The Government has published an update regarding a new ISA product, with Treasury minister Rachel Blake responding to a query from Liberal Democrat MP Sarah Dyke on whether Chancellor Rachel Reeves had considered introducing "charity ISAs" to support long-term charity funding.
Blake stated: "The Government already offers a range of tax advantaged savings accounts (ISAs) that are well placed to support individuals to donate the capital and/or the growth to a charity of their choice." She added that Gift Aid enables charities to claim a basic rate top-up on eligible donations, providing over £2.5 billion of tax relief.
Current ISA Options and Allowances
Savers can currently deposit up to £20,000 per tax year into ISAs, split across cash ISAs, stocks and shares ISAs, innovative finance ISAs, and Lifetime ISAs. A junior ISA for children under 18 allows deposits of up to £9,000 per tax year.
One key advantage of ISAs is that interest or investment growth is tax-free. Outside ISAs, basic rate taxpayers can earn up to £1,000 in interest without tax, higher rate taxpayers up to £500, and additional rate taxpayers have no allowance.
Key Changes Coming from April 2027
From April 2027, the £20,000 ISA allowance will be reduced. Savers can allocate only up to £12,000 as they choose, while the remaining £8,000 will be restricted solely to stocks and shares accounts.
The tax rate on interest earnings will rise by two percentage points across all tax bands: basic rate from 20% to 22%, higher rate from 40% to 42%, and additional rate from 45% to 47%.
Government's Stance on Future Changes
Blake said: "The Government keeps all taxes and reliefs under review, and we remain committed to ensuring charities get the most out of the existing system, and to improving that system where we can."
