UK Budget 2026: New Savings Tax Hike and How to Limit the Damage
Chancellor John Healey raised savings and property income tax rates beyond prior plans, catching savers off guard in his debut budget.
Chancellor John Healey delivered a mixed verdict for British savers in his debut budget, scrapping a proposed cut to the cash ISA limit for under-65s while simultaneously announcing a steeper-than-expected tax increase on savings and property income.
Healey's predecessor, Rachel Reeves, had already set in motion a plan to raise income tax rates on savings and landlord income, scheduled to take effect in April 2027. Healey went beyond that blueprint, tacking on an additional two percentage points to each of the affected rates — a move that caught financial advisers and savers by surprise.
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Jason Hollands, managing director at wealth manager Evelyn Partners, characterized the higher rates as a "sting in the tail" for savers, suggesting that while the ISA reprieve offered some relief, the added tax burden on savings income could erode returns meaningfully for those holding cash outside tax-sheltered wrappers.
Financial planners are now urging savers to review their holdings and consider strategies to reduce exposure to the new rates. Maximizing contributions to ISAs and pension vehicles, which shield returns from income tax, is widely seen as the most direct route to offsetting the impact of the revised savings tax structure.
The budget underscores a broader tension in UK fiscal policy between encouraging household saving and raising revenue. For savers sitting on taxable interest income, the window to act before the higher rates come into force may be narrower than previously anticipated. Continue reading at Business | The Guardian.
