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Savings tax and cash ISA changes from April 2027: who is affected
From 6 April 2027, tax on savings interest rises by two points in each band and the cash ISA limit falls for under-65s. What changes, what stays the same, and who it affects.
At a glance
From 6 April 2027, savings interest above your tax-free allowances will be taxed at 22%, 42% or 47%, up from 20%, 40% and 45%. The Personal Savings Allowance and the £5,000 starting rate for savings do not change. Interest in a cash ISA stays tax-free, but interest on cash held inside a stocks and shares or innovative finance ISA will be charged at 22%.
From the same date, if you are 64 or under at the end of the tax year you can pay up to £12,000 a year into cash ISAs, within the unchanged £20,000 ISA allowance. If you are 65 or over by then, your cash ISA limit stays £20,000.
Key figures
- 22%Savings basic rate from 6 April 2027. UK-wide, Scotland included2027 to 2028 · Set in law · Source [2]
- 42%Savings higher rate from 6 April 20272027 to 2028 · Set in law · Source [2]
- 47%Savings additional rate from 6 April 20272027 to 2028 · Set in law · Source [2]
- £1,000Personal Savings Allowance, basic-rate taxpayersUnchanged in 2027 to 2028 · Set in law · Source [4], [8]
- £500Personal Savings Allowance, higher-rate taxpayersUnchanged in 2027 to 2028 · Set in law · Source [4], [8]
- £5,000Starting rate for savings: interest taxed at 0%. Shrinks as other income rises above the personal allowanceFrozen until 2030 to 2031 · Set in law · Source [3]
- £12,000Cash ISA limit if you are 64 or under at the end of the tax yearFrom 6 April 2027 · Set in law · Source [5], [6]
- £20,000ISA allowance, all ISAs togetherUnchanged in 2027 to 2028 · Set in law · Source [7], [5]
- 22%Cash ISA savers under 65 who paid in more than £12,0002022 to 2023 · Estimate · Source [7]
New tax rates on savings interest
Finance Act 2026 sets the savings rates of Income Tax for 2027 to 2028. They apply across the UK, Scotland included: savings interest is taxed at these UK rates wherever you live.
| Your tax band | 2026 to 2027 | From 6 April 2027 |
|---|---|---|
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
These are rates of tax on interest, not on your balance, and they are not your bank's interest rate. You pay them only on interest above your allowances, so each band's rate rises by two percentage points on that interest alone.
One more change affects how the tax is worked out. Your personal allowance will be set against your earnings, pension and other income first, and only then against property, savings and dividend income.
If you owe tax on savings interest, HMRC usually collects it through your tax code or your Self Assessment return, using what banks and building societies report. That does not change; the new rates apply once they take effect.
What stays the same
- The Personal Savings Allowance. Basic-rate taxpayers can earn £1,000 of interest tax-free and higher-rate taxpayers £500. Additional-rate taxpayers have no allowance.
- The starting rate for savings. Up to £5,000 of interest is taxed at 0%. The band shrinks by £1 for every £1 of other income above your personal allowance, so it runs out once your other income reaches £17,570. The band is frozen until 2030 to 2031.
- The ISA allowance. You can still pay in £20,000 a year across all your ISAs. Interest in a cash ISA, and investment growth and income in a stocks and shares ISA, stay tax-free. The exception is interest on cash held inside a stocks and shares or innovative finance ISA: see below.
- Money already saved. The new cash ISA limit applies to what you pay in each tax year. It does not make you take money out of a cash ISA.
The new cash ISA limit and the age test
From 6 April 2027, the most you can pay into cash ISAs in a tax year is £12,000 if you are 64 or under at the end of that tax year, on 5 April. The rest of your £20,000 can go into other ISAs, such as a stocks and shares ISA. If you are 65 or over at the end of the tax year, you can still pay the full £20,000 into cash ISAs.
Because the test is your age at the end of the tax year, someone whose 65th birthday falls on or before 5 April 2028 can pay up to £20,000 into cash ISAs in 2027 to 2028.
The same regulations close two routes around the limit:
- If you are under 65 at the end of the tax year, you will not be able to transfer money from a stocks and shares ISA or an innovative finance ISA into a cash ISA.
- Interest on cash held inside a stocks and shares or innovative finance ISA will no longer be tax-free. The ISA manager will pay a flat charge on it at the savings basic rate, 22% from April 2027.
