into investments on your normal schedule.
What could still change before April 2027?
These rules are one consultation response away from their final shape. The realistic list of moving parts:
- The consultation response. The technical consultation on the draft regulations closed on 2 August 2026. Industry commentary during the consultation window pressed on the cash-awaiting-investment problem, the treatment of transit cash, and transfer mechanics. The final regulations, due to be laid in autumn 2026, may adjust any of it.
- Administration detail. How ISA managers calculate, deduct and remit the 22% charge is entirely unpublished. Expect HMRC guidance closer to April 2027.
- No penalties regime has been published for breaches of the new rules — another gap the final package needs to fill.
- Flexible ISA mechanics are unsettled. The draft amendment to regulation 5DDB says replacement subscriptions into a cash account must not exceed the £12,000 limit where it applies, but how replacement of prior-year flexible withdrawals interacts with the cap has not been explained in guidance. If you rely on flexible withdrawals, see the flexible ISA guide and watch this space.
- Side rules worth knowing: JISAs are excluded from the 22% charge under draft regulation 2D, and the £9,000 JISA and £4,000 LISA limits are unchanged (fixed until 5 April 2031). Under the draft rules as reported, LISA subscriptions sit outside the £12,000 cash cap (though inside the overall £20,000) — no gov.uk sentence states this directly. Help to Buy ISA treatment is not addressed in any published document.
We re-verify this page against the primary sources at each milestone — the laying of the final regulations in autumn 2026 being the next one. The Autumn Budget tracker flags anything that lands at the 28 October fiscal event, and the wider allowance picture lives in the complete UK ISA guide.
Sources and methodology
Every rule on this page traces to a primary source: HMRC's ISA reform 2027 anti-circumvention rules factsheet (23 June 2026), the draft Individual Savings Account (Amendment) Regulations 2026 and its consultation, the Budget 2025 OOTLAR, and Tax-free savings newsletter 22 (June 2026). Where a widely reported point has no direct gov.uk sentence behind it — the treatment of existing balances, LISA subscriptions and the cash cap — the text says so explicitly. The methodology page documents how we verify figures.
Related ISA reform guides
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Every page is reviewed against the editorial standards, written from primary sources, sourced openly, and corrected publicly. No affiliate revenue. No sponsored content. No paid placements.