Just how much cash will you be able to hold in your ISA from next year and what will it cost you to do so? At first sight, new rules for individual savings accounts (ISAs) due to come into force from 6 April 2027 look straightforward. In practice, they are likely to prove anything but, thanks to tricky new regulations published this week.

The confusion stems from changes announced in last November's Budget. Chancellor Rachel Reeves stressed her determination to use the tax system to encourage risk-taking investment into UK companies and infrastructure; she therefore announced that from the 2027-2028 tax year onwards, the annual limit on investments into cash ISAs – where your money is simply held in a risk-free bank or building society account – will fall to £12,000. By contrast, the annual stocks and shares ISA allowance – where your money flows through into productive investments – will remain at the full £20,000.

So far, so good. But what about cash held in a stocks and shares ISA? You're also entitled to hold cash in these accounts. Perhaps you're concerned about market volatility, or think you might need to make a withdrawal soon; maybe you just want to maintain a small cash balance to fund fees and investment charges; you may even have opted to take dividends from existing holdings in cash, potentially to be invested later on.

Moreover, what about cash-like investments in a stocks and shares ISA? Opting for a money-market fund, say, is akin to holding your ISA savings in cash, even if you're technically making an investment.

Reeves's new ISA changes will affect everyone

These complexities have prompted some head-scratching at the Treasury, which delayed publication of the detailed regulation on how the new rules will apply to stocks and shares ISAs until earlier this week. Now, however, it has published an “anti-circumvention rules fact sheet” that is more demanding than many had expected. Most strikingly, the Treasury plans to introduce a new tax on interest earned on cash held in a stocks and shares ISA, even though the tax-free nature of money held in such accounts is meant to be sacrosanct. A 22% tax charge will apply, in line with the rate of savings interest tax, from April 2027 onwards.

While a similar arrangement operated in the UK until 2014, some ISA providers believe the change will fundamentally undermine the tax efficiency of ISAs. Providers will no longer be able to describe all ISAs as tax-free in order to encourage savers and investors, they say. Some ISAs will be more tax-free than others.

The Treasury has also confirmed plans to restrict savers from holding cash-like investments in their stocks and shares ISA. Money-market funds will not qualify for ISAs if they account for the entirety of the investor's stocks and shares ISA portfolio; ISA managers and platforms will then be forced to intervene.

There will also be a veto on transfers of money into a cash ISA from holdings in a stocks and shares or innovative ISA, which is currently allowed. Again, while the goal is to stop investors getting round the new rules, one result will be to limit financial planning and constrain the flexibility of investment strategies.

This will affect everyone. In last November's Budget, the Treasury said savers and investors aged 65 or over would be exempt from the lower annual allowance on cash ISAs, maintaining their full £20,000. The thinking is that older people are often in a phase of running down their savings and may therefore need to take a more risk-averse approach to managing their money. This week, however, the Treasury revealed that the over-65s won't be exempt from the ban on investing an entire stocks and shares ISA in money-market funds, or from the moratorium on transfers to cash ISAs.

All of which adds a great deal of complexity to the ISA rules – and plenty of scope for adverse outcomes for investors. Plus, ISA providers themselves will muddy the waters. JPMorgan Personal Investing, for example, has already announced that, from this week onwards, it will no longer pay interest on cash held in a stocks and shares ISA if an investor's entire pot is held in cash. The move is in line with the intent of the Treasury's thinking, but will naturally save JPMorgan Investing some money. And previously, the Financial Conduct Authority has warned the whole ISA industry about paying poor interest rates on cash held in a stocks and shares ISA.

Elsewhere, ISA providers – including leading online platforms – are already beginning to rethink their policies on what they will and won't allow investors to do. They will want to get ahead of restrictions and may simply withdraw certain products and services completely. Maybe they'll no longer allow investors to receive cash dividends, for example, requiring everyone to use accumulation funds.

Will Reeves stay chancellor long enough?

All of which is a reminder of how strongly the law of unintended consequences applies in the world of tax. The desire of the Treasury to shift money out of cash ISAs into stocks and shares accounts that are seen as more supportive of economic growth is understandable – the most recent official statistics reveal investors put £69.5bn into the former in the 2023-2024 tax year against only £31.1bn in the latter. But more doubt and complexity may simply put people off, reducing the size of the whole pie.

There's one final unknown, meanwhile. This scheme is the brainchild of Rachel Reeves and her team. But will she remain chancellor long enough to finalise the remaining details – a short technical consultation will take place between now and the autumn – let alone to see it come into operation next April? Maybe a different chancellor will want to do something completely different.

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Investors will face a charge on any interest paid on cash in a stocks and shares ISA, the Treasury has confirmed in its latest guidance on ISA reforms.

Plans are underway to reduce the cash ISA allowance to £12,000 per year from April 2027 for savers under age 65.

The Treasury is also disincentivising holding uninvested cash in a stocks and shares ISA and restricting how much can be held in cash-style products within this type of ISA.

It has confirmed plans for a 22% charge on any interest or alternative finance return paid on cash held within a non-cash ISA, from April 2027. This may be money that account holders haven’t invested yet or from dividends paid out.

But in some good news for investors, money market funds will be allowed in a stocks and shares ISA as long as they do not make up 100% of the investments.

Common investments held in stocks and shares ISAs such as individual shares, funds, investment trusts, exchange-traded funds and corporate and government bonds, including UK gilts, will not be treated as cash-like assets, the Treasury said.

James Carter, head of platform policy at Fidelity International, said: “We are pleased to see that cash-like investments will remain eligible for non-cash ISAs.

“These products are genuine investment products, holding short-term government and high-quality debt, and form a valued part of many balanced portfolios. Removing them from the stocks and shares ISA framework would have undermined the government’s objective of encouraging more people to invest, by giving customers a cliff edge choice between staying in cash or moving directly into higher-risk, more complex products.”

New restrictions on transfers into cash ISAs

Transfers from stocks and shares ISAs into cash ISAs will not be permitted but it will be allowed the other way round.

Individuals aged 65 and over will still benefit from a higher cash ISA limit of £20,000 per year, if they wish to use the full annual ISA allowance for that type of account.

The transfer restriction will be stopped from this point but the charge on interest earned on cash in a stocks and shares ISA and the prohibition on 100% cash-like investments will remain in place.

A technical consultation is due to be released by the Treasury on how the charge will work.

Greg Davies, head of behavioural finance at Oxford Risk, has already warned that the measure risks backfiring.

He said: “Getting people invested is an inherently behavioural challenge. You do not encourage nervous savers into investing by making the first step feel more complicated, more punitive and harder to reverse.

“People move from cash into markets when the journey feels clear, safe enough, and matched to their goals, time horizon and financial circumstances. Adding tax charges and transfer restrictions to an already confusing ISA system sends precisely the wrong behavioural signal.

“For many would-be investors, this will not create confident investors. It will create more hesitation, more disengagement, and more people doing nothing.”

Rachel Vahey, head of public policy for AJ Bell, warned that the changes are “increasingly complex” and “riddled with unintended consequences” and may mean people just keep money in cash ISAs instead.

She said: “The new rules mean a charge of 22% will be applied to interest paid on cash in investment ISAs. This is a flat rate charge, meaning the same rate applies whether the ISA account holder is a basic rate taxpayer, higher rate taxpayer, or indeed doesn’t pay any income tax.

“The ISA holder cannot invest 100% of their (non-cash) investment portfolio in money market funds, or that would be classed as a ‘non-qualifying’ investment. This means they could invest 99% in money market funds and 1% in, say, UK equities and that would be allowed.

“It also means they could hold 50% of their portfolio in cash, but if the remaining 50% was held in money market funds that wouldn’t be allowed. Whereas if they held 49% in money market funds and 1% in UK equities, this would be permitted under the rules.”

Will investment platforms stop paying interest on cash?

Several investment platforms such as Bestinvest, AJ Bell, interactive investor, Fidelity and Hargreaves Lansdown pay interest on cash held within a stocks and shares ISA.

The rates are not that competitive but the benefit for investors is that they can get cash in the wrapper or receive dividends and decide how they want to invest it.

It is currently unclear if platforms will stop paying interest or if investors will just need to be aware of the charge.

Carter said: “We have consistently welcomed the government’s recent focus on encouraging more people to invest, supporting better long-term outcomes. Recent initiatives such as a review of risk warnings, the introduction of a targeted support regime, and an education campaign on the benefits of investing, will all help to reset the approach to risk and bridge the gap between precautionary cash savings and long-term investment.

“We look forward to the publication of the technical consultation which will include further details required to enable providers to implement these changes.”

A spokesperson for AJ Bell was unable to comment on whether the platform will stop paying interest on cash.

Jason Hollands, managing director of Bestinvest, described the anti-circumvention measures as a "disproportionate response to a problem that may never meaningfully materialise."

He added: "Investors will also need to weigh up the relative difference in returns on a money market fund minus any platform fees, versus holding cash and having the 22% charge deducted."

MoneyWeek has asked Hargreaves Lansdown and interactive investor for comment.

