Financial expert Martin Lewis has issued an urgent warning to households across the United Kingdom following Chancellor Rachel Reeves' Autumn Budget announcement, which introduces two significant changes that will impact anyone with savings.
Cash ISA Allowance Slashed
One of the most substantial changes confirmed in the budget is the reduction of the Cash ISA tax-free allowance. From April 2027, the amount you can save annually without paying tax will be cut from £20,000 to £12,000.
Taking to social media platform X, the MoneySavingExpert.com founder explained the implications. "The big one is that the Cash ISA threshold will be cut," Lewis stated. "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."
Increased Tax on Savings Interest
In a further blow to savers, the government announced it will be increasing the tax on savings interest, property interest, and dividends by 2% from April 2027.
Lewis detailed what this means for taxpayers: "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%."
He was quick to note that most people don't currently pay tax on savings because basic rate taxpayers can earn £1,000 of interest annually without being taxed. However, for those earning interest above this threshold outside of an ISA, the increased rates will apply.
Impact on Pensioners and Savers
Martin Lewis revealed that he had previously discussed with the Chancellor how pushing people toward investment rather than cash savings could particularly affect pensioners.
Chancellor Rachel Reeves defended her decisions, stating: "I am building on our successful use of targeted checks on welfare claims to root out fraud and error and prevent public money being paid to people who are not entitled to it."
She added: "Today I will take the fair and necessary choices to deliver on our promise of change. I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing."
The changes, set to take effect in April 2027, represent one of the most significant shifts in savings policy in recent years and will require households to reconsider their financial planning strategies.
