Alex Campbell, of trading platform Freetrade, said: “The introduction of a 22pc charge on interest earned on cash held in a stocks and shares Isa may now limit the ability of platforms to market the wrapper as ‘tax efficient’.
“We may also see platforms decide to lower or eliminate interest payments for cash held in stocks and shares Isas now in the name of limiting the charges faced by consumers.”
However, the Treasury has decided not to reintroduce restrictions on “cash-like” assets which were in place before 2014. This would have meant that investors would not have been allowed to hold money market funds and short-dated gilts, also known as T-bills, in the tax-free accounts.
Such holdings are often used by investors to inflation-proof their cash while seeking new investment opportunities.
The Treasury said: “We have recognised that the pre-April 2014 test to determine whether an investment is cash-like was difficult to operate and that preventing cash-like investments from being held in a non-cash Isa would hamper normal investment behaviour.”
The Telegraph understands the publication of the new rules was delayed due to internal Treasury discussions between civil servants designing the new Isa rules and the Debt Management Office about whether T-bills should be restricted.
Instead, cash-like assets will be defined simply as money market funds and will be permitted within investment Isas as long as said assets do not form 100pc of a portfolio.
As The Telegraph revealed, this means there could be a 1p loophole to the new rules – as long as at least a penny is held in other qualifying investments, then money market funds and short-dated gilts would be permitted.
The Treasury was contacted for comment.
