Stephen McGee,  CEO at Scottish Friendly comments on rumoured proposals to allow HMRC to charge ISA savers 22 percent on cash interest

“We welcome the government’s focus on encouraging more people to invest. There is a golden opportunity now to reset the nation’s attitude to saving and spark a genuine investing culture in the UK. For too long, the country has had a cash mindset that history shows erodes household wealth and deprives UK businesses of vital capital. 

“While this proposal may not be popular with some savers who hold cash within their investment ISAs, it should be seen as part of a broader effort to prompt greater engagement with long term investing.

 “Too many savers remain heavily weighted towards cash by default, even within investment ISAs. Reforms like this can act as a prompt for people to review how their money is held and whether investing could play a greater role in helping them meet their long-term goals.

“It comes hard on the heels of the announcement in the Autumn Budget that cash ISA limits will be reduced in April 2027 to £12,000 for savers under 65 years of age. The direction of travel is right, but if the Government really wants to shift behaviour and support long-term wealth creation, the cap ideally needs to be set at around £8,000. 

“At that level, households would still be able to build a meaningful emergency fund but would be encouraged to invest anything above that. This is vital, as there is currently around £360 billion sitting in cash ISAs earning interest that often fails to keep pace with inflation. 

 “There is no doubt that cash will always have an important part to play in a balanced financial picture, particularly for managing short term needs, risk and market volatility. That is why it is essential these changes are introduced with clear guidance, sensible carve outs and enough time for savers to adapt, especially where cash is held temporarily as part of an investment strategy.

 “If handled well, these proposals could provide a useful nudge that helps to normalise investing, increase engagement with savings decisions, and support better outcomes for savers over the long term. For those reasons, the reforms being mooted should be welcomed.”