Savings tax rise and cash ISA cut from April 2027
Short answer
From 6 April 2027, tax on savings interest rises to 22%, 42% and 47%, and under-65s can only put £12,000 a year into a cash ISA (down from £20,000). The Personal Savings Allowance (£1,000 basic, £500 higher) and ISA tax-free status don't change.
Two changes hit UK savers on 6 April 2027: tax on savings interest rises by 2 percentage points, and the amount under-65s can put into a cash ISA each year falls from £20,000 to £12,000. Both were announced in the November 2025 Budget.
New tax rates on savings interest
| Your tax band | Until 5 April 2027 | From 6 April 2027 |
|---|---|---|
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
These apply across the whole UK, including Scotland. HMRC estimates around 3.8 million people will pay more tax on savings by 2029–30.
What doesn’t change
- Personal Savings Allowance: you can still earn £1,000 of interest tax-free as a basic-rate taxpayer, £500 as a higher-rate taxpayer, and £0 as an additional-rate taxpayer.
- Starting rate for savings: up to £5,000 of interest can be tax-free if your other income is low.
- ISAs: interest inside any ISA stays completely tax-free.
The cash ISA limit cut
- The overall ISA allowance stays at £20,000 a year.
- From 6 April 2027, if you’re under 65, only £12,000 of it can go into a cash ISA. The other £8,000 can only go into stocks and shares (or innovative finance) ISAs.
- If you’re 65 or over, you can still put the full £20,000 into cash, from the tax year you turn 65.
- Money already in a cash ISA isn’t affected. The limit applies to new deposits.
How much more will you pay?
Higher-rate taxpayer with £30,000 in an easy-access account at 4%: £1,200 interest, minus the £500 allowance, leaves £700 taxable.
- Now: £700 × 40% = £280
- From April 2027: £700 × 42% = £294 (+£14)
Basic-rate taxpayer with £50,000 at 4.5%: £2,250 interest, minus £1,000 allowance, leaves £1,250 taxable.
- Now: £1,250 × 20% = £250
- From April 2027: £1,250 × 22% = £275 (+£25)
The rate rise itself is small for most savers. The bigger effect is that it pushes people to keep more money inside ISAs, just as the cash ISA limit falls.
What to do before April 2027
- Use your full £20,000 cash ISA allowance for 2026/27 (before 5 April 2027) if you have savings outside ISAs. It’s the last tax year under-65s can add that much cash.
- Check if your interest will go over your allowance at current rates. If not, the change won’t cost you anything.
- Think about who holds the savings. Couples can save tax by keeping savings in the name of the lower-earning partner.
- Consider a stocks and shares ISA for long-term money you won’t need for five years or more, knowing that investments can fall as well as rise.
Getting a better rate without the admin
The quickest win for most savers isn’t the tax rate, it’s the interest rate. Easy-access accounts at big high-street banks often pay a fraction of the best rates. A savings marketplace lets you open accounts with several banks through one login and move money when a better rate appears.
Landlord? See the landlord tax rise from April 2027.
Sources: HMRC policy paper on property, savings and dividend rates; cash ISA limits as announced in the Budget and reported by Financial Reporter. General information, not financial advice.
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