The Individual Savings Account (Amendment) (No. 2) Regulations 2026

Published: Mon 14th Sept 26

Introduced a £12,000 cash ISA limit for under-65s and a tax charge on interest from cash held in investment ISAs.

This instrument amends the Individual Savings Account Regulations 1998 to introduce a specific £12,000 annual subscription limit for cash ISAs applicable to individuals aged 64 or under.

It removes tax relief on interest or alternative finance returns generated by cash deposits held within stocks and shares or innovative finance ISA components, requiring account managers to pay a flat-rate charge to HMRC at the savings basic rate.

Additionally, the regulations update the definition of money market funds and prohibit stocks and shares ISAs from consisting entirely of such funds, while revising transfer rules to restrict under-65s from moving funds into cash accounts in certain circumstances.

Arguments For

The instrument seeks to modernize the ISA framework by updating the definition of money market funds in line with Regulation 2017/1131 of the European Parliament and of the Council.
Provisions in the regulations establish a differentiated subscription model based on age, specifically introducing a lower £12,000 limit for cash ISAs for individuals aged 64 or under.
The regulations aim to standardize the tax treatment of cash held within investment-focused components (stocks and shares or innovative finance) by introducing a flat-rate charge on interest earned, ensuring these funds are treated as separate from tax-exempt ISA income.

Arguments Against

Financial institutions may face increased administrative burdens due to the requirement for account managers to calculate and pay a flat-rate charge on interest from cash deposits within 6 months of the tax year end.
Legal scholars or consumer advocates might question the complexity introduced by age-based subscription limits, which require account managers to verify if an investor is 64 or under at the end of the year.
Investors who maintain large cash balances within a stocks and shares ISA or Innovative Finance ISA will see a reduction in net returns due to the removal of tax relief on that specific interest.
The restriction preventing a stocks and shares component from being composed of 100% money market funds adds a layer of portfolio management oversight for both managers and investors.

Citation and commencement

1 These Regulations may be cited as the Individual Savings Account (Amendment) (No. 2) Regulations 2026 and come into force on 6th April 2027.

This section establishes the official name of the regulations.

It sets the commencement date for all provisions as 6 April 2027.

Amendment of the Individual Savings Account Regulations 1998

2 The Individual Savings Account Regulations 1998( 3 ) are amended as follows.

This section identifies the Individual Savings Account Regulations 1998 as the primary legislation being modified.

All subsequent amendments in this document apply to that 1998 instrument.

Amendment of regulation 2

3 In regulation 2 (interpretation)( 4 ), in paragraph (1), in sub-paragraph (b), in the appropriate places insert the following definitions-
''alternative finance return' has the meaning given by Part 10A of ITA 2007;';

''money market fund' means a money market fund authorised in accordance with Article 4 or Article 5 of Regulation 2017/1131 of the European Parliament and of the Council of 14th June 2017 on Money Market Funds( 5 );'.

This section adds two new definitions to the ISA regulatory framework.

It defines 'alternative finance return' by reference to existing income tax law and provides a specific definition for 'money market fund' based on retained EU regulatory standards.

Amendment of regulation 2D

4 In regulation 2D (regulations that do not apply to junior ISA accounts)( 6 )-
(a) after '7(2)(h)' insert 'and (10A)';
(b) after '21' insert ', 22A'.

This section clarifies which rules do not apply to Junior ISAs.

It ensures that the new restriction on 100% money market fund holdings and the new tax charge on cash interest (Regulation 22A) are excluded from the Junior ISA regime.

Amendment of regulation 4

5 In regulation 4 (general conditions for accounts and subscriptions to accounts)( 7 ), in paragraph (1B), in sub-paragraph (e) for 'limit in regulation 4ZA(1)' substitute 'limits in regulation 4ZA(1) and (1ZA)'.

This section updates the general conditions for ISA subscriptions to acknowledge that multiple limits may now apply.

It prepares the regulatory text for the introduction of a separate limit for cash accounts.

Amendment of regulation 4ZA

6 In regulation 4ZA (subscriptions to an account other than a junior ISA account)( 8 )-

(a) at the end of paragraph (1) insert ', subject to paragraph (1ZA)';
(b) after paragraph (1) insert-

'(1ZA) In any year in which a qualifying individual is 64 or under at the end of that year, the subscription limit for the aggregate of the individual's subscriptions to cash accounts is £12,000.'