The Treasury has revealed plans for a revamped Lifetime ISA (LISA) product that will remove the upper age limit and withdrawal charges but the retirement savings component will also disappear.

Chancellor Rachel Reeves revealed in her 2025 Autumn Budget that the government would launch a consultation on a “new, simpler ISA product to support first-time buyers to buy a home” in “early” 2026.

A consultation released by the Treasury this week said there is evidence that the current product is “not working well for many".

The LISA was launched in 2017, aimed at first-time buyers and pension savers.

Under current rules, you can put up to £4,000 a year into a Lifetime ISA and the government adds 25%, up to a maximum of £1,000 per year. This allowance is included within the overall £20,000 annual ISA allowance.

The money can be used either to contribute towards a deposit on a property worth up to £450,000, or to save the money and withdraw it fee-free once you reach 60 years old.

Critics suggest the price cap and age limits as well as the 25% withdrawal charge for "unauthorised" withdrawals make the Lifetime ISA unattractive.

The Treasury consultation acknowledges this and highlights that the number of unauthorised withdrawal charges is increasing year on year, reaching 8% of all accounts opened in 2024/25.

The document also warns that the LISA "may be diverting people from saving into pension products that may be a more appropriate for them".

The Treasury said: “The government is committed to making the aspiration of home ownership a reality for as many households as possible. However, we recognise that the LISA is not working for everyone, and that when people’s circumstances change, they should be able to adjust their finances accordingly.

“We understand that the complexity of the LISA may have dissuaded many providers from offering it, and savers from taking it up, meaning that it is not as accessible as it could be. That is why we are consulting on the implementation of a new, simpler, ISA product to support first-time buyers.”

The government is now seeking views on a replacement product called the First Time Buyer ISA (FTB ISA).

How would the First Time Buyer ISA work?

The new First Time Buyer ISA (FTB ISA) will solely be for the purposes of buying a first home.

The self-employed who can't access auto-enrolment would need to stick with a LISA or focus on a private pension or self-invested personal pension to save for retirement.

Similar to the LISA, there would be cash and stocks and shares options, money saved into the account would go towards your annual ISA allowance and there would be a government bonus, although the level hasn't been announced.

Accounts can only be open from age 18 and there would be no upper age limit.

Subscription limits, property price caps and the level of the government bonus will be announced at a future fiscal event to take account of market conditions and wider public finance context, the Treasury said.

The document added: “Increases to any of these parameters in isolation would come with a cost. A lower subscription limit and/or property price cap could allow for a higher government bonus and would shift the benefits towards lower income savers outside London and the South East.”

There isn't a launch date yet for the product but the Treasury said it would like it to be available "as soon as practically possible".

What is the difference between the First Time Buyer ISA and the Lifetime ISA?

There are a few differences between the FTB ISA and the LISA, including it only being available to first-time buyers.

Unlike the LISA, which has to be opened by age 40 and the bonus can only be earned until age 50, there will be no upper age limit.

The government bonus will be paid as a percentage of subscriptions made, rather than the value of the account, at the point that an individual withdraws funds to purchase their first home.

This means that the bonus is calculated on what an individual has put into the account, minus any withdrawals made, not on any investment growth or savings interest accrued subsequently.

Under the current system, providers pay the government bonus in a LISA each month, when a contribution has been made in the previous month. For example, if you deposit £1,000 in one month, a 25% bonus (£250) would be added in the following month.

But the new FTB ISA bonus will be paid at the point an individual makes a withdrawal for purchasing their first home.

The Treasury said this removes the need for a withdrawal charge and means a saver can withdraw funds, should their circumstances change, without penalty.

Rachael Griffin, tax and financial planning expert at Quilter, said: “Thousands of savers have been charged for accessing their LISA for an unauthorised withdrawal, often because their financial circumstances changed unexpectedly and they needed to dip into their savings. Allowing people to access their money when needed, while still being incentivised to save towards a deposit for a first home, would be a much better design.

“Equally important is the decision to remove the upper age limit. The average age of a first-time buyer has been consistently on the rise, yet the Lifetime ISA effectively shut the door on those who did not get onto the property ladder prior to turning 40. A reformed product with no age limit would reflect a more modern housing market.”

Rachel Vahey, head of public policy at AJ Bell, said moving away from an upfront bonus should make the system simpler but she has warned that savers will lose out on the investment growth they could have earned on the bonus while building up their deposit.

She highlighted that someone paying in £4,000 each year for five years into a Lifetime ISA with a bonus added each year would have built up £28,165 assuming 4% growth net of charges. Under the FTB ISA, assuming the same terms including payments, and that a government bonus of 25% is added when buying the house, the ISA holder would only have built up £27,532.

Vahey added: “For some first-time buyers, that could mean having less money available when they come to purchase a home.”

Who can use the FTB ISA?

The FTB ISA will be available to UK residents over age 18 looking to purchase their first home.

It can only be used with a mortgage, which excludes cash buyers and you will need to have the account open for at least 12 months to become eligible for the bonus.

What will happen to the Lifetime ISA?  

There is no suggestion currently that the LISA will be phased out so accounts can still be opened and used.

Individuals with funds in a LISA will not be able to transfer their money to the new FTB product as they will have already received the government bonus.

But you will be able to use any funds in your existing LISA and those in the new FTB ISA for the same purchase.

Individuals will be able to hold both the new FTB ISA and an existing LISA, but will only be able to save into one in the same tax year.

Regardless of where the property price cap is set, the FTB ISA, LISA and Help to Buy ISA cap will be aligned so that no account holders will lose out, the Treasury said.

To ensure that holders of the Help to Buy ISA do not lose out, the Treasury is also proposing that holders will be able to transfer their holdings into the new FTB product up to the subscription limits.

Additionally, as part of wider ISA reforms, transfers from a stocks and shares ISA to the new cash FTB ISA will be banned.

Paula Higgins, chief executive of the HomeOwners Alliance, said this is “well-intentioned reform” but warned that unless the property price cap is reviewed, it risks fixing one unfairness while leaving another firmly in place.

She said: “The Treasury should update the cap now and future-proof the scheme by ensuring it rises in line with house prices, rather than allowing it to become outdated again.

“First-time buyers need a product designed for the housing market of the future, not one based on prices from nearly a decade ago.”

Investment platforms are starting to stop paying interest on uninvested cash.

It comes ahead of the changes to ISA rules from April 2027.

Chancellor Rachel Reeves used her 2025 Autumn Budget to reveal new restrictions on cash ISAs in an attempt to encourage more people to invest rather than keeping their money in cash.

From April 2027, under-65s will only be able to put up to £12,000 into a cash ISA each tax year, down from the current £20,000 that can be used across the tax wrapper. They will still have the overall £20,000 annual ISA allowance, so if they put £12,000 into a cash ISA, the remaining £8,000 could go into a stocks and shares ISA.

Transfers from stocks and shares ISAs to cash ISAs will also be banned as part of the changes.

Plus, HMRC has said it will introduce a charge for those earning interest on cash within a stocks and shares ISA.

The aim is to disincentivise investors from keeping cash holdings in a stocks and shares ISA for a long time and instead encourage them to put the money back into the market.

For now, many of the major investment platforms are still paying interest on uninvested cash.

But J.P Morgan Personal Investing appears to be getting its investors ready for the changes now.

Cash pot changes

It may be tempting to keep money in cash while you decide where to invest, especially if you are earning some interest.

But the Treasury wants to get more people investing, ideally in UK stocks, so the new charge aims to provide a disincentive as it could outweigh any interest earned.

HMRC is due to consult on the changes.

While not explicitly linked to the reforms, J.P Morgan Personal Investing has unveiled plans to remove the interest paid on cash-only pots.

Currently, the robo-wealth manager pays the Bank of England base rate minus 2.5% on its cash-only pots.

This is money that investors can use to drip-feed funds into their portfolio or to protect your balance from market movements ahead of a withdrawal.

It is separate to cash held in the investment pot that goes towards management fees. Interest on this cash is currently paid at the base rate minus 0.75%.

But from 22 June, J.P Morgan said cash-only pots will no longer accrue interest.

Instead, cash‑only pots will remain available for holding cash and drip feeding money.

Any interest accrued up to but not including 22 June 2026 will be paid into your pot at the end of the current quarter.

Interest will still be paid on cash held in your investment pot.

Can you still earn interest on uninvested cash in a stocks and shares ISA?

Most other investment platforms are still paying interest on cash for now.

BestInvest pays a relatively decent 2.98% interest on cash holdings within any of your investment accounts.

Its managing director Jason Hollands said there are no plans yet to change the way cash is treated in its stocks and shares ISA, while HMRC has yet to firm up its plans.

In contrast, AJ Bell’s stocks and shares ISAs, lifetime ISAs, and junior ISAs pay 1.75% interest on all cash balances.

The interest paid can also depend on the amount being held.

For ISAs and junior ISAs, interactive investor now pays 1.11% on the first £20,000, 1.26% on the value between £20,000 and £50,000, 1.36% between £50,000 and £100,000, and 2.21% on the value above £100,000.

