The 22% ISA Charge, Explained Simply.

You have a stocks and shares ISA. It holds investments. It also holds cash, because every S&S ISA has a cash element where uninvested money sits.

From 6 April 2027, that cash earns interest. That interest gets a 22% charge.

That is the rule. Here is what it means in practice.

Who The Charge Applies To

The 22% charge applies to under-65s who hold cash inside a stocks and shares ISA or an Innovative Finance ISA. If you are 65 or older, you are exempt.

It applies regardless of whether the cash is sitting there on purpose or by accident. Most people with a S&S ISA have some cash in it. Dividend payments arrive as cash before being reinvested. Top-ups land as cash before being deployed. Some people leave thousands in cash because they meant to invest it and did not get round to it. All of it is now in scope.

What It Costs In Real Numbers

The current cash rate inside most S&S ISAs is between 4.0% and 4.5%. That is what you earn on the cash component before any charge.

The absolute numbers are not catastrophic. The principle is. The Treasury is treating uninvested cash inside an investment wrapper as if it were sitting outside an ISA. The tax-free benefit of the wrapper is being removed for the cash bit specifically.

Why The Rule Exists

The stated reason is to discourage people from holding large cash balances inside S&S ISAs indefinitely. The Treasury wants cash in cash ISAs and investments in S&S ISAs. Clean split, simple policy.

The practical effect is that if you have been using a S&S ISA as a parking spot for uninvested cash, that decision now has a price. The price is small per year. Over five or ten years, it adds up.

How To Avoid The Charge

Three options. Pick one before 6 April 2027.

Option 1: Invest The Cash

If the cash was always meant to be invested, the cleanest answer is to invest it. Pick a fund, pick a global index tracker, pick whatever matches your existing ISA. The cash becomes holdings. The 22% charge no longer applies because there is no longer any cash interest to charge.

This is the right answer if the cash represents money you were planning to invest anyway and just had not got round to.

Option 2: Move It To A Cash ISA

Withdraw the cash from your S&S ISA to your current account, then deposit it into a cash ISA using your 2026/27 allowance. This is the last tax year under the current rules, so the full £20,000 cash ISA allowance is available if you have not already used it.

This is the right answer if the cash was actually meant to be cash savings, not investments. From April 2027, transferring directly from a S&S ISA to a cash ISA will not be possible for under-65s, so this is your last clean chance to make the move.

Option 3: Accept The Charge

Leave the cash where it is and accept the 22% charge on the interest from April 2027 onwards. This only makes sense if the cash is genuinely transitional (a dividend reinvestment pending, a top-up waiting to be deployed in the next few weeks) rather than a long-term parking spot.

A few hundred pounds sitting as a buffer before you invest it is fine. £10,000 sitting there for two years is a choice, and it is now a choice with a small annual cost.

If You Are 60 To 64

The 22% charge exempts people aged 65 and over. If you are 60 to 64 right now, check your date of birth against 6 April 2027.

If you turn 65 before 6 April 2027, the charge does not apply to you. Your cash can sit where it is.

If you turn 65 later, the charge applies from April 2027 onwards. The same three options apply.

What To Check This Week

Log into your S&S ISA provider. Look at the cash balance. Decide whether it is meant to be invested, meant to be cash, or meant to be somewhere else entirely.

If the number is above a few hundred pounds and you have not made a deliberate decision about it, that is your action item for the rest of August.

This is one of the quietest ways the new ISA rules will cost people money. Most people will not realise the charge is happening until they look at a statement twelve months from now and notice the interest is lower than they expected. The fix is a one-time check this month.