Chancellor John Healey announced a further rise in tax rates on interest in the 2026 Autumn Budget, setting the new rates at 4% above the ordinary income-tax rates from 6 April 2027. The Budget document sets out the change.
The increase adds two percentage points to the two-point rise announced in Budget 2025. It applies to taxable savings income in the 2027/28 tax year.
The higher savings rates apply across the UK. Property income rates will also change, but Scotland and Wales can set their own property rates, unlike the UK-wide savings rates.
The government says 84% of income tax payers will be unaffected. Healey said in his Budget speech, “88% of people will pay no more tax on their savings.”
The Treasury’s distributional analysis estimates that 11% of taxpayers will see their tax bill rise, with the top 10% of earners paying more than £100 a year extra. An estimate for the combined savings and property measures puts the five-year revenue at £4.3bn, including almost £2bn from landlords and almost £2.4bn from savers.
The higher bands apply to taxable interest across the UK
| Income band | 2026/27 savings rate | 2027/28 savings rate |
|---|---|---|
| Under £12,571 | 0% | 0% |
| £12,571 to £50,270 | 20% | 24% |
| £50,271 to £125,140 | 40% | 44% |
| Over £125,140 | 45% | 49% |
The Personal Savings Allowance remains £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. Additional-rate taxpayers have no allowance. Those limits have been frozen since 2016.
Eligible lower-income savers can still use the 0% starting rate on up to £5,000 of interest. People with income below £18,570 may qualify for the full amount. The allowance falls by £1 for every £1 of non-savings income above £12,570.
The government says basic-rate taxpayers would need “over £25,000 in savings in addition to any ISA savings before paying tax.” People who also qualify for the starting rate could have “up to £150,000 in savings in addition to their ISAs without paying tax.” Interest counts as taxable income and can push someone into a higher band, reducing or removing their Personal Savings Allowance.
The cash ISA limit stays at £20,000
The government dropped its earlier plan to cut the annual cash ISA subscription limit from £20,000 to £12,000 for savers under 65. The limit remains £20,000 for all taxpayers, allowing a couple to subscribe up to £40,000 between them each year.
Officials will work with the investment industry to develop an incentive for people investing in a stocks and shares ISA for the first time. The design remains to be developed with the industry.
Property income rates will rise in parallel with the bands in the table. Mortgage-interest relief for landlords will be calculated at the new property basic rate of 24%, up from 20%. Property income remains taxable after other non-savings income but before savings interest. These property rates apply in England and Northern Ireland; the Scottish and Welsh governments can set their own.
The Pension Tax Allowance is intended to keep pensioners with total income up to the full new State Pension out of income tax. It is calculated at 20% of the difference between the full new State Pension and the Personal Allowance, then reduced by £1 for every £3 of income above the full new State Pension.
The allowance will run for three tax years, ending 5 April 2030. In 2027/28, state pensioners with total income below £13,319 will qualify. The trading allowance will rise from £1,000 to £3,000 in 2027/28, and the Self Assessment reporting threshold for trading income will rise to the same amount.
Dividend tax rates are unchanged: 10.75% at the ordinary rate, 35.75% at the upper rate and 39.35% at the additional rate, above the £500 dividend allowance.
Frozen thresholds keep shaping who moves into higher bands
The personal allowance remains £12,570, the basic-rate limit £37,700 and the higher-rate threshold £50,270 in England, Wales and Northern Ireland. The previously announced freeze runs until April 2031.
The reduction in the Personal Allowance for incomes above £100,000 also remains. The blind person’s allowance rises from £3,250 to £3,370, while the transferable allowance for married couples and civil partners stays at £1,260.
Jason Hollands, managing director at Evelyn Partners, said savers earning interest above the allowance faced “the prospect of a 4% tax hike on interest earned outside of ISAs and pensions.” He said the allowance has been “frozen since 2016” and has been losing value after inflation.
When the allowance was introduced, savings rates were around 1.0–1.5%, Hollands said. Rates have been around 4.0% or higher in recent years, making it easier for savers to exceed the limit without realizing it.
Hollands suggested reviewing the balance between cash and investments, using ISA allowances and coordinating allowances between spouses or civil partners. Any cash transfer to a lower-rate partner must be genuine. He also pointed to short-dated, low-coupon gilts for people with substantial cash savings.
Isabella Galliers-Pratt, senior investment director at Rathbones, said large cash deposits have become less attractive for higher- and additional-rate taxpayers, although cash still provides liquidity. She said the new tax treatment changes the calculation for money held beyond immediate needs.
Fiscal pressure and the next savings product frame the debate
Eva Mariscotti of J.P. Morgan Private Bank described the Budget as the first of Andy Burnham’s premiership and Healey’s first, with the government choosing continuity over reinvention. She put fiscal headroom at £15 billion. The 30-year gilt yield had breached 6% earlier in October, its highest since 1998, while the 10-year yield closed at around 5.30% on the eve of the Budget.
The Office for Budget Responsibility expects the total welfare bill to rise almost 30%, from £333.8bn last year to £431.3bn in 2031-32. Its 2030-31 estimate is as much as £8.3bn a year above its previous forecast.
Kemi Badenoch, the Conservative Party leader, said Labour was “taxing everything that they can get their hands on” and called for Healey to resign. Healey described his Budget as being “for the working people of Britain” and said it offered “breathing space” and a “clear direction for the future.”
A new First Time Buyer ISA is due to replace the Lifetime ISA from April 2029. It will offer a 25% bonus, up to £20,000, on withdrawals towards a first home worth no more than £450,000. The Lifetime ISA will remain available until then, and its withdrawal charge will fall from 25% to 20% when a buyer exceeds the purchase-price limit.