Hargreaves Lansdown users can earn 1.51% on cash balances between £0 and £19,999, 1.18% between £20,000 and £99,999, 2.02% between £100,000 and £999,999, and 2.38% on balances worth £1 million and higher.

MoneyWeek has asked the major platforms what there plans are once a charge is introduced.

The new tax year has begun, and with it comes a fresh £20,000 annual ISA allowance. But should you use this allowance right at the start of the year, or leave it later?

As well as knowing where to invest, and making sure you select the best funds and stocks for your portfolio, the timing of your ISA contributions will have a significant impact on your returns over time.

Analysis shows that early bird ISA investors who make use of their ISA allowance from the start of the tax year tend to do better than those who invest at the last minute.

Analysis from asset manager Vanguard shows that a hypothetical investor who invested their entire £20,000 allowance on 6 April 2025, and did the same at the start of each subsequent tax year, would see their pot grow to £1,079,320 by the end of the 25th year (assuming a 5.5% annual return after fees).

Waiting until the end of each tax year to invest the £20,000, though, would leave the same investor with £1,023,052 – around £56,000 less, just by virtue of waiting until the end of the tax year.

“Time in the market really matters,” said James Norton, head of retirement & investments at Vanguard. “We see that many people rush to max out their ISA allowance at the end of a tax year, rather than at the beginning, missing out on almost a year of tax-efficient returns.

“The key is to make your money work for you as early as you can, in a way that fits your circumstances,” Norton added.

Over the entire history of ISAs, since their introduction in 1999, early bird ISA investors could be £83,000 better off than last-minute investors, according to analysis from investment platform InvestEngine.

Putting the £20,000 annual ISA allowance into the MSCI ACWI Net Total Return (GBP) index at the start of every financial year since April 1999 would have built a pot worth £1,277,963, compared to the £1,195,127 that the same contributions would have grown to if made at the end of each year.

“With the new lower cash ISA limit set to come in next year, those considering a stocks and shares ISA for the first time could benefit by starting early with their investments. Even small amounts can make a big difference over time.”

How do early bird ISA investors perform compared to regular monthly investors?

Meanwhile, asset manager Fidelity International compared three approaches to ISA investing: using the entire ISA allowance at the start of the tax year (Early), using it all at the end of the year (Late) or drip-feeding the allowance through monthly across the course of the year (Regular monthly).

Again, the best approach was to invest the entire allowance at the start of the year, based on historic returns of the FTSE All Share Index:

^{Source: Datastream, Fidelity International, 05/04/2001-06/04/2026 Total return in GBP of FTSE All Share}

^{Source: Datastream, Fidelity International, 05/04/2016-06/04/2026. Total return in GBP of FTSE All Share}

“For many people, investing regularly can make the process feel more manageable,” said Marianna Hunt, personal finance expert at Fidelity International. “It helps reduce the pressure of trying to time the market and can take some of the emotion out of investment decisions.

“What matters most is making use of your ISA allowance and maintaining a long-term focus,” Hunt added.

A group of 270 UK individuals are part of an exclusive community that is technically open to everyone in the country, if you have the time, money and investment performance to join – the £2 million ISA club.

The figure, revealed in a Freedom of Information request to HMRC by financial planning firm Bowmore Wealth Group, showed just what is possible if you take your ISA savings ultra seriously over the long term.

By investing the full annual ISA allowance of £20,000 – equivalent to £1,666 a month – in a stocks and shares ISA and achieving an average annual return of 7%, investors could build a £2 million tax-free portfolio over three decades, according to Bowmore’s calculations.

John Clamp, chartered financial planner at Bowmore, said: “Reaching a £2 million ISA pot is no longer an unrealistic ambition for investors and could be achieved tax-free in as little as 31 years with consistent investing.”

We look at some of the best stocks and shares ISAs in a separate article.

The benefits of long term investing

The findings highlight the growing importance of ISAs as a long-term wealth-building tool, particularly as more savers look to make the most of tax-free returns.

However, Bowmore warned many investors risk falling short of their goals by holding too much in cash ISAs for too long or by dipping into their savings prematurely.

While cash ISAs may appear to offer security, their lower returns can significantly slow wealth accumulation over time – often shrinking in real terms due to inflation. In contrast, investing in equities can dramatically accelerate long-term growth, particularly when returns are compounded.

Clamp said: “ISA millionaires are becoming increasingly common but the next milestone – the £2 million ISA – is already within reach for many investors who take a long-term view.”

“The real difference comes down to behaviour. Consistently investing the full allowance and allowing returns to compound over time can turn what seems like an ambitious target into something very achievable.”

From £1 million ISA to £2 million ISA

Separate research by investment platform AJ Bell found it takes 25 years of saving £1,433 a month – or £17,196 a year, less than the £20,000 annual allowance – to build up a £1 million ISA. But it only takes a further 10 years to make it to the £2 million mark. This is assuming you get 6% growth on your investments.

Laith Khalaf, head of investment analysis at AJ Bell, said: “It’s no walk in the park to build up a million pound ISA, but once you get there, hitting new milestones becomes increasingly easy because you have a huge tailwind from growth on the money you’ve already stashed away – known as compound growth.”

He added: “Compound growth is a formidable force, though you do have to be diligent and patient to harness its power. Clearly the higher the return you achieve on your investments, the more powerful the effect of compound growth on your wealth.”

Over the long term, then, a cash saver is likely to see a weaker compounding effect than an investor putting their money into the stock market, though the investor will of course see greater fluctuations in the value of their holdings along the way.

Effects of compound growth

“Compound growth is a wonderful thing when you break it down,” said Khalaf. “Even to reach your first million pounds in 25 years, you would only need to save less than half of this sum, or £429,900, because the remainder would be made up by growth on the savings you make (assuming 6% net fund growth).

On this basis, after 12 years of saving £1,433 a month, your annual ISA fund growth is already exceeding the £17,196 you’re putting away each year. This effect gets turbocharged the more you save, because of the growth on the pot of money you’ve already built up.

Khalaf said: “This explains why it only takes 10 years, rather than 25 years, to save your second million. In other words, it’s 2.5 times easier to save your second ISA million than your first.”

This is reflected in the amount you need to save as well. To get from £0 to £1 million in 25 years you need to stump up £429,900. But to get from £1 million to £2 million by saving £1,433 a month, you would only need to stash away £171,960 yourself.

Over a decade of saving, you would receive £859,189 in growth, because not only are your new savings growing, but so is the million pounds you’ve already built up in your ISA.

Source: AJ Bell, based on 6% net fund growth per annum. Numbers do not add to round millions as they have been calculated based on whole years of saving.

To get to your third million would only take a further six years of saving £1,433 a month. During this time you would only need to stump up £103,176 in savings, with £874,067 accruing in fund growth.

In total that means 41 years of saving £1,433 a month to get to £3 million.

“If you are in the fortunate position to be able to do that, over the course of those 41 years, you would have stashed away £705,036, with the remaining £2,303,414 coming from fund growth,” Khalaf pointed out.

The end of the 2025/26 tax year is nearly here, with just weeks left before annual tax-free allowances reset. Some of these tax breaks will be lost forever if you don’t use them this tax year.

With countless allowances and deadlines to keep track of, MoneyWeek’s tax year end checklist could help you to save you money before the end of the financial year.

If you’re an investor with money in Venture Capital Trusts (VCTs) or the Seed Enterprise Investment Scheme (SEIS), you may need to check the experienced investor’s end of tax year checklist.

So how much do you know about the end of the tax year? Test yourself in our quiz.

How well did you fare in the quiz? Share your results on social media.

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Sometimes it seems we are too hard on Rachel Reeves. Yes, she is a bad chancellor: anti-business with no coherent vision for getting the economy growing and no backbone when she is pushed by her party. On the other hand, it has been seven years since Britain had at least a semi-competent chancellor, and she has inherited a catastrophic mess that would be a gigantic challenge even for an outstanding one.

One might briefly feel that she deserves some support as an under-qualified person trying to do an impossible job at the head of a sclerotic Treasury that needs to be broken up and rebuilt. Then you look at her proposed changes for individual savings accounts (ISAs) and all sympathy goes right out the window.

A brief history of ISA rules

To see why these ISA rule changes are so misguided and why they show Reeves and her team to be truly clueless about investing, let’s go back to when ISAs were first launched back in 1999. The ISA rules then were much more restrictive.

You could pay up to £7,000 into a “Maxi Stocks & Shares ISA” each year, or up to £3,000 into a “Mini Stocks & Shares ISA”, up to £3,000 into a “Mini Cash ISA” and up to £1,000 into a little-used “Insurance ISA” that let you put money into with-profits funds from an insurance company (which in theory was supposed to be less volatile than investing directly in the stock market). You could transfer from a cash ISA to a stocks and shares ISA, but not the other way round. Interest on cash held in stocks and shares ISAs was taxed at 20%. Investments had to have a credible possibility of losing at least 5% of the capital. Bonds had to have at least five years remaining until maturity when they were purchased.

