Budget 2026
Budget 2026: what it means for your savings
Tax on savings interest goes up 4 points from April 2027, but the cash ISA cut is scrapped. Here is what changed, when, and the sums on typical balances.
I've read the Budget so you don't have to. Two things matter most for savers: interest above your tax-free allowance will be taxed more from April 2027, and the full £20,000 cash ISA allowance stays. Workings below.
The changes at a glance
- Tax on savings interest rises to 24% (basic rate), 44% (higher rate) and 49% (additional rate) from 6 April 2027. The 2025 Budget had already set 22%, 42% and 47% for that date; this Budget adds 2 more points.
- The rates apply across the UK, including to Scottish taxpayers, and are due to be legislated in Finance Bill 2026-27.
- The Personal Savings Allowance is unchanged: £1,000 of interest tax-free for basic-rate taxpayers, £500 for higher-rate, nothing for additional-rate.
- The starting rate for savings is unchanged: up to £5,000 of interest tax-free if your other income is below £17,570.
- The Personal Allowance stays frozen at £12,570, now until at least April 2031.
- The planned cut in the cash ISA allowance to £12,000 for under-65s from April 2027 is scrapped. Everyone 18 and over keeps the full £20,000.
- The related plans to charge tax on cash held in stocks and shares ISAs, and to stop transfers from stocks and shares ISAs to cash ISAs, will not go ahead as planned.
- Lifetime ISA: the withdrawal charge for buying a first home over £450,000 falls from 25% to 20%, from 29 October 2026.
- A First-Time Buyer ISA is confirmed for April 2029.
John Healey delivered his first Budget as Chancellor on 28 October 2026. These are the measures that touch cash savings.
What the tax rise costs on typical balances
| Saver | Interest | Allowance | Taxable | Tax 2026-27 | Tax 2027-28 | Extra a year |
|---|---|---|---|---|---|---|
| Basic rate, £25,000 | £1,125 | £1,000 | £125 | £25 (20%) | £30 (24%) | £5 |
| Basic rate, £50,000 | £2,250 | £1,000 | £1,250 | £250 (20%) | £300 (24%) | £50 |
| Higher rate, £50,000 | £2,250 | £500 | £1,750 | £700 (40%) | £770 (44%) | £70 |
| Additional rate, £100,000 | £4,500 | £0 | £4,500 | £2,025 (45%) | £2,205 (49%) | £180 |
Workings: interest = balance × rate. Taxable interest = interest − Personal Savings Allowance. Tax = taxable interest × your rate on savings. Example 1: £25,000 × 4.50% = £1,125 interest; £1,125 − £1,000 = £125 taxable; £125 × 20% = £25 now, £125 × 24% = £30 from April 2027.
The 4.50% rate is for illustration only, not a rate any account is paying. The examples assume the interest doesn't move you into a higher tax band, that the starting rate for savings doesn't apply, and that the money isn't in an ISA.
Who pays nothing extra
If all your interest falls within your Personal Savings Allowance or the starting rate for savings, the new rates make no difference: there is no tax to pay at either rate. A basic-rate taxpayer earning £900 of interest pays nothing in 2026-27 and nothing in 2027-28.
Interest earned inside a cash ISA is tax-free and doesn't use up your Personal Savings Allowance, so the rise doesn't touch it either. Our tax calculator shows the figures for your own balance and band.
The cash ISA U-turn
At the 2025 Budget, the then Chancellor announced that from April 2027 under-65s could only put £12,000 a year into cash ISAs, with the rest of the £20,000 reserved for stocks and shares. That plan, and the anti-avoidance rules that came with it, will not go ahead.
So from April 2027 the ISA allowance is £20,000 a year for everyone aged 18 and over, and all of it can go into cash. The Government also said it will work with industry on a new incentive for first-time investors in a stocks and shares ISA; no details yet.
Saving for a first home
From 29 October 2026, a first-time buyer who uses a Lifetime ISA to buy a home costing more than £450,000 pays a 20% withdrawal charge instead of 25%. In practice they get back what they paid in plus interest, but lose the government bonus. All other early withdrawals still cost 25%.
A new First-Time Buyer ISA is due in April 2029: a 25% bonus on up to £4,000 a year, for homes up to £450,000, with no upper age limit to open one. Full details are still to come. Our Lifetime ISA explainer has the sums.
About this article
Figures come from the Budget documents as reported on 28 to 30 October 2026 by the sources below. The tax rates are announced, not yet law: they need Finance Bill 2026-27 to pass.
Worked examples use a single illustrative rate (4.50%) and round to the nearest pound.
This is general information, not advice: it doesn't take your circumstances into account. Rates and rules can change; the sources below are where to check.
Sources
- Which?: Autumn Budget 2026, cash ISA U-turn but savings tax hiked further
- Deloitte Taxscape: savings and property income tax rate increases (Budget 2026)
- MoneySavingExpert: cash ISA limit to stay at £20,000
- MoneySavingExpert: Budget 2026, instant reaction and analysis
- Moneyfactscompare: Autumn Budget 2026, key announcements
- GOV.UK: reduce Lifetime ISA withdrawal charge for properties over the property price cap
- GOV.UK: Income Tax, changes to tax rates for property, savings and dividend income (Budget 2025)
Some banks pay us when you open an account through our link. That never changes the order of our tables or what this report says.