'Triple blow' for savers over tax-free Personal Savings Allowance rule
Households with savings face a ‘triple blow’ in the next 12 months say financial experts after a cut to Cash ISAs and a freeze on the tax-free Personal Savings Allowance - while tax rates for savings have been increased.
TL;DR
- A cut to the Cash ISA allowance will reduce the tax-free deposit limit to £12,000 from April 2027 for those under 65.
- The Personal Savings Allowance remains frozen at £1,000 for basic rate taxpayers.
- Tax rates on savings interest will increase by two percentage points from April 2027, affecting both basic and higher rate taxpayers.
- These changes combine to create a 'triple blow' for cash savers, leading to higher tax bills.
- Alternative options for savers include Premium Bonds, NS&I products, and investments, which offer tax-free winnings or higher potential returns.
- Investing has historically yielded significantly higher returns than Cash ISAs.
- Fixed-term savings accounts can offer higher interest rates, and tactical use can defer tax liabilities to future tax years.