Martin Lewis has issued an important warning to savers following Chancellor Rachel Reeves' Autumn Budget announcements, which introduce two significant tax changes that will impact UK households with savings.
One of the headline changes is a sharp reduction in the annual tax-free Cash ISA allowance, which has been cut from £20,000 to just £12,000 starting April 2027. Martin Lewis took to X (formerly Twitter) to explain, “The big change is the Cash ISA threshold dropping from £20,000 to £12,000 per tax year. The Stocks and Shares ISA allowance remains at £20,000, so savers will be able to split their allowances between Cash and Shares ISAs — £12,000 in Cash and the remainder in Shares.”
Martin also highlighted another concerning change: an increase in the tax rates applied to savings interest, property income, and dividends by 2%. He noted, “From 2027, the basic rate for savings tax moves up from 20% to 22%, the higher rate increases from 40% to 42%, and the top rate goes from 45% to 47%.”
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It’s important to remember that many basic-rate taxpayers don’t pay tax on savings up to a £1,000 personal savings allowance. However, for those with savings interest exceeding this threshold outside of ISAs, the tax burden will rise.
Martin added that he had previously discussed with Chancellor Reeves how encouraging more people to invest could affect pensioners. Meanwhile, Reeves stated she is committed to targeted measures to combat welfare fraud and public spending misuse, asserting her intention to avoid austerity while driving growth for the UK economy.
These changes mark a notable shift in government policy toward savings and taxation, making it crucial for households to review their saving strategies and understand the impact on their finances starting in 2027.