Money expert Martin Lewis has issued a warning to savers following the Autumn Budget being revealed by Chancellor Rachel Reeves this afternoon.
Two new savings taxes will be introduced following the Budget which will hit people with savings, including Cash ISAs, Martin has revealed today.
Taking to X following Labour’s Budget plan being made public on Wednesday, Martin said: “There are big changes coming to savings. All of these happen in April 2027. The big one is that the Cash ISA threshold will be cut, from you being allowed to put in £20,000 per tax year to you being only allowed to put in £12,000 per tax year.
“The shares ISA will stay at £20,000, which will mean from that point you’ll be able to put in £12,000 into a Cash ISA and the remaining amount into shares.”
The money expert explained that this is ‘only for new money’ and won’t affect existing money in Cash ISAs. It means if you have tens of thousands of pounds already stashed away in your ISA, you won’t lose any money from the new tax. Instead, the deposit limits cut applies only to ‘new money’ that you put into the accounts from April 2027 onwards.
Martin also explained that he stressed to the Chancellor during a previous meeting how the push to get people investing would impact pensioners, who don’t want to risk their money when they are retired, which resulted in an exemption from the Cash ISA limit cut for those aged over 65.
But there is another savings tax which will hit all age groups, Martin added.
Martin warned: “But there’s another hit to savings too. They’re going to be increasing the tax on savings interest, money coming in from property interest, and dividends, by 2%.
“So that means a basic rate of savings tax will no longer be 20% from 2027, it will be 22%, the higher rate will be 42% from 40% and the top rate will be 47% from 45%.
“Now remember, most people don’t pay tax on savings because as a basic rate taxpayer you can earn £1,000 of interest a year without paying tax on it, but if you earn more than that and it’s outside of an ISA then that tax rate will be going up.”
The annual adult cash ISA subscription limit will be slashed to £12,000 from April 2027, in what one building society described as a “sucker punch” to savers.
In the Budget, the Government unveiled plans to reform the Isa system so that only over-65s will retain the full £20,000 annual cash Isa allowance.
The annual overall contribution limit into adult Isas will remain at £20,000, potentially encouraging some savers who reach the £12,000 cash Isa limit to put more money in stocks and shares.
A consultation will also be published in early 2026 on the implementation of a “new, simpler” Isa product to support first-time buyers to buy a home. Once available, this new product will be offered in place of the Lifetime Isa.
Financial services firms will be providing new easily navigable ways for people to find the right UK investment for them, the Government said.
Harriet Guevera, chief saving officer at Nottingham Building Society, said: “The decision to slash the annual cash Isa allowance from April 2027 is a sucker punch for savers and deeply disappointing for lenders.
“We support the Government’s aim to boost an investing culture in the UK, but restricting choice is not the way to do it.”
Tom Selby, director of public policy at AJ Bell, said: “There is scant evidence the proposal to cut the cash Isa allowance from £20,000 to £12,000 will do anything to encourage retail investing. Instead, there is a real risk that the April 2027 deadline will drive more people to cash Isas in the short-term.
“The decision to exempt over-65s from the cash Isa cut is frankly bizarre given pensioners will in the main be prioritising taking an income from their funds rather than piling in £20,000 a year.
“All of this adds up to massive extra complexity and friction in the Isa system.”