HMRC estimates that in 2022 to 2023, 78% of cash ISA savers under 65 paid in less than £12,000 and 22% paid in more.
Who is affected
- Savers with interest above their allowances outside an ISA will pay two percentage points more tax on that interest from 6 April 2027.
- Savers under 65 who pay more than £12,000 a year into cash ISAs will need to put the rest into another type of ISA or save it outside an ISA.
- Investors who hold cash in a stocks and shares ISA, or who planned to move money from one into a cash ISA.
Not affected: interest within your allowances or inside a cash ISA, and the cash ISA limit for anyone who is 65 or over at the end of the tax year.
An example under this year's rules
A higher-rate taxpayer has £20,000 in an account paying 4% AER, outside an ISA. Over a year it earns £800.00 of interest. After their £500.00 allowance, they pay £120.00 of tax at 40% and keep £680.00.
From 6 April 2027, interest above their allowance will be taxed at 42% instead. Our savings calculator models the 2026/27 rules, so this example is not a calculation under the new rates.
What this means for you
- Compare the interest you earn in a year with your allowance. If it is below, the new rates won't change your tax on it.
- In the 2026/27 tax year, which ends on 5 April 2027, you can pay up to £20,000 into cash ISAs whatever your age.
- These rules could change at the Budget on 28 October 2026. We will review this article after it, and our compound interest guide explains how ISAs and the Personal Savings Allowance work today.
Check the interest on your own savings under this year's rules.
Sources and method
The rates and limits come from the law: Finance Act 2026 for the savings rates and the starting rate band, and the Individual Savings Account (Amendment) (No. 2) Regulations 2026 for the cash ISA limit. Those regulations were made on 10 September 2026 and come into force on 6 April 2027. In the ISA rules a “year” is a tax year, so the age test is your age on 5 April at the end of it.
The share of cash ISA savers paying in more than £12,000 is HMRC's estimate for 2022 to 2023, from its impact note on the change. It describes savers under 65 who paid into a cash ISA that year, not all savers.
The example uses PayCalc's savings calculator, which models the 2026/27 rules: the Personal Savings Allowance by tax band, and tax at the band's rate on interest above it. It does not model the 2027/28 rates, the starting rate for savings or interest that pushes you into a higher band, so it is not a calculation under the new rules. We checked its figures by hand.
What this article doesn't cover: the new rates on property income and the dividend rates that rose in April 2026, the rules for money market funds inside ISAs, and anything announced after 10 October 2026, including at the Budget on 28 October 2026.
Corrected on 11 October 2026: the first version said interest inside any ISA stays tax-free. From 6 April 2027 that holds for a cash ISA, but interest on cash held inside a stocks and shares or innovative finance ISA is charged at the savings basic rate (regulation 15 of the 2026 amendment regulations).
- legislation.gov.uk, Finance Act 2026, section 3: Default and savings rates of income tax for tax year 2026-27 ↗. Published 18 March 2026. Accessed 10 October 2026.
- legislation.gov.uk, Finance Act 2026, section 5: Savings rates of income tax for tax year 2027-28 ↗. Published 18 March 2026. Accessed 10 October 2026.
- legislation.gov.uk, Finance Act 2026, section 9: Freezing starting rate limit for savings for tax years 2026-27 to 2030-31 ↗. Published 18 March 2026. Accessed 10 October 2026.
- HM Revenue & Customs, Change to tax rates for property, savings and dividend income: technical note ↗, Savings Income Tax changes; Changes to the use of allowances and reliefs; Tax administration. Published 26 November 2025. Accessed 10 October 2026.
- legislation.gov.uk, The Individual Savings Account (Amendment) (No. 2) Regulations 2026 (SI 2026/1018) ↗, Regulations 6, 13 and 15. Published 10 September 2026. Accessed 10 October 2026.
- legislation.gov.uk, The Individual Savings Account Regulations 1998, regulation 2: Interpretation ↗, Definition of “year”. Accessed 10 October 2026.
- HM Revenue & Customs, Cash Individual Savings Account (ISA) limit reduction ↗, Tax information and impact note: impact on individuals. Published 17 September 2026. Accessed 10 October 2026.
- GOV.UK, Tax on savings interest: how much is tax free ↗. Accessed 10 October 2026.
This article is general information, not financial advice. Check your own position before you act.