There were a few tweaks through the years before 2014 when then-chancellor George Osborne greatly improved the ISA rules: a higher annual limit of £15,000 could now be split between a cash ISA and a stock and shares ISA in whatever proportions you liked. Money could be freely transferred between both. Cash interest was no longer taxed in a stocks and shares ISA, and low-risk cash-like investments were allowed.

This was a huge step forward. Subsequent changes to ISA rules include flexibility, allowing you to take out money temporarily and put it back again without affecting your annual allowance. You can also now contribute to more than one ISA of each type each year. Today, the ISA is probably the best account of its kind in the world and has inspired similar products in other countries.

Set against this, new types of ISA added complexity. The Help to Buy ISA was a counterproductive attempt to solve the housing affordability crisis that is now a legacy zombie product. The Lifetime ISA's potential as a flexible retirement savings tool was weakened by overly tight age limits and by withdrawal penalties. The Innovative Finance ISA has been too niche for most investors. So further reforms were overdue.

What should happen is the merger of most types of ISAs to create a flexible general-purpose wrapper. All providers could choose what to offer in the wrapper – including cash, investments and innovative finance products – according to what kind of customers they wanted to serve. Lifetime ISAs would probably remain as a separate product with similar flexibility, but open to a wider age range, with fairer withdrawal rules and the ability to transfer in stranded Help to Buy ISAs.

Rachel Reeves's ISA rule changes would be a retrograde decision

Instead, Reeves and the Treasury came to believe that restricting the ability to hold cash would encourage more money to go into the UK stock market. So, unless there is a change of heart, ISAs will take a huge step backwards from April 2027.

Cash ISAs will have a lower annual contribution limit (£12,000 versus £20,000). You will be able to transfer from a cash ISA to a stocks and shares ISA, but not the other way. Cash-like investments such as money market funds will no longer be allowed in stocks and shares ISAs. Interest paid on cash held in stocks and shares ISAs will be taxed.

In other words, we are returning to many of the pre-2014 ISA rules. The degree of stupidity required to attempt this cannot be overstated. Whoever came up with this proposal does not appreciate what investors and savers need and has ignored all the clear benefits that previous reforms delivered.

MoneyWeek would be the first to agree that there is a problem with attitudes towards investing in Britain, but the current ISA rules have nothing to do with that. Quite the opposite: at present, you can put money into as many cash ISAs or stocks and shares ISAs as you like, transfer between them freely, and hold investments then move to cash in the same account if you are nervous about markets or you need to reduce risk. This flexibility is reassuring. Your money does not feel trapped.

Trying to coerce people to invest by restricting cash ISAs is not going to work. They will simply hold cash in taxable accounts instead rather than take risks they don’t want. Much more plausible reasons why people in the UK are unwilling to invest are i) regulators that have been far too keen to talk up the risks of mainstream investments while doing far too little to crack down on unregulated scams and ii) the ongoing national obsession with property.

Depressingly, Reeves’ other proposed ISA rule changes also include plans to end the Lifetime ISA and bring in a new Help to Buy ISA. Whether this will increasingly leave existing Lifetime ISAs as a zombie product, like the original Help to Buy ISA, remains to be seen. Regardless, it would clearly be another retrograde decision. And if the stock market remains moribund, it can only be a matter of time before the immensely idiotic idea of a “British ISA” limited to UK stocks – or, even worse, restricting international investments in all ISAs – also gets resurrected.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Very few people want the stock market to crash, potentially wiping out years worth of gains – but they do happen.

Since the turn of the millennium, investors have experienced numerous crashes, navigating through everything from pandemic-induced losses to a crisis that threatened the entire global financial system.

With fears mounting that we could be on the verge of an AI bubble, it might be a good idea to study the history of market crashes and see if there are any lessons to be learnt.

So how much do you know about stock market crashes? Test your knowledge in our quiz.

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Investors are being urged to consider consolidating their stocks and shares ISAs onto one investment platform, but there are risks to be aware of.

With the end of the tax year approaching, investors have just weeks to make use of their ISA allowance and there are also plenty of cashback incentives around to transfer your tax-free savings from previous years.

Research by interactive investor found a third of investors currently have more than three different providers holding their ISA or pensions and almost half have two.

The platform claims investors with a £75,000 portfolio split between three providers, could save £844 over a five-year period by consolidating into a single account with interactive investor, which charges a flat fee rather than a percentage of the portfolio's value.

This assumes investment growth of 5% per annum and a £25,000 investment with three providers: Hargreaves Lansdown, AJ Bell, and interactive investor.

There are other factors to consider though such as trading fees, the product range on offer and functionality such as apps and research tools as well as customer service.

Other investment platforms may even work out cheaper, depending how much you invest and how regularly you are trading shares or funds.

For example, interactive investor’s cheapest plan starts at £5.99 per month or £71.88 a year.

But Scottish Widows Share Dealing, formerly IWeb, which is owned by Lloyds Banking Group, doesn’t charge any annual or ongoing fees. Trades cost £5 each.

Aside from fees, there are other factors to consider if you plan to consolidate your ISA.

Why consolidate your ISA?

Consolidating your ISA can mean paying one fee, which ideally should work out cheaper

It also give you a more complete view of your finances.

Brian Byrnes, director of personal finance at Moneybox, said: “The biggest win for consolidation is simplicity. With a single provider, you don’t have to juggle multiple accounts, passwords, and apps.

“On top of this, a single view allows you to see your progress instantly. It’s simpler to know exactly how much you have saved for your house deposit, your emergency fund, or your retirement when it’s all on one dashboard. This visibility helps you stay motivated and make faster, more informed financial decisions.”

Consolidating your ISA gives you more control and helps avoid duplicate holdings.

Plus it can help set a clearer strategy.

Ben Faulkner, of EQ Investors, said: “Bringing a portfolio together helps you check you’re properly diversified and haven’t invested more in some areas than you’d intended.

“You may want to invest in companies that are environmentally and ethically aware and look after their employees, but are you confident all your investments follow this approach?

“Consolidating your ISAs can help to ensure your aligning investments with your personal values.

Another benefit is estate planning for inheritance tax.

Rachael Griffin, tax and personal finance expert at Quilter, said: “With the government confirming that pensions will fall within the scope of inheritance tax from April 2027, consolidating financial accounts is likely to become more important for many families.

“This change means more estates will be pulled into inheritance tax and a single, well‑organised ISA structure will make life far easier for executors working through IHT reporting requirements.”

What to watch out for when consolidating an ISA

There may be downsides to consolidating though, particularly if there are exit fees.

Griffin says cost savings are possible, although not guaranteed.

She said: “Some platforms favour larger portfolios with flat fees, while others suit smaller balances with percentage charges. Consolidation only pays if the chosen platform’s structure is genuinely cheaper once everything is under one roof.

“The potential downsides are mostly practical. Exit fees, loss of preferential fund classes and the risk of being out of the market during a transfer all need weighing up. Not all assets can transfer in specie, and specialist holdings may not be fully portable.

Nouran Moustafa, practice principal at Roxton Wealth, says people need to watch carefully for exit fees, transfer costs, loss of access to certain funds or tax wrappers, and the risk of ending up less diversified than they were before.

She said: “The key is to consolidate with purpose, not just for convenience, and to make sure the new home is genuinely better, not just tidier.”

One of the best ways to protect your cash and investments from the taxman is by making sure you hold them in an ISA.

An ISA is a type of savings or investment account that acts as a tax wrapper, protecting your savings interest or investment returns from the taxman.

A stocks and shares ISA can protect you from capital gains tax and dividend tax, making sure that you keep all your returns.

ISA season typically runs from February to the start of the new tax year in April, as savers and investors are encouraged to utilise their annual ISA allowance. But how much do you know about the popular tax-free accounts? Test your knowledge in MoneyWeek’s ISA quiz.

Did you know as much about ISAs as you thought you did? Share your results on social media.

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• How to find the best stocks and shares ISA
• Isas vs savings accounts: what’s the best home for your cash savings?
• 'I've used my annual ISA allowance. How can I shield my savings from tax?'

With the end of the 2025/26 tax year approaching on 5 April, now is the time to make full use of your current £20,000 ISA allowance and start thinking about what to do with the next allowance when it resets on 6 April.

Stocks and shares ISAs provide investors with a home to grow money free of any tax on the gains, which can be significant. Those who invested the full ISA allowance every year into the FTSE All-Share Index from when ISAs launched in April 1999, for example, would have a portfolio worth £665,696 over the 26 years to April 2025, according to calculations by Interactive Investor (having contributed £326,560).

Picking the right investments for your stocks and shares ISA portfolio is key – ideally you should balance your attitude to risk, the types of investments you already hold and where you are in your investment learning curve.

MoneyWeek asked investment experts at fund platforms Fidelity International and Interactive Investor for their top ISA fund and ISA investment trust picks, to suit different types of investors.

Investing for growth

Growth investing is a strategy focused on capital appreciation – that is buying stocks in companies expected to grow in value at an above-average rate compared to the wider market.

