Chancellor reverses cash ISA restrictions but raises savings tax

Summarised from 2 outlets · Updated 28 Oct, 16:50 · Archive

The Chancellor reversed proposed restrictions on cash ISAs for under-65s but increased income tax on savings from 2 per cent to 4 per cent from April 2027.

The Chancellor has reversed proposed restrictions on cash ISAs for those aged under 65, who previously faced a proposed annual investment limit of £12,000. The U-turn was welcomed by savers and financial advisers, as the restrictions could have affected banks' liquidity and had knock-on effects for mortgage availability.

However, savers face an offsetting tax increase. The income tax supplement on savings will double from 2 per cent to 4 per cent from April 2027. This means basic rate taxpayers will pay 24 per cent on savings income, higher rate taxpayers will pay 44 per cent, and additional rate taxpayers will pay 49 per cent.

The government also made a welcome adjustment to the penalty regime for lifetime ISAs, which previously could see investors lose as much as 25 per cent of their investment in certain circumstances. Financial advisers note the tax rise could push savers towards stocks and shares investments, which face lower tax rates, potentially benefiting the wider economy.

How it is being reported

• Budget cash ISA U-turn welcomed... but savers still face 'under-the-radar' tax stingThe Chancellor’s decision to reverse the proposed restrictions on investing in cash ISAs will be welcomed by those aged under 65 who want to shelter their cash holdings from tax - and who were facing an annual investment limit of £12,000 under the initial proposals, writes Chris Egmore of Lovewell Blake Financial Planning.Norwich Evening News · 28 Oct, 16:29
• Budget cash ISA U-turn welcomed... but savers still face 'under-the-radar' tax stingThe Chancellor’s decision to reverse the proposed restrictions on investing in cash ISAs will be welcomed by those aged under 65 who want to shelter their cash holdings from tax - and who were facing an annual investment limit of £12,000 under the initial proposals, writes Chris Egmore of Lovewell Blake Financial Planning.Eastern Daily Press · 28 Oct, 16:29

In this story: Chancellor · Lovewell Blake Financial Planning

This summary was written by AI from the headlines and standfirsts above, and states as fact only what at least two outlets report. How we use AI · Report a problem · Corrections log