From April 2027, the allowance for saving into cash ISAs will be cut from £20,000 to £12,000
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Chancellor Rachel Reeves has delivered the Autumn Budget, setting out the government's financial roadmap for the coming years. After weeks of intense speculation, and some notable late-stage changes to the Treasury’s plans, we now have clarity on changes to the tax and savings landscape.

Here is a summary of the key announcements and what they could mean for your money.

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ISA allowances shift for cash savings — use it or lose it! 

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In a significant move for savers, the structure of the Individual Savings Account (ISA) allowance is changing from April 2027.  

The total annual limit for saving and investing, with either a Cash ISA or Stocks & Shares ISA, is £20,000 across all accounts, and savers are permitted to open different ISAs of the same type across different providers, provided they remain within the allowance limit. 

However, following Rachel Reeves announcement on Wednesday, savers will only be permitted to save £12,000 of their total annual allowance within Cash ISA products — a move the Chancellor hopes will encourage greater use of Stocks & Shares ISAs. 

The Treasury has indicated this policy is designed to shift the UK’s savings culture, and encourage savers with solid cash savings to consider investing as a way of getting the most out of their money long-term. 

Big piles of cash savings generally lose value to inflation over time, and investing can hold the keys to really growing that money. The Chancellor said in her speech “investing £1,000 a year in an average stocks and shares ISA every year since 1999 would have delivered a £50,000 better return than if it was invested in a cash ISA.”¹

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Income tax stays put, but thresholds frozen until 2030

Following intense debate over potential rises to Income Tax, the Chancellor confirms that the rates for basic, higher, and additional taxpayers will remain unchanged. 

However, to raise further potential revenue of £7.5 billion, the freeze on Income Tax has been extended for a further two years until April 2030² — this determines how much you can earn before paying tax (currently £12,570) or entering the 40% tax bracket (£50,270).

This means that while real income tax rates aren’t changing, the effect of ‘fiscal drag’ means that as wages rise with inflation over the next five years, a larger proportion of earnings will likely fall into higher tax bands. This effectively increases tax contributions of earners without moving the tax bands. 

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Tax beyond Personal Savings Allowance to increase from April 2027

The rules on rates of tax outside the Personal Savings Allowance are changing from April 2027 with a 2% increase to tax on savings interest outside of ISAs. The increases that apply to your tax band are as follows. Basic (20% to 22%), higher rate (40% to 42%) and additional bands (45% to 47%).

The tax on dividends outside of your £500 allowance will also increase by 2% from April 2027 for each tax band respectively.
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Changes to pension salary sacrifice 

The rules for sacrificing a portion of your pre-tax salary to make additional pension contributions are being tightened. Under current rules, employees can opt in to sacrifice a portion of their gross pay to additional workplace contributions as an employee benefit.

This is a more tax-efficient way to pay more into your pension, as the amount comes from your salary before tax and national insurance are taken, meaning it costs you less to make a contribution.  

New restrictions coming into effect in April 2029, will limit the amount of national insurance exempt earnings that can be exchanged for pension contributions to £2,000 a year.

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Pension tax-free lump sum is safe

Providing certainty for those approaching retirement, the Chancellor confirmed that the 25% tax-free pension lump sum will remain as it is, with the current cap (£268,275) unchanged. This ends recent speculation about potential reductions to tax-free withdrawals.

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Things to think about
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Make use of your cash ISA allowances: If you plan to save more than £12,000 into your Cash ISA, tax year ending 5 April 2027 will be the last year you can do it before the allowance is lowered. With a 2% increase in tax outside of your personal savings allowance also announced, ISAs are as important as ever.
 

Keep an eye out for pension changes: If you make additional contributions to your pension through your employer's salary sacrifice scheme, keep your eyes open for any communications regarding changes to your scheme.

The importance of making your money work harder: The Budget is a reminder that factors like fiscal drag may squeeze your take-home pay. Keeping a solid cash buffer is important, but growing your money through investing can be an effective way to stay ahead over the long term.

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Get the most out of your £20k

At Chip, our Cash ISA and Stocks & Shares ISA can help you take full advantage of your tax-free allowance. Whether you’re looking to make the most of the £20,000 cash allowance before the 2027/2028 Tax Year rolls in, or take your money further with investing, we’ve got you covered — all in one place. 

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Chip does not provide tax or financial advice. Tax treatment depends on individual circumstances and may be subject to change in the future.

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Right now we’re also letting new investors benefit from 0% platform fees* until 31 January 2027. Eligibility & T&Cs apply. Promotion ends 8 January 2026.

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¹Budget 2025

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²The Guardian

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*Fund management fees apply

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When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than your original investment. Chip does not provide financial advice.

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Seccl Custody Limited is the ISA Manager for the Chip Stocks and Shares ISA. ISA limits apply. Invest £20k per tax year. 

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Your Chip Cash ISA is a cash ISA provided by ClearBank Limited. ISA limits apply. Deposit up to £20k per tax year. Chip does not provide tax advice or financial advice. Tax treatment depends on individual circumstances and may be subject to change in the future.

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