Individual Savings Accounts (ISAs)

ISA Reform – From 6 April 2027 the annual ISA cash limit will be set at £12,000, within the overall annual ISA limit of £20,000. Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2031. Savers over the age of 65 will continue to be able to save up to £20,000 in a cash ISA each year. In addition, financial services firms will be providing new, easily navigable ways for people to find the right UK investment for them.

It has been confirmed by HMRC that the following rules will be introduced to avoid circumvention of the lower limit for cash ISAs

• no transfers from stocks and shares and Innovative Finance ISAs to cash ISAs
• tests to determine whether an investment is eligible to be held in a stocks and shares ISA or is ‘cash like’
• a charge on any interest paid on cash held in a stocks and shares or Innovative Finance ISA

These rules will apply to investors under the age of 65.

Industry will be consulted on the draft legislation, which will be made by amendments to the ISA regulations, and laid before Parliament well ahead of April 2027.

Lifetime ISA Reform – The government will publish a consultation 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.

Help to Save Reform – The government will make the Help to Save scheme permanent and, from April 2028, will expand eligibility to include all Universal Credit claimants who receive the child element, the caring element or both.

ISA Digitalisation - the digitalisation of ISAs will be delayed until April 2028

Other savings market announcements

Changes to tax on savings income – The government is changing the rates of income tax applicable to savings income. From 2027-28, the savings basic rate will be increased by 2 percentage points to 22%, the savings higher rate will be increased by 2 percentage points to 42% and the savings additional rate will be increased by 2 percentage points to 47%. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2027.

Starting Rate for Savings – The Starting Rate for Savings will be retained at £5,000 for 2026-27 and will stay at this level until 5 April 2031, allowing individuals with less than £17,570 in employment or pensions income to receive up to £5,000 of savings income tax-free.

NS&I’s net financing target in 2025-26 is being revised up by £1 billion, to £13 billion within a range of +/- £4 billion. 

Housing & mortgages

High Value Council Tax Surcharge – The government will introduce the High Value Council Tax Surcharge a new charge on owners of residential property in England worth £2 million or more, starting in 2028-29. Local authorities will collect this revenue on behalf of central government. Revenue will be used to support funding for local government services, with further detail to be set out at the next spending review.

This charge will be based on updated valuations to identify properties above the threshold and will be in addition to existing Council Tax. Fewer than 1% of properties will be in scope of HVCTS. New charges start at £2,500 per year, rising to £7,500 per year for properties valued above £5 million, and will be levied on property owners rather than occupiers. Local authorities will collect this revenue on behalf of central government and will be fully compensated for the additional costs of administering this new tax.  The government will consult on detailed implementation of the HVCTS in the new year, including to determine who might need additional support to pay the charge and how to deliver it.

Changes to tax on property income – The government will create separate tax rates for property income. From 2027-28, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%. These rates will apply across England, Wales and Northern Ireland. The government will engage with the devolved governments of Scotland and Wales to provide them with the ability to set property income rates in line with their current income tax powers in their fiscal frameworks. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2027.
 

Salary sacrifice

Salary sacrifice for pension contributions – The government will charge employer and employee NICs on pension contributions above £2,000 per annum made via salary sacrifice. These changes will be legislated for through primary and secondary legislation which will be introduced in due course. This will take effect from 6 April 2029.