Tax Increases on Savings Interest from April 2027
From April 2027, the tax rate on taxable interest earnings will increase by two percentage points across all three income tax brackets. Basic rate taxpayers will see their rate rise from 20% to 22%, higher rate taxpayers from 40% to 42%, and additional rate taxpayers from 45% to 47%. This change is part of a series of adjustments that experts say will make the savings landscape even more complex.
ISA Rules Become More Complex
Currently, savers can deposit up to £20,000 into ISAs, split between cash accounts and stocks and shares ISAs as they choose. However, from April 2027, individuals aged 65 will only be able to put up to £12,000 into cash ISAs, with the remaining £8,000 restricted to stocks and shares deposits. Additionally, the government has announced that cash deposits held within a stocks and shares ISA will be subject to a 22% charge, though full details have yet to be confirmed.
Bank Boss Warns of Confusion
Veronika Lovett, CEO of Kroo Bank, urged savers to review their accounts ahead of the changes. She said: “Having a clear understanding of what each account is for can make a huge difference. Many people end up with multiple accounts opened over many years, each with different rates, terms and tax rates.” She added: “Taking time to review what you have, consolidate where appropriate, and ensure each account has a clear purpose can make managing your money much less overwhelming.”
Complexity Undermines Confidence
Ms Lovett warned that the system is already hard enough for people to understand. She stated: “Many people already find savings and investment products difficult to navigate. Introducing different tax rates across different types of accounts risks making an already complicated landscape even harder to understand. People want confidence that their money is working in their favour. The more complex the rules become, the harder it can be for consumers to know whether they’re making the right choices for their circumstances.”
Tips for Moving into Investing
The bank boss shared advice for those looking to diversify from cash savings into investing. She recommended: “It's really important not to feel pressured into making complex decisions straight away. Start by understanding your short and longer-term goals. Are you saving for a holiday, a house deposit, retirement, or simply trying to grow your money over the long term?” She also highlighted key differences between cash savings and investments: “Cash savings offer certainty, while investing can offer higher long-term returns but comes with risk and fluctuations in value. It's worth taking the time to understand the fees, risks and flexibility of different products before making a decision. Most importantly, choose an approach that you understand and feel comfortable with, rather than chasing the highest headline return.”
