What investors need to know about the recent 22% tax on stocks and shares ISAs

If you’re a UK investor using a Stocks and Shares ISA, you’ve probably heard about the recent 22% tax. But don’t panic yet. For most investors, the recent tax will not have a significant impact.

Still, it’s worth knowing what’s changing, so here’s what you need to know…

Is it worth buying City Of London Investment Trust Plc shares today?

Before you make a decision, please take a moment to read this report. Despite ongoing uncertainty from US tariffs to global conflicts, Mark Rogers and his team believe that many UK shares are still trading at significant discounts, offering many potential learning opportunities for experienced investors.

That’s why this could be the perfect time to conduct this valuable research – Mark’s analysts have combed the markets to discover his 5 favorite long-term “buys”. Please do not make any essential decisions before watching them.

What’s changing?

Firstly, tax doesn’t apply to everything in an ISA. Only applies to cash held in a Stocks and Shares ISA from 6 April 2027.

Therefore, any interest charged on a cash balance held in a cashless ISA will be charged a fixed fee of 22%. The remaining assets remain unchanged. So for those using an ISA primarily for investment purposes, there will be no impact on capital gains or dividend income.

Please note that tax treatment depends on each client’s individual situation and may change in the future. The content of this article is for informational purposes only. It is not intended to be and does not constitute any form of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

Still, there are a few finer points worth paying attention to. Moreover, it is worth considering what these changes mean for the future.

So what might the long-term impact be?

Essentially, the change only affects anyone who keeps cash in a Stocks and Shares ISA long enough for interest to accrue. And while this also applies to ‘alternative finance returns’, HMRC says money market funds (MMFs) are treated separately under the recent rules.

This is a key issue worth considering for those who prefer to keep their funds in a “cash” instrument. Overall, however, the change is intended to encourage investors to support the UK market by choosing to hold shares rather than cash.

New ISA limits at a glance (from April 2027):

ISA cash benefit reduced to £12,000 for under 65s.
The general ISA allowance remains at £20,000.
Stop transfers from Cashless ISAs to Cash ISAs.

Takeaway food

For most long-term investors, the main rule is basic: a stocks and shares ISA is still valuable to invest in, but is no longer a sensible place to keep your cash.

For income investors or anyone investing in wealth in the form of growth stocks, the change will have no impact on dividends or profits. However, if you usually keep cash in an ISA waiting to invest, try cutting it down or using it more quickly.

With that in mind, here’s one reliable UK stock you might want to consider moving your cash into before the recent rules come into effect.

A reliable, low-risk British name

In my opinion, a diversified UK income trust makes the most sense when you want to turn your cash into something low risk. This is one of my all-time favorites Investment fund of the City of London (LSE:CTY).

The fund, run by Janus Henderson, is popular with income investors due to its very long dividend history and defensive, diversified portfolio.

The most essential farms include: HSBC, Shell, British-American tobacco, BAE systems, NatWest, Lloyds, RioTinto, AstraZeneca, Unilever AND Tesco — a wide spread that helps limit sector-specific risks.

It’s not a completely risk-free solution, but it’s worth considering for someone who wants to avoid sitting on cash but keep volatility and risk more confined than with a single holding.

Key Points:

Share price: 567p.
Market capitalization: £2.92 billion.
Dividend yield: 3.85%.
Bonus: +1.04%.
Net debt: 4.59%.

Admittedly, by focusing solely on London-listed shares, it is strongly tied to the domestic economy and lacks regional diversification. So any deterioration in the UK market will naturally harm the share price.

So is low volatility the best idea for UK investors ditching cash?

Should you invest £5,000 in City Of London Investment Trust Plc now?

If investing expert Mark Rogers and his team have stock advice, it can pay to listen. After all, Twelfth Magpie’s flagship Share Advisor newsletter, which it has run for almost a decade, provides thousands of paying members with the best share recommendations from across the UK and US markets.

Mark believes there are 6 standout stocks that investors should consider buying right now. Want to check if City Of London Investment Trust Plc is on the list?

Mark Hartley owns shares in City of London Investment Trust, HSBC, British American Tobacco, BAE Systems, Lloyds, AstraZeneca, Unilever and Tesco.