Tom Stevenson, investment director at Fidelity International, who recently featured on the MoneyWeek Talks podcast, said: “Growth investing requires patience and a long-term mindset. Market volatility is inevitable, but staying invested and diversified gives your money the best opportunity to compound over time.”

From Fidelity’s Select 50 list, he highlighted four funds that offer different approaches to growth investing:

Dodge & Cox Worldwide Global Stock fund – a value-oriented global equity fund investing in established companies that appear undervalued but have strong long-term prospects. Its diversified international approach provides broad exposure beyond the largest US technology names.

Rathbones Global Opportunities fund – a concentrated global growth strategy targeting companies with durable competitive advantages and strong expansion potential. The fund focuses on identifying businesses with distinctive qualities and the ability to sustain growth.

Federated Hermes Asia ex-Japan – a regional fund investing in attractively valued Asian companies outside Japan. The manager seeks quality businesses that are currently out of favour but offer strong long-term upside potential.

Vanguard Global Small Cap Index fund – a passive strategy providing exposure to thousands of smaller companies across developed markets. Smaller companies can be more volatile, but they have historically offered attractive long-term growth potential for investors with a longer time horizon.

Reliable returns

Stocks and shares ISA investors seeking a reliable return might look at global equity income funds. Investing in dividend-paying companies across the globe, they have the potential for a growing income stream alongside long-term capital growth.

Global equity income funds often lean towards financially robust, well-managed businesses, a great match for anyone who loves the idea of steady earnings but still wants exposure to global markets.

Dzmitry Lipski, head of funds research at Interactive Investor, suggested the Fidelity Global Dividend fund, which has been managed by Dan Roberts since its 2012 launch, drawing on more than two decades of dividend-investing experience.

“It invests in companies globally that offer a healthy dividend yield and the potential for capital growth and aims to generate roughly 25% more income than its benchmark,” said Lipski.

The portfolio holds around 46 large, resilient companies, with Europe representing roughly 48%, North America 26% and the UK 15%, and no Chinese exposure. Lipski said: “Sector allocations are deliberately defensive, led by financials, industrials and consumer staples.”

Alternatively, Jemma Slingo, pensions and investment specialist at Fidelity International, said she likes Pyrford Global Total Return – about two thirds of the portfolio is in high quality bonds, and a third is in equities.

“It tries to keep volatility low, while providing a stable stream of inflation-beating returns,” she said. Slingo said that, while at first glance at the fund’s performance chart reveals few serious falls, “on the flip side, growth has been fairly muted particularly when inflation is accounted for”.

Pyrford has turned an initial investment of £1,000 into £1,440 over the course of the decade. If you want a ‘sleep at night’ option, however, this might be a trade off you’re willing to make.

Stevenson, from Fidelity International, added: “Dividend and interest allowances have reduced significantly in recent years, so sheltering income-producing investments from tax in an ISA can improve the net yield you receive.

“Income investing doesn’t mean sacrificing growth altogether. Many income funds aim to provide a balance of regular distributions and long-term capital appreciation.”

From Fidelity’s Select 50, Stevenson’s three picks offering diversified sources of income are:

M&G Corporate Bond fund – a fixed interest fund investing primarily in investment grade corporate bonds, with the flexibility to hold government and high yield debt.

International Public Partnerships Ltd (LON:INPP) – a specialist infrastructure investment trust investing in essential assets such as schools, hospitals, transport and renewable energy projects. These assets typically benefit from long-term contractual cash flows.

Ninety One Diversified Income fund – a multi-asset income fund investing across bonds, dividend-paying equities, infrastructure and property. Managed with a focus on limiting volatility relative to the UK stock market, the managers John Stopford and Jason Borbora-Sheen have a long track record running this strategy and have successfully been able to limit capital losses while providing a steady yet growing income.

Adventurous diversification

With global stock markets becoming increasingly concentrated and growing fears of the AI theme potentially being overheated, those wanting to spice up their stocks and shares ISA portfolio with some interesting diversification could take a look at investment trust Murray International.

Kyle Caldwell, funds and investment education editor at interactive investor, said he likes the trust because he is “looking more towards those investment trusts that use their full global remit in having a good chunk of exposure to Asia Pacific and Latin America – Murray International ticks this box”.

The portfolio is very different from the wider market. It has a value investment style, and it offers an above average dividend yield of around 4%, Caldwell pointed out.

Fidelity’s Slingo is also concerned about the stock market being dominated by a handful of US technology stocks – and also likes Latin America and Asia, but this time in the form of the Lazard Emerging Markets fund.

“The fund seeks out companies that are cheaper than the market but that have better fundamental prospects,” she said, adding emerging markets were among the best performing equity assets last year and the outlook remains positive.

“Strong earnings growth, a weak US dollar and a rotation out of the US could all boost performance this year,” Slingo said.

Newer investors

For newer investors who would like something a little more interesting than a global tracker fund and who are nervous about jumpy markets, the Fidelity Global Dividend fund could be a good option.

“It invests in companies from around the world; offers a combination of growth and income; and aims to keep volatility lower than the wider market. The fund has delivered steady gains over the past 10 years,” Slingo said.

The fund contains some well-known names like Unilever and National Grid, Slingo added, so “new investors will know that buying the fund means buying real businesses that impact them”.

Alternatively Lipski at Interactive Investor highlights a managed solution, like Interactive Investor’s Managed ISA, might be a good place to start, where the investments are chosen for you.

Investors fill out a questionnaire and are matched with one of 10 portfolios – in two styles (index investment style and sustainable investment style) and five different levels of risk. Once invested, the portfolio is periodically rebalanced – in line with the risk level you signed up for.

The fund fees are low, and there is no separate management fee as it sits within Interactive Investor’s existing flat-fee subscription-based charging model.

We look at the best investment funds for beginners and the best investment platforms for beginners in separate articles.

A less experienced investor may also want to look at absolute return or capital preservation funds. They use a mix of strategies to limit volatility and help protect against big downturns.

Lipski suggested looking at the Trojan Fund: “Co-managed by Sebastian Lyon and Charlotte Yonge, Trojan Fund takes a conservative, disciplined approach focused on preserving capital and delivering long-term real returns,” he said.

Lyon invests across a broad range of asset classes. The equity portion is focused on large, financially robust companies in developed markets, particularly the UK and US. The fund also holds high-quality sovereign and inflation-linked bonds as defensive assets, alongside a strategic allocation to gold. Cash is also used meaningfully to protect capital and allow swift investment when opportunities arise.

“The fund offers a steady, defensive option for investors seeking long-term real returns with controlled risk,” said Lipski.

Experienced investors

More experienced investors may want to consider smaller companies for their stocks and shares ISA. “These can be significantly riskier than large ones,” Fidelity’s Slingo pointed out, “however, experienced investors with long time horizons might want some exposure to this part of the market”.

Slingo suggested the Brown Advisory US Smaller Companies fund. “It deploys a big team of researchers to find the most promising smaller companies listed in the US. Their strategy is based on the belief that good fundamental research coupled with a long-term approach can generate attractive outperformance,” she said.

The fund is a higher risk option, and its performance has lagged the benchmark in recent years. “However, it may appeal to experienced investors who are concerned about the dominance of huge US tech stocks in their portfolios,” said Slingo.

Finally, according to Dave Baxter, senior fund content specialist at Interactive Investor, another good option for the more seasoned investor is the Marlborough Special Situations fund.

It invests in the dynamic growth potential of the UK’s innovative and agile smaller companies. Its sector bets are markedly different with big weightings to industrials, consumer discretionary shares and technology. Top holdings include Zegona Communications, Boku and SCA Investments.

Baxter said: “Marlborough Special Situations has been poor in 2025, and in recent years. The fund has more than 150 holdings and small position sizes, with its top holding making up only 2.6% of the portfolio.

“However, the fund has a good long-term record, and good exposure to micro caps, small caps and mid caps. It should in theory do better when interest rates fall in earnest.”

Junior ISAs (JISAs) are emerging as an effective inheritance planning tool amid impending pension inheritance tax changes.

The inheritance tax system is facing an overhaul in the coming years, with pensions forming part of taxable estates from April 2027.

The House of Lords last week criticised the pension changes but many people are now looking to find ways to pass on wealth to their loved ones in a more tax-efficient way to avoid giving too much unnecessarily to the taxman.

One option is for parents or grandparents to put money into a JISA - savings accounts for children under age 18.

Increasing numbers of people are making use of the full £9,000 JISA allowance, a Freedom of Information request by Murphy Wealth to HMRC found. The research showed 78,330 accounts maximised their allowance in 2023/2024, the most since 2019/2020’s 80,060.

It also marks a 9% increase on the previous tax year (71,910) and a 41% rise since 2020/2021 (55,570).

Adrian Murphy, chief executive of Murphy Wealth, said: “A lot of families are exploring different ways of passing down wealth to their loved ones earlier in life.

JISAs are a great way of doing that, providing tax-free growth and income that can compound over a significant period of time.

“With pensions becoming part of people’s estates from next year – the decision about which wouldn’t be reflected in these figures, as it was announced in the Autumn 2024 Budget – we would expect to see a further acceleration in the number of JISAs being maximised.”

