Tax Update 2026: simplification, modernisation and fairness

[willendure]

( The youngest member of the forum is 43. )

And still can't afford a house !

[willendure]

Also a recent change to cash in a stocks & shares ISA to come in 2027.
22% tax on interest on cash in these https://www.gov.uk/government/public...ules-factsheet

Cash can form an important part of a diversified portfolio and this will just complicate ISAs.
Most likely, platforms will just pay zero interest on cash balances.

Bloody ridiculous. It sends totally the wrong message - "you must be fully invested at all times".

I am 40% in cash right now - now that I give a tulip about the pennies in interest on it. I just see zero point in buying equities at todays crazy prices. Buy low sell high remember ?

Keeping cash in an ISA might not be the greatest investment strategy, but sometimes it is the smart thing to do. But there is always T-bills, so ...

But this is also a slippery slope, you can't do anything in this country with the government telling you how to do it, and that is only getting worse.

[Protagoras]

Bloody ridiculous. It sends totally the wrong message - "you must be fully invested at all times".

I am 40% in cash right now - now that I give a tulip about the pennies in interest on it. I just see zero point in buying equities at todays crazy prices. Buy low sell high remember ?

Keeping cash in an ISA might not be the greatest investment strategy, but sometimes it is the smart thing to do. But there is always T-bills, so ...

But this is also a slippery slope, you can't do anything in this country with the government telling you how to do it, and that is only getting worse.

Suppose one holds a managed fund in an ISA and the fund manager has decided to hold 40% of the fund in cash - interest on that is presumably not taxed. But if you manage your own portfolio, cash is taxed?

Reducing the cash ISA allowance to £12k for under 65s is another example of penalising young people along with the Salary Sacrifice changes from 2029 (if they're not cancelled).

I see no simplification or fairness emerging in the tax system, quite the reverse.

[jamesbrown]

I see no simplification or fairness emerging in the tax system, quite the reverse.

Handy Kafkaesque word map:

• Simplification: easier for us to collect tax from baddies*
• Fairness: more tax from baddies*

*you

[Protagoras]

Handy Kafkaesque word map:

• Simplification: easier for us to collect tax from baddies*
• Fairness: more tax from baddies*

*you

Very good.

I'll read 'you' as 'youse' so as not to take this personally :-)

[WTFH]

Kinda makes sense. There used to be cash ISAs and Stocks and Shares ISAs. The government would prefer people to have S&S ISAs, so they kept the limit at £20k for those. Cash ISAs are limited to £12k. It appears that some people were moving their cash into S&S to get round the £8k reduction, but treating it like a cash ISA.
So all that has really happened is that a loophole has been closed down for people who thought they could beat the system.
If it's an S&S ISA, use it as such. It's not a Cash ISA.
Either put £12k in cash or £20k in S&S, but don't have cash holdings above £12k in any kind of ISA.

[jamesbrown]

Kinda makes sense. There used to be cash ISAs and Stocks and Shares ISAs. The government would prefer people to have S&S ISAs, so they kept the limit at £20k for those. Cash ISAs are limited to £12k. It appears that some people were moving their cash into S&S to get round the £8k reduction, but treating it like a cash ISA.
So all that has really happened is that a loophole has been closed down for people who thought they could beat the system.
If it's an S&S ISA, use it as such. It's not a Cash ISA.
Either put £12k in cash or £20k in S&S, but don't have cash holdings above £12k in any kind of ISA.

This is all pre-emptive "big brain" because the £12k limit and associated tax on cash-like investments doesn't kick in until next year. There is no existing loophole, other than low-risk investments currently being available within S&S ISA wrappers. They were simply trying to get more money punted into UK listed companies, but it's unlikely to work and it's spectacularly over-complicated, as evidenced by pretty much the entire industry pointing and laughing at the gov't. If someone wants to hold money in a low-risk investment within a S&S ISA wrapper or hold cash in between investments (totally ordinary investment strategy), that is (should be) perfectly fine/justified and the distinction between cash-like and low risk is very blurry indeed. Gov't bonds are perfectly fine, of course (for Gilts held to maturity, backed by the same guarantee, effectively, as cash under the FSCS).

[Protagoras]

Government sought to incentivise saving, so introduced ISAs with no maximum cumulative holding limit. They were perhaps too popular and so government is now reigning back on these in an overcomplicated manner by way of simplification.

What next - maybe reduce the amount of premium bonds than can be held tax free? [Notwithstanding that like all cash instruments, Premium Bonds are subject to inflation tax].

[woody1]

The interest rate on cash held in S&S ISAs (and SIPPs) is generally crap anyway. Better to have it in a money market fund.

Better still (IMO), are ETFs like XSTR (inc) and CSH2 (acc) which track SONIA.

[eek]

The interest rate on cash held in S&S ISAs (and SIPPs) is generally crap anyway. Better to have it in a money market fund.

Better still (IMO), are ETFs like XSTR (inc) and CSH2 (acc) which track SONIA.

That's the thing - all this tax change does is to create a race to create instruments that look like cash investments but aren't subject to the tax.