The UK's leading investment firms have issued a stark warning to the government, accusing it of rushing through "fundamentally flawed" changes to Individual Savings Accounts (ISAs) that could backfire and deter people from investing in British companies.
Heated Talks Over ISA Changes
Sky News has learned that a meeting on Tuesday 13 January 2026 between top ISA providers, investment platforms, and officials from the Treasury and HM Revenue & Customs (HMRC) descended into a heated exchange. Representatives from major firms including Hargreaves Lansdown, HSBC, and Lloyds Banking Group voiced serious concerns about the implications of the Chancellor's proposed reforms.
The core of the dispute is a plan confirmed by Chancellor Rachel Reeves in the November Budget. From April 2027, the annual allowance for cash ISAs will be reduced from £20,000 to £12,000. The stated aim is to stimulate greater investment in UK equities by making the remaining £8,000 of the allowance available only for stocks and shares ISAs.
Complex Rules and Unintended Consequences
To enforce this change, the Treasury and HMRC are drafting detailed anti-avoidance rules. These are expected to include:
- A ban on transferring funds from stocks and shares or Innovative Finance ISAs into cash ISAs.
- The introduction of tests to determine if an investment is sufficiently 'non-cash' to qualify for a stocks and shares ISA.
- Potential charges on interest earned on cash held within an investment ISA.
The industry argues these measures will create unnecessary complexity and penalise savers, particularly those looking to derisk their portfolios as they approach retirement age. There is a growing fear that aggressively taxing cash balances within investment ISAs could severely tarnish the product's reputation as a simple, tax-free wrapper.
Political and Campaign Fallout
Any sign that the reforms are undermining stock market investment ahead of the next general election would be politically damaging for Ms Reeves. The Chancellor has already instructed the industry to collaborate on a multimillion-pound campaign to promote retail investing, but several firms have reportedly withdrawn over concerns about cost and coordination.
One industry insider present at Tuesday's talks said: "It became abundantly clear... that significant reforms to ISAs are being made on the hoof with little understanding of how retail investors behave." They added that HMRC has been put in an "invidious position" trying to implement problematic changes and called for the government to go back to the drawing board.
The reforms will undergo a consultation, with draft legislation due well before the April 2027 implementation. The stakes are high: in the 2023-24 tax year, a record £103 billion was paid into ISAs, with around £70 billion of that going into cash ISAs.
Other organisations at the meeting included the Building Societies Association, AJ Bell, Fidelity, Vanguard, and the Investment Association. A government spokesperson stated they are working closely with industry to develop the rules and will publish clear guidance in due course.
