Overview
- From April 2027, tax on savings interest will rise to 22% for basic‑rate taxpayers, 42% for higher‑rate taxpayers, and 47% for additional‑rate taxpayers.
- The annual cash ISA subscription for savers under 65 will drop to £12,000, while the overall £20,000 ISA allowance remains and over‑65s keep a £20,000 cash ISA limit.
- HMRC plans to block transfers from stocks and shares or Innovative Finance ISAs into cash ISAs, assess whether holdings are “cash‑like,” and may levy charges on interest held as cash in other ISA wrappers.
- Industry reaction warns of operational questions, with concerns that charges tied to client cash balances could be passed on as account fees and that access to money market funds may be affected.
- InvestEngine reports 7.1 million people used cash ISAs in 2022/23 and estimates just over two million saved above the new cap, with example losses on £8,000 shifted to a 4.5% taxable account at roughly £264 over five years for basic‑rate savers and about £1,216 for higher‑rate savers once allowances are exceeded.