Major UK bank NatWest has issued an important communication to its customer base in the wake of Chancellor Rachel Reeves' Autumn Budget statement. The Labour Chancellor unveiled a comprehensive set of economic measures on Wednesday, prompting the bank to advise clients to proactively assess their financial strategies.
Key Budget Changes Affecting Savers and Investors
Rachel Reeves announced several significant fiscal policies, including the abolition of the two-child benefit cap, a freeze on tax thresholds, and a new 3p per mile charge for electric vehicles. Notably, the Budget introduces fundamental alterations to Individual Savings Accounts (ISAs) that will reshape how Britons save and invest.
The most dramatic shift concerns cash ISAs. From 6 April 2027, the annual tax-free allowance for cash ISAs will be reduced from £20,000 to £12,000 for savers under 65. The government's clear intention is to incentivise investment in stocks and shares ISAs. However, individuals aged 65 and over will retain the full £20,000 allowance, which can be allocated across all ISA types without restriction.
NatWest's Guidance on Navigating the New Rules
In an email to customers, NatWest clarified the practical implications. The total annual ISA allowance remains at £20,000, but its composition changes for those under 65. Savers can place up to £12,000 in a cash ISA, with the remaining £8,000 available for a stocks and shares ISA, or any combination that respects the £12,000 cash limit and the £20,000 overall cap.
The bank emphasised that "these changes aren't imminent," giving customers this tax year and the next to continue utilising the current £20,000 cash ISA limit. All existing ISA savings are protected and will continue to earn tax-free interest. Furthermore, Junior ISA allowances remain unchanged at £9,000 per child annually.
Broader Tax Implications Beyond ISAs
Separate from the ISA adjustments, the Budget signals future increases to the income tax applied to savings interest earned outside of ISAs, effective from April 2027. For basic-rate taxpayers, the rate will rise to 22%, while higher-rate taxpayers will face a 42% charge, and additional-rate taxpayers will see a jump to 47% on interest exceeding their personal savings allowance.
NatWest concludes its advice by acknowledging that "investing isn't right for everyone" and stresses the importance of maintaining accessible cash reserves for emergencies. However, the bank suggests that for long-term goals typically spanning five years or more, exploring investment options could be a prudent step, while always considering individual risk appetite.