The benefits of a JISA for inheritance planning

There are lots of ways to pass on money to your grandchildren or children.

Pension wealth is set to form part of an estate for inheritance tax purposes from April 2027, which may affect how much can be passed on.

You could give financial gifts during your lifetime but, if they exceed inheritance tax gift allowances, there are risks of a tax bill if you pass away within seven years of the transfer.

JISAs provide another tax-efficient way that parents and grandparents can give their loved ones a financial boost.

You can gift up to £3,000 a year, either to one person or several people, without the money being liable for inheritance tax. If you don’t use all your allowance, anything left carries over into the next year, but only for one year. So you could technically put £6,000 into a JISA.

Murphy added: "Children can't access the accounts until they are 18, which also provides a level of assurance that the money will be used for some of the big life events that take place around that age – whether it's buying a first car, help with university costs, or taking that first step into a career or onto the property ladder.

“And the people making the contributions will likely get to see their child or grandchild enjoy that money, which may not be the case with other ways of tax-efficiently passing wealth down.”

Alice Haine, personal finance analyst at Bestinvest, highlights that the tax benefits mirror those of an adult ISA – with no capital gains or income tax.

But there are other advantages. She said: “JISAs sidestep the parental tax rules.

“If a child earns more than £100 in interest on money gifted by a parent and held in a regular savings account, that income is taxed as if it were the parent’s – an issue that does not apply to JISAs. Parents should tread carefully, however. There’s no point topping up a JISA if they might require the money for their own needs, because they can’t get it back.”

However you plan to pass wealth onto family members, Murphy said it’s important you have a plan and don’t leave yourself short.

He added: “Speak to a financial adviser who can provide guidance on how to sustainably gift money to children and grandchildren, while ensuring your financial requirements are taken care of in retirement.”

“I’ve stopped paying into my Lifetime ISA now. I don't think it's worth it,” a friend explained. The rest of the group, mostly renters in their early 30s, nodded in support as she explained her plight – the property cap (which has been frozen at £450,000 since the Lifetime ISA launched in 2017) is becoming more and more restrictive if you want to buy in London. The increasing likelihood of paying an effective 6.25% penalty on your hard-earned savings if your dream home exceeds this threshold makes the account much less appealing – putting money elsewhere gives you more choice.

I remember discussing the Lifetime ISA (LISA) when it first launched, almost a decade ago, with a group of friends who were long term renters in the capital. It was replacing the Help to Buy ISA, and the Lifetime ISA seemed to be a welcome improvement.

Each tax year, you can save up to £4,000 in a Lifetime ISA and get a 25% (up to £1,000) boost from the government. With the Help to Buy ISA, which you can no longer open, you can pay in £200 a month and also get a 25% top up, but the overall maximum bonus is £3,000.

I ran the calculations – if you could afford to max out your Lifetime ISA for more than three tax years, you would end up with a greater bonus via the Lifetime ISA. Plus the 25% boost is paid into your account the following month, rather than needing to be claimed when you come to purchase, so you can benefit from compound interest (you can hold cash and/or stocks and shares in Lifetime ISA).

To get the Help to Buy ISA bonus, the purchase price of a property is capped at £250,000, or £450,000 in London. With the Lifetime ISA, it’s a blanket £450,000.

When the Lifetime ISA launched in April 2017, the average UK house price was £220,094, according to HM Land Registry. In London, the average was £482,779. But as of November 2025, the average UK house price is £271,188, and £553,258 in the capital.

While house prices have risen, the Lifetime ISA cap has failed to keep pace. If it had been uprated, the limit would have grown to £575,550 according to AJ Bell calculations in February 2025. This restricts prospective buyers who face fewer affordable options that fall within the Lifetime ISA boundaries.

Plus, bizarrely, the £450,000 cap doesn't align with first-time buyer's relief on stamp duty land tax (SDLT) – which applies on properties costing up to £500,000. As a first-time buyer you pay no SDLT on the first £300,000 then 5% on the portion from £300,001 to £500,000. Surely it’s time to uprate the Lifetime ISA property value limit to be at least in line with this relief.

How Lifetime ISA withdrawals work

Lifetime ISA withdrawal rules are stringent. You can access the cash penalty-free if you’re buying an “authorised” property (you’re buying a property costing £450,000 or less, with a mortgage, using a conveyancer or solicitor and you first paid into the Lifetime ISA at least one year ago) or if you’re 60 or older. Otherwise, unless you’re terminally ill with less than 12 months to live, you will be charged 25% on withdrawals.

Let’s say you put in £16,000 over the years. With the £4,000 bonus, you’d have £20,000, assuming no growth. You then want to buy a property for £500,000, so withdraw the entire pot. As this is just over the Lifetime ISA cap, you would pay a 25% withdrawal charge of £5,000 – leaving you with just £15,000. This works out at an effective 6.25% penalty on your savings.

A withdrawal charge is understandable given the 25% top up is applied within the tax year, but cutting it to 20% would mean HMRC can recoup the bonus if it’s not used to buy a first home. We don’t need an entirely new ISA product for that – the rate was cut to 20% during the coronavirus pandemic.

The rumoured Lifetime ISA replacement

In the 2025 Autumn Budget, chancellor Rachel Reeves announced the government will publish a consultation in early 2026, on the “implementation of a new, simpler ISA product to support first time buyers to buy a home”. It’ll be offered in place of the Lifetime ISA. It’s promising news – Lifetime ISA reform is long overdue. But HMRC this week suggested the consultation will focus on launching a new product which removes the retirement saving aspect of Lifetime ISAs and the withdrawal charge.

It seems the new product, reportedly due to launch from April 2028, will return to the Help to Buy ISA model, where the bonus is applied when the property is bought. This should “be cheaper” for the government, but potential homeowners would lose out on the “investment growth earned on the bonus during the years they save for their first house”, Rachel Vahey, head of public policy at AJ Bell, points out.

It’s not yet known whether the property value threshold will be changed. I really hope it is. If it remains frozen, the government would be ignoring the main problem with the Lifetime ISA and missing a huge opportunity to genuinely help first-time buyers get on the property ladder amid rising house prices.

I believe the Lifetime ISA is a great product for prospective homeowners, but it’s failing because the property cap hasn’t kept up with house price growth. First-time buyers are being restricted to fewer options as property prices rise, and the frozen threshold is undermining confidence in the product. Why would you commit to locking your savings for a deposit in a Lifetime ISA if you were likely to lose a chunk of the money you put in to buy your first home?

Fixing this flaw by uprating the limit is a fantastic opportunity for the government to win support from millennials and Generation Z. Launching a new product which doesn’t address the frozen threshold would just be a huge waste of time and taxpayers’ money.

Lifetime ISAs (LISA) are set for the biggest shake-up since their introduction in 2017, with the government set to consult on a “simpler” replacement ISA.

The product will be exclusively focused on first-time buyers, dropping the retirement saving option currently available, CityWire reports. The new ISA could launch in April 2028, according to the publication.

Under current rules, Brits can put up to £4,000 a year into a Lifetime ISA and the government adds 25%, up to a maximum of £1,000 per year. The £4,000 must be within the overall £20,000 annual ISA allowance. You can hold cash or stocks and shares in a LISA.

You can then use the money to either contribute towards a down payment on a property worth up to £450,000, or save the money and withdraw it fee-free once you reach 60 years old.

If you withdraw money from your LISA for anything else, you have to pay a 25% exit penalty, unless you are terminally ill, with less than 12 months to live.

Under the proposed rules, the 25% bonus would reportedly be paid when an individual withdraws their cash to buy a property, rather than paid monthly. As the bonus would be paid at the point of purchase, it’s expected there wouldn’t be 25% exit penalties.

However, by not paying the bonus monthly, savers would not be able to make the most of compounding interest and investment returns on the government bonus. It could mean that future LISA-equivalent pots will be smaller over time compared to ones that benefit from the monthly payment system.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, told MoneyWeek that a potential removal of the retirement option was “disappointing as the LISA has the potential to be a gamechanger in helping groups such as the self-employed prepare for retirement”.

Chancellor Rachel Reeves said in her 2025 Autumn Budget that the government would launch a consultation on a “new, simpler ISA product to support first time buyers to buy a home” in “early” 2026.

A Treasury spokesman told MoneyWeek: “We recognise that the Lifetime ISA is not working for everyone, particularly when people's circumstances change. That is why we intend to consult on a new and improved product, specifically designed to support first-time buyers and without penalty for withdrawals.”

No word on property cap being scrapped

It is not currently known whether the £450,000 property price cap would be scrapped when the new ISA product launches.

This cap, which means savers have to pay a 25% penalty if they want to use their LISA to purchase a home just £1 over the limit, has been the subject of criticism by some who think it is not enough.

The average property in the UK cost £297,755 in December 2025, according to the Halifax House Price Index, meaning first-time buyers in most of the UK aren’t affected by the £450,000 limit.

