Savers with money outside an ISA will pay more tax on their interest from April 2027, after the Chancellor raised savings tax rates by a further two percentage points in the Budget on 28 October.
From 6 April 2027 the basic, higher and additional rates of tax on savings income will be 24%, 44% and 49%, against 20%, 40% and 45% today. The rise comes on top of a two-point increase announced in the 2025 Budget and applies across the UK.
John Healey also reversed his predecessor’s plan to cut the cash ISA allowance to £12,000 for under-65s, so the limit stays at £20,000. A planned 22% charge on interest earned by cash held in Stocks and Shares ISAs has been dropped too.
The Office for Budget Responsibility (OBR), the government’s official forecaster, expects the higher rates to raise about £600 million a year from 2028/29. It expects savers to move more money into ISAs in response, which cuts that figure by around £200 million a year.
The Treasury calls the change “a fair and proportionate approach” and says 84% of income taxpayers will be unaffected. It says a basic-rate taxpayer earning 4% interest would need more than £25,000 in savings outside an ISA before paying any tax.
Higher earners have the smallest tax-free allowance
The personal savings allowance lets basic-rate taxpayers earn £1,000 of interest a year tax-free. Higher-rate taxpayers get £500 and additional-rate taxpayers get nothing, and interest above the allowance is taxed at the savings rates.
A higher-rate taxpayer with £50,000 in an easy-access account paying 4% earns £2,000 a year, of which £1,500 is taxable. At today’s 40% rate the bill is £600. From April 2027, at 44%, it rises to £660.
Moving £20,000 of that money into a cash ISA would take £800 of interest out of tax altogether, a saving of £352 a year at the new rate.
The government also says it will work with the investment industry on a new incentive for people putting money into a Stocks and Shares ISA for the first time. It has not yet published any detail.
Two ISA allowances fall either side of the change
The 2026/27 ISA allowance can be used until 5 April 2027, and the 2027/28 allowance becomes available the next day. A couple who use both years in full could move up to £80,000 into ISAs around the time the new rates take effect.
How much of that should stay in cash depends on how much you need within easy reach and what the rest of your money is for. Pensions, investments and gifts to family can all change the sums.
If you’d like to talk through where your savings sit and whether they’re working as hard as they could, get in touch. We’re happy to take a look.