This section mandates a specific subscription limit for cash ISA accounts.

Individuals who are 64 or younger at the end of a tax year are restricted to a total of £12,000 in cash subscriptions for 그 year.

Amendment of regulation 4A

7 In regulation 4A (repair of certain incompatible account and excess subscriptions - accounts other than junior ISA accounts)( 9 )-

(a) in paragraph (1A)-
(i) after 'because' insert 'one or both of the';
(ii) for 'limit' substitute 'limits';
(iii) after '4ZA(1)' insert 'and (1ZA)';
(b) in paragraph (3), in sub-paragraph (b)-
(i) after 'with the' insert 'conditions of the';
(ii) for 'limit' substitute 'limits';
(iii) after '4ZA(1)' insert 'and, where relevant, (1ZA)';
(c) in paragraph 4, in sub-paragraph (a), in paragraph (ii) after '4ZA(1)' insert 'and, where relevant, (1ZA)'.

This section adjusts the 'repair' procedures used when an individual accidentally over-subscribes to their ISA. It allows for the correction of accounts that have exceeded either the general subscription limit or the new £12,000 cash-specific limit.

Amendment of regulation 5DDB

8 In regulation 5DDB (flexible account)( 10 ), at the end of paragraph (3A), insert 'and, where applicable, must not exceed the subscription limit in regulation 4ZA(1ZA)'.

This section applies the new cash subscription limit to 'flexible' ISAs, which allow investors to withdraw and replace money.

It stipulates that any replacement subscriptions must still comply with the £12,000 limit for individuals aged 64 or under.

Amendment of regulation 7

9 In regulation 7 (qualifying investments for a stocks and shares component)( 11 )-
(a) in paragraph (2), after sub-paragraph (s) insert-
'(t) subject to the conditions specified in paragraph (10A), money market funds.';
(b) after paragraph (10) insert-

'(10A) The condition specified in this paragraph is that 100% of the value of the investments, other than cash, held under the stocks and shares component, must not be money market funds.'.

This section permits money market funds to be held within a stocks and shares ISA. However, it prohibits an account (excluding its cash balance) from being composed entirely of money market funds.

Amendment of regulation 8

10 In regulation 8 (qualifying investments for a cash component)( 12 ), in paragraph (2)-

(a) for paragraph (p) substitute-
'(p) money market funds.';
(b) omit paragraph (q).

This section updates the list of allowed investments for the cash component of an ISA. It simplifies the entry for money market funds and removes a redundant paragraph.

Amendment of regulation 10

11 In regulation 10 (qualifying individuals who may invest under an account that is not a junior ISA account nor a Lifetime ISA)( 13 ), in paragraph (2), in sub-paragraph (ca) for 'limit in regulation 4ZA(1)' substitute 'limits in regulation 4ZA(1) and (1ZA)'.

This section ensures that the criteria for becoming a 'qualifying individual' (someone eligible to open an ISA) include the requirement to adhere to both the general and the new age-specific cash subscription limits.

Amendment of regulation 12

12 In regulation 12 (conditions for application to open an account that is not a junior ISA account or a Lifetime ISA)( 14 ), in paragraph (3), after sub-paragraph (ea) insert-

'(ec) that in the case of a cash account the applicant has not subscribed, and will not subscribe, more than the subscription limit in regulation 4ZA(1ZA)-
(i) in the year to which paragraph (2) refers, and
(ii) in each successive year following that year, in which the declaration has effect and the subscription limit in regulation 4ZA(1ZA) applies;'.

This section requires individuals applying for a cash ISA to declare that they have not and will not exceed the £12,000 subscription limit.

This declaration must cover the current year and all future years in which the limit applies to them.

Amendment of regulation 21

13 In regulation 21 (transfers relating accounts other than junior ISA accounts)( 15 )-

(a) in paragraph (4)-

(i) at the beginning, for 'The' substitute 'In the case of a cash account, the';

(ii) in sub-paragraphs (a), (c) and (d) omit '(if the account investor is 18 years of age or over)';
(b) after paragraph (4) insert-

'(4ZA) In the case of a stocks and shares account or an innovative finance account, the current year's subscriptions and the previous years' subscriptions may be transferred to-

(a) a stocks and shares account,
(b) an innovative finance account,
(c) a Lifetime ISA, or
(d) a cash account, if the account investor is 65 or over at the end of the year,

belonging to the same account investor.';

This section amends the rules for transferring funds between different types of ISAs.

