Will I be taxed on my stocks and shares ISA?

Last reviewed and updated by Darren Shepherd, June 2026

If you have seen the headlines saying the government is taxing ISAs, take a breath. The story is real, but it has been squashed into a headline that sounds far bigger and scarier than it is. Let me take you back to basics, so by the end you know what an ISA is, how the two main types work, and whether any of this actually affects you.

First, what actually is an ISA?

An ISA is simply a wrapper you put around your money that tells the taxman to keep his hands off. Whatever sits inside it grows free of UK tax.

That is the whole idea. You do not pay tax on the interest, the growth, or the dividends earned inside it. You can pay in up to £20,000 across your ISAs each tax year. The two main types differ mainly in what you are allowed to hold inside that wrapper.

Cash ISA vs stocks and shares ISA

Think of it as two buckets.

Same wrapper. Different contents. One holds cash, the other holds investments. That difference is the key to understanding the 2027 change.

So will I be taxed on my stocks and shares ISA?

Here is the bit that matters, and the bit the headlines blur. The tax does not depend on which type of ISA you hold. It depends on whether your money is sitting as cash or is actually invested.

What is changing in 2027?

HMRC set out the detail in a factsheet on 23 June 2026, building on the wider ISA reforms first announced in the 2025 Autumn Budget. In plain English:

• A flat 22 per cent charge on interest earned on cash held inside a stocks and shares ISA, from April 2027.
• The cash ISA allowance for under 65s is being cut, from £20,000 down to £12,000 a year. Your total ISA allowance stays at £20,000, but no more than £12,000 of it can go into a cash ISA.
• Over 65s keep the full £20,000 cash ISA allowance, so the allowance cut does not affect them. The 22 per cent charge on idle cash above still applies at any age, though.
• A clarification on money market funds. You can still hold them inside a stocks and shares ISA and keep the returns tax free. They only become a problem if they make up 100 per cent of the ISA, in which case they count as a non qualifying investment.

It is worth knowing this is not a brand new idea. A similar charge existed before 2014, when cash interest inside these accounts was taxed at 20 per cent. The new 22 per cent simply matches the rate of tax on savings interest held outside an ISA, so it lines cash up the same way whether it sits inside or outside the wrapper.

Why are they doing this?

Who actually needs to think about this?

• ✓You invest your stocks and shares ISA. Not affected, whatever your age.
• ✓You only use a cash ISA. The 22 per cent charge does not touch cash ISAs at all.
• !You hold a lump of idle cash inside a stocks and shares ISA. This is the charge, and it applies at any age, even if you are over 65 and even if you do not normally pay tax.

One point that trips people up. Being over 65 protects your cash ISA allowance, because the cut from £20,000 to £12,000 is for under 65s only. It does not protect you from the 22 per cent charge on idle cash in an investment ISA. Those are two separate rules.

For the vast majority of people, though, this is a headline, not a problem.

What this means for you

If you take one thing away, make it this. "They are taxing ISAs" and "they are taxing idle cash held inside an investment account to close a loophole" are two very different statements. The first is what the headline implies. The second is what is actually happening.

There is a fair debate to be had about whether this is a sensible way to encourage investing, and plenty of people in the industry have argued it adds needless complexity. But that is a different argument from "your savings are being raided," which simply is not true for most people.

If you are not sure whether your own money is invested or sitting as cash, the quickest way to find out is to log into your ISA provider and check.

This article is general information and education only. It is not financial, tax, or investment advice, and it is not a personal recommendation. ISA and tax rules can change and depend on your individual circumstances. For advice on your own situation, speak to a regulated financial adviser, or visit the free and impartial MoneyHelper service backed by the government.