However, those seeking to buy where house prices are typically more expensive, such as London, are much more pressed. The average price of a property in the capital is £539,086, almost £100,000 above the LISA cap.

With house prices this high, Londoners wanting to buy their first home with their Lifetime ISA bonus are much more restricted in which houses they can purchase.

Morrissey said: “The £450,000 limit for value of first homes bought with a LISA has been in place since the product was first introduced so there’s a strong argument that it needs to be increased given the house price inflation we’ve seen over that time.

“This needs to be addressed both in the consultation on what a new product would look like but also for the LISA as it currently stands. People are still using the LISA to help them get on the property ladder and it is vital that it remains fit for purpose for these people.”

In June 2025, the Treasury committee released a report that highlighted some problems with the current LISA regime. The report called the LISA “complex” and said it increases the risk of savers choosing “unsuitable investment strategies”.

The committee also criticised the confusion around the penalty incurred when LISA funds are withdrawn for something other than a house purchase under £450,000 or retirement.

They were less critical of the house price cap, however, saying that the current cap “ensures government spending supports those who need financial assistance the most”.

A total of £872 billion is held in Britain’s ISA accounts, with almost £100billion of that added in the last year alone. I would hazard a guess that almost every subscriber to MoneyWeek magazine has one. Within an ISA, your money is completely free of income tax and capital-gains tax, and unlike with pensions, there is flexibility over when you can take it out. ISAs have become central to the way the British save and invest. With a £20,000 annual limit, it soaks up most of the spare money people have to put aside.

Now, they are starting to come under sustained attack. In the last Budget, chancellor Rachel Reeves reduced the amount that could be put into a cash ISA to £12,000 a year as of April 2027. There are reports that the taxman wants to go further and charge a 22% levy on cash assets held within a stocks and shares ISA, and is also looking at aligning the rate with income tax, so that 40% and 45% taxpayers would have to pay extra on any cash held in their ISA.

It sounds like an administrative nightmare. It will be hard for ISA providers to work out what percentage of a fund is in cash; whether a client is a standard or higher-rate taxpayer, or whether they have used up their dividend or personal allowances for the year. Some of the smaller firms, which may also be the most innovative, may simply decide it is no longer worth the hassle and give up. But the real problem is not just all the red tape that will now be imposed on a product that was designed for its simplicity. It is also the precedent.

The slippery slope with ISAs

The simple rule that the ISA is free of tax has now been breached and, once that taboo is broken, future chancellors can easily ramp up the tax levied on ISAs. After all, what counts as a cash holding? A money-market ETF? A bond fund? A high-yielding equity? The tax grab might start with simple cash balances, but it is not hard to see the reach getting extended, especially as clever fund managers come up with products that have all the characteristics of a savings account with a different wrapper. Perhaps only basic-rate taxpayers should be allowed relief on their entire holdings; or ISAs should be restricted to the holding of shares listed in Britain. Alternatively, perhaps there should be a £100,000 lifetime limit on contributions to an ISA, an idea already put forward by the Resolution Foundation, whose former boss, Torsten Bell, is now a Treasury minister. Or how about a special 10% income and capital-gains tax on any assets held within an ISA?

After all, the government is desperate to raise more money and is boxed in by its rash promise not to raise any of the three main taxes. That makes all the cash locked up in savings accounts a tempting target. After a few years, almost all the tax advantages may well have been stripped away.

Britain is returning to the 1970s

And yet that would be a tragedy. The ISA can be traced back to Nigel Lawson’s Personal Equity Plan first launched four decades ago. Gordon Brown put a new label on it, but it was basically the same vehicle. When it was started, it was part of the Thatcherite project to create a shareholding democracy. The theory was that if people owned shares, they would be independent of the state, it would increase the amount of capital available to British industry, and, perhaps most importantly of all, it would build support for free markets.

When industries were privatised, the shares were sold at a discount, and many people put them straight into their Pep/ISA and held onto them. If enough people had a stake in the system and were benefiting from it personally, then they were far more likely to be suspicious of higher corporate taxes or more regulations for business.

It is arguably the last surviving remnant of the Thatcher reforms of the 1980s. We no longer have a flexible labour market. Our rate of corporation tax is about average for Europe and no longer one of the lowest. Our top rate of income tax is punishingly high and kicks in at a very low level, while inheritance taxes are among the highest in the world. The trade unions are allowed to become steadily more powerful. With Great British Energy and Great British Rail, we are even renationalising major industries. The Labour government has now started to destroy the last relic of that era – and the British economy will complete its journey back to the dysfunctional 1970s.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

The allure of a 25% government top up was enough to persuade me to open a Help to Buy ISA in the late 2010s.

But fast forward to 2025 and I’ve decided to do away with the account and put my money elsewhere.

Having moved into my partner’s property last year, and therefore no longer looking to buy a first home, the account was effectively redundant.

Without the 25% bonus, and offering a paltry interest rate of 2.5%, I was losing money in real terms, based on the latest CPI rate of inflation.

Instead, I’ve put 80% of the Help to Buy money into a taxable cash savings account and transferred the remaining 20% into a stocks and shares ISA.

My cash savings account is currently paying over 4% in interest, offering far more than the Help to Buy ISA.

The interest I’ll make from the cash savings account will be well within my personal savings allowance for the 2025/26 tax year. At some point, I will transfer some or all of the money from this savings account into a cash ISA though, to protect it from the taxman.

The 20% I am adding to the stocks and shares ISA is an amount I can afford to lose. Because it’s in an ISA, any returns will be shielded from capital gains, dividend and income tax.

Moving the Help to Buy ISA money into cash savings and a stocks and shares ISA will mean my money will work harder and my returns should be stronger over the long-term.

I considered opening a Lifetime ISA, which also offers a 25% bonus from the government, as you can invest in stocks and shares with these accounts.

However, you only get that bonus if you’re buying a first home (which I no longer am) or withdrawing the money after the age of 60. If you withdraw your cash and it’s not for either of these two reasons, you are faced with a hefty 25% penalty.

I wanted a tax-wrappered account offering more flexibility than this, in case I want to withdraw my money earlier than 60 penalty-free – a stocks and shares ISA allows me to do this.

Millions ‘trapped’ with Help to Buy ISAs

More than two million savers are still stuck with Help to Buy ISAs, a recent Freedom of Information request made by comparison site Finder found.

These savers will not be able to add more money into their accounts after November 2029 and from November 2030, can’t claim the 25% bonus.

To qualify for the 25% bonus, you need to buy a house costing no more than £250,000 outside of London and £450,000 inside the capital. These limits have not changed since the Help to Buy scheme launched in December 2015, despite house prices rising by around 45% between September 2015 and September 2025, according to Land Registry data.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said the Help to Buy ISA could be a ‘real shot in the arm’ for would-be home buyers, but savers who no longer need to get on the property ladder will likely do better putting their money elsewhere.

“If your plans have changed, and you’re no longer buying, this account essentially becomes a savings account with a monthly cap.

“Given that the best rate on offer right now is 3%, it’s not a particularly competitive savings account, so a cash ISA would be a more sensible option. If you want the money for a longer-term goal, you might be better off with a stocks and shares ISA.”

Cuts to cash ISA allowance as Reeves pushes for an investment culture change

Rachel Reeves confirmed in the Budget the cash ISA annual allowance limit will be reduced from £20,000 to £12,000 for under 65s from April 2027. Savers will still retain the overall £20,000 annual ISA limit.

The chancellor is seeking to push more savers towards investing their money rather than relying on the less risky but typically less lucrative option of cash savings.

Her attempts to shift people’s attitude towards riskier forms of saving may not bear fruit though, research suggests.

Polling by AJ Bell found 51% of cash ISA savers would simply put their money into a taxable savings account following a cut to the annual cash ISA allowance.

However, while stocks and shares ISAs are a riskier way of saving, returns are often greater than stashing the cash away in a taxable savings account or cash ISA – if you’re looking to invest over a longer-term period of five years or more.

Analysis from AJ Bell shows a one-off £1,000 investment in the average North America fund back in April 1999, when ISAs were first introduced, would now be worth £6,285, compared to just £2,079 if held in the average cash ISA.

The investment platform found even UK equity funds, despite two decades of market challenges, would have grown the original £1,000 to £3,787, comfortably beating cash returns and inflation over the same period.

Laura Suter, director of personal finance at AJ Bell, said the figures revealed the “hidden cost of playing it safe”.

“Inflation quietly eats away at savings, and even the average cash ISA will have struggled to keep pace. By contrast, investors who were willing to take on some risk have been handsomely rewarded,” Suter said.

If you’re looking to open a stocks and shares ISA, bear in mind you may have to pay certain fees which can impact any gains you make.

You may be charged a platform or account fee, charged as either a percentage of your investment amount or as a flat amount each month or year. You may also have to pay trading or dealing fees each time you buy or sell an investment.

Make sure you read our guides on how to start investing and the best investing apps.

Money market funds and other ‘cash-like’ investments could be subject to the incoming £12,000 cash ISA limit from 6 April 2027, limiting the ability of investors to manage their risk profiles.