It specifies that individuals may only transfer funds from stocks and shares or innovative finance ISAs into a cash ISA if they are 65 or older at the end of the tax year.

Amendment of regulation 22

14 In regulation 22 (exemption from tax of account income and gains)( 16 ), in paragraph (1)-

(a) in sub-paragraph (a), in paragraph (ia) omit 'paid by a financial institution in accordance with Part 10A of ITA 2007';
(b) in sub-paragraph (e) omit 'held under a cash component'.

This section removes certain broad tax exemptions for interest.

These changes are preparatory for the new specific tax charge introduced in the following section.

Insertion of regulation 22A

15 After regulation 22 insert-

' Interest or alternative finance return on cash deposits held under a stocks and shares component or innovative finance component

22A.-. -(1) When in any year, a sum of interest or alternative finance return is paid or credited in respect of a cash deposit which is held under a stocks and shares component or innovative finance component in accordance with regulation 6(4) to (6)-

(a) no relief from tax applies to such interest or alternative finance return, but
(b) paragraph (2) applies.

(2) Where this paragraph applies-

(a) the account manager must pay to the Board a flat rate charge on all sums of interest or alternative finance return referred to in paragraph (1) paid or credited in that year, and
(b) any amount so payable is to be treated as an amount of tax due under an assessment which is final and conclusive and payable not later than 6 months after the end of the year in which the interest was paid or credited.

(3) The 'flat rate charge' in paragraph (2) is charged at the savings basic rate in force for the year under section 7A of ITA 2007( 17 ).

(4) The interest or alternative finance return referred to in paragraph (1) in all other respects, except for the purposes of section 629 of ITTOIA 2005, is to be regarded as if it were not income for any income tax purposes, and no repayment of tax or amounts representing tax may be made to the account investor receiving or entitled to such interest.

(5) In paragraph (1) 'interest' has the same meaning as in regulation 22.'.

This section introduces a tax charge on interest earned from cash held within a stocks and shares ISA or an Innovative Finance ISA. It requires the ISA manager to pay a flat-rate charge to HMRC, calculated at the savings basic rate, within six months of the end of the tax year.

The interest is otherwise not treated as income for the investor, and the investor cannot claim tax repayments on it.

Amendment of regulation 24

16 In regulation 24 (tax liabilities and reliefs-account manager to act on behalf of account investor)( 18 ), in paragraph (3)-

(a) omit the 'and' at the end of sub-paragraph (a);
(b) after that sub-paragraph insert-

'(aa) any sum which is payable under regulation 22A;'.

This section explicitly authorizes the ISA account manager to act on behalf of the investor to pay the new tax charge on cash interest.

It adds this payment to the list of official duties the manager performs regarding tax liabilities.

Amendment of regulation 26

17 In regulation 26 (repayments in respect of tax to account manager-annual returns and annual claims)( 19 ), for paragraph (2) substitute-

'(2) An account manager must, within six months after the end of the year, make a return to the Board of-

(a) all income,
(b) all sums of interest or alternative finance return falling within regulation 22A(1),
(c) the total amount payable under regulation 22A(2)(a),
(d) any gains treated as arising in accordance with regulation 36(3), and
(e) an annual claim to establish the total of repayments due under an account for that year.'.

This section mandates that ISA account managers include the details of interest earned on investment-cash and the corresponding tax charges in their annual returns to HMRC. This return must be submitted within six months of the tax year's end.

Amendment of regulation 31

18 In regulation 31 (returns of information by account manager)( 20 ), paragraph (4), subparagraph (a), after paragraph (viii) insert-

'(ix) funds in a money market fund,

(x) any sum which is payable under regulation 22A,'.

This section requires ISA managers to include specific information about money market fund holdings and the new tax charges in their information returns.

This ensures HMRC can monitor compliance with the 100% money market fund restriction and the interest tax charge.

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