Before You Put Another £1 Into ISAs... Read This

Hi Reader,

Welcome to The Money Series! If you are new here, thank you for signing up. Personal Finance can feel ambiguous and overwhelming, but I am here to help simplify the journey.

If you live in the UK, plan to live in the UK, or know someone that lives in the UK, then this is important.

The UK Chancellor released the Autumn 2025 budget few days ago, and several of the proposed changes will directly affect how UK residents save, invest, and manage taxes going forward. I’ve distilled the two most impactful changes you should pay attention to, and what you can do to stay ahead of them.

1. The Cash ISA annual allowance will fall from £20,000 to £12,000

ISAs (Individual Savings Accounts) are one of the most valuable tax shelters available to UK residents. They allow you to save or invest without paying tax on interest, dividends, or capital gains.

Currently, you can place up to £20,000 each tax year into Cash ISAs, Stocks & Shares ISAs, or any combination of the two. However, under the new budget:

• Cash ISA allowance drops to £12,000

• Stocks & Shares ISA allowance remains £20,000

This means you’ll no longer be able to hold your full annual ISA allowance in cash unless you’re over 65. People aged 65+ will retain the £20,000 Cash ISA allowance, likely because they are closer to, or already in, retirement and may need to prioritise low-risk, liquid savings. Younger adults, on the other hand, are being nudged toward long-term investing through these changes.

To keep your savings tax-free, you should;

• Consider leaning more heavily on Stocks & Shares ISAs, especially if you’re building long-term wealth.

• Max out the £12k Cash ISA allowance for liquidity, then place the remaining amount into a Stocks & Shares ISA.

This way, you maximize your full £20k just with a different allocation.

2. Taxes on savings income will rise by 2 percentage points

This affects to interest on savings, returns on property investments, and dividends earned outside an ISA. This implies that the basic tax rate in savings will increase to 22% from 20%.

If you’re a basic rate taxpayer, you will still still receive the £1,000 Personal Savings Allowance (you can earn up to £1,000 interest on savings without paying taxes). Anything abiove that will be taxed at 22%. Higher-rate taxpayers will see the same 2% increase on savings income above their £500 allowance. Again, this is only on income outside an ISA.

What does this mean for you? If you keep sizeable cash savings in regular bank accounts, you’re likely leaving money on the table. It reinforces the principles I’ve always emphasised:

• Use savings for stability and emergencies

• Use investing for growth

• Maximize tax-advantaged accounts like ISAs where possible

If your earned income is already taxed above the basic rate, shielding your cash and investments becomes even more valuable.

In summary…

These changes are scheduled to take effect from April 2027. They will apply only to ISA contributions and savings income going forward, not to money already saved or invested today.

If you have questions or would like a detailed guide to tax-free investing in the UK, just hit reply!

Reflect on This:

• Are you making full use of your ISA allowances each year? If not, what’s holding you back?

Till next week, I am rooting for you, money-ly!

Dee

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Disclaimer: This does not constitute financial advice. Please conduct your research or consult your financial advisor for important financial advice.