Under new rules published by HMRC, ‘cash-like’ investments – which experts believe could include money market funds and similar investments like short-dated bonds – will be subject to tests to establish whether they are eligible to be held in a stocks and shares ISA or a cash ISA.

Beginner investors who are switching from exclusively cash savings towards investing by opening a stocks and shares ISA can currently use money market funds as a bridge between the two. They offer low-risk cash-like returns from within a stocks and shares ISA.

Money market funds have also been rising in popularity and were some of the top funds purchased by DIY investors in November.

But if speculation that money market funds or short-dated bonds would be considered cash-like, the reforms that HMRC is proposing could block new or cautious investors from using these products to manage their risk.

“Blocking money market funds within stocks and shares ISAs would be a serious setback for investors,” said Mark Burges Watson, co-founder of investing app Kaldi. “These funds are among the safest short-term investment options – low-risk, cash-like, and currently yielding over 4%, far higher than instant-access cash ISAs at high street banks.”

MoneyWeek asked HMRC for clarification over whether money market funds would be considered 'cash-like' under the new rules, and how the mechanism for enforcing the respective limits would work - a HMRC spokesperson said: "Rules will be introduced to avoid circumvention of the lower limit for cash ISAs, including tests to determine whether an investment is eligible to be held in a stocks and shares or innovative finance ISA, or is ‘cash like’.

"Whether an investment will qualify for inclusion within an ISA will depend on whether it complies with the rules. The detail of the changes to the rules will be publicised in advance of the change, and following discussions with stakeholders."

The new HMRC rules will also ban transfers from stocks and shares to cash ISAs, as well as implementing a charge on any interest paid on cash holdings within a stocks and shares or Innovative Finance ISA.

Why are investors using money market funds?

Under the current rules, money market funds can be held in a stocks and shares ISA. That means they would theoretically circumvent the upcoming reduction in the annual cash ISA limit to £12,000, which will affect people under the age of 65.

“With the cash ISA allowance cut to £12,000, millions of savers will be forced into taxable accounts for their excess savings,” said Burges Watson. “Money market funds serve as an ideal stepping stone, letting savers park money securely while deciding how to invest or managing short-term market volatility.”

If money market funds were to remain eligible for stocks and shares ISA inclusion (or would otherwise be exempt from the ‘cash-like investment’ restrictions) then savers could theoretically deposit £12,000 annually in a cash ISA and put the remaining £8,000 into money market funds in a stocks and shares ISA – utilising their entire £20,000 ISA allowance but keeping it in low-risk, cash-like investments.

Burges Watson added that restricting access to lower-risk products “undermines the very purpose of ISAs: supporting safe, flexible investment”.

Volatility within the market is a particular concern for many investors, with stretched stock market valuations prompting fears of an AI-driven bubble.

“Record high markets have… served to foster an appetite for lower risk investments such as money market funds and short duration bonds,” said Ryan Hughes, managing director at AJ Bell Investments.

Assets invested in the Money Market model portfolio service (MPS) on AJ Bell’s advised platform tripled in the 12 months to November. The MPS, which is only available to AJ Bell's advised clients, invests in cash, as well as cash alternatives including money market funds and ultra-short-dated bonds.

How would HMRC restrict access to money market funds?

It isn’t clear yet how a potential rule change would be implemented. HMRC's website says that the industry will be consulted on the draft legislation to amend ISA regulations, and that this legislation will appear before Parliament "well ahead" of the April 2027 rule change.

HMRC's statement in response to MoneyWeek's question about enforcement indicates that cash-like investments will likely be excluded from stocks and shares ISA eligibility.

But whatever happens, implementing the block could add further complexity to an ISA system which critics warn is already becoming confusing for beginner investors.

The nature of money market funds may also prohibit HMRC from changing their designation.

“HMRC could have a tough time enforcing these restrictions, as money market funds are classified as investments, carry a ‘Capital At Risk’ warning and are not covered by the FSCS,” said Burges Watson.

Investors will no longer be able to transfer stocks and shares ISA money to cash equivalents under the government’s controversial reforms.

Chancellor Rachel Reeves announced plans in her Autumn Budget to cut the cash ISA allowance for under-65s to £12,000 from April 2027.

The aim is to encourage more people to use their £20,000 ISA allowance to invest in stocks and shares and there are estimates that those leaving money in traditional savings accounts could face paying thousands of pounds extra in tax.

HMRC has now announced more restrictions to incentivise savers towards stocks and shares ISAs.

Transfers from stocks and shares ISAs to cash ISAs will also be banned as part of the changes.

Plus, there will be a charge for those earning interest on cash within a stocks and shares ISA.

This will provide a disincentive for investors to keep cash holdings in a stocks and shares ISA for too long and instead encourage them to put it back into the market.

What are the new ISA transfer rules?

Transfers have been allowed between stocks and shares ISAs and cash ISAs since 2008.

This provided flexibility for people whose strategies and risk appetite may change.

But the system will change again once the cash ISA allowance is cut in April 2027.

An update from HMRC said transfers from stocks and shares and Innovative Finance ISAs to cash ISAs will no longer be allowed.

There will also be tests to determine whether an investment is eligible to be held in a stocks and shares ISA or is ‘cash like.’

Plus, the government looks set to stop people parking cash in a stocks and shares ISA through a platform, where interest rates have been high in recent years.

Currently, cash holdings held in a stocks and shares ISA, often from investment returns or uninvested money, may earn an interest rate while an investor decides how to use the money.

HMRC said it will introduce a charge on any interest paid on cash held in a stocks and shares or Innovative Finance ISA, creating a disincentive to keep hold of cash in the tax wrapper for too long.

These rules, subject to consultation and new legislation, will apply to investors under the age of 65.

Critics may describe this as yet another stealth tax by the government.

Jason Hollands, managing director of Bestinvest, said: “While it is no surprise they are going to take action – as we predicted this - levying a charge on cash held within stocks and shares ISAs is yet another stealth tax that will impact genuine investors who sometimes decide to park money in cash for a period of time awaiting investment, or because they are nervous about the market environment.

“The ‘tests to determine whether eligible investments are ‘cash like’ will throw doubt about access to money market funds within Stocks and shares ISAs and could even bring short-dated bonds into question.

“There is more uncertainty ahead.”

Lifetime ISA changes

HMRC has also given more clues about changes to the Lifetime ISA, that got a short mention in the Autumn Budget document.

The taxman’s alert said: “The government will consult on introducing a new, first time buyer only product that will provide the bonus when a person uses it to buy a house, removing the need for a withdrawal charge and giving savers flexibility in case their circumstances change.”

This may appease those who have complained about withdrawal penalties and makes the produce similar to the now defunct Help to Buy ISA.

Savers will be up to £1,200 worse-off after five years once cash ISA reforms and new savings taxes are introduced, research suggests.

Chancellor Rachel Reeves used her Autumn Budget last week to reveal plans to cut the cash ISA allowance to £12,000 from April 2027 while also raising the income tax rate on savings by two percentage points, to 22% for basic rate taxpayers and 42% for higher earners from the next tax year.

The combination of both changes could be bad news for savers.

Analysis by InvestEngine found that of the 7.1 million who contribute to cash ISA in 2022/2023, 2 million saved more than £12,000.

The investment platform’s research suggests that millions of savers could be affected as the remaining £8,000 they may have previously put in a cash ISA - the difference between the cash ISA and stocks and shares allowance - could end up being taxed in a mainstream savings account, even with the personal savings allowance.

Here is how savers could be affected once savings income tax rises in 2026 and the cash ISA allowance is cut in 2027.

The impact of cash ISA cuts and savings income tax hikes

InvestEngine’s analysis found that almost 1.5 million basic-rate taxpayers and 462,00 higher-rate taxpayers deposited more than £12,000 into their cash ISA in the previous financial year

But it won’t take much for the taxman to come knocking if cash ISA savers divert their money into savings accounts instead.

A basic rate taxpayer will see the income tax on savings rise to 22% from April 2027.

They still have a personal savings allowance of £1,000.

But if they put £8,000 into a savings account each year, earning the current typical rate of 4.5%, the personal savings allowance would be breached after the third year and they will have paid £264 of tax after five years.

It is worse for higher earners, who will face a 42% savings income tax rate and already have a reduced personal savings allowance of £500.

Higher earners saving £8,000 per year at 4.5% would breach the allowance after just two years and face paying £1,216 in tax after five years.

Andrew Prosser, head of investments at InvestEngine, said: “Our analysis shows that millions of savers regularly deposit more than £12,000 a year into cash ISAs.

"This cut to the allowance could push many into paying unnecessary tax on their savings interest."

How to protect your savings after the cash ISA cut

The cut to the cash ISA allowance will take effect in April 2027, with savers being allowed to put the full £20,000 tax-free limit in cash until then.

But after this date, those who still want to put that extra £8,000 into cash will have to get a bit more creative and look into alternative ways to protect their savings from the taxman.

Stocks and shares ISAs

The easiest way for savers to avoid a new tax bill is by investing instead in a stocks and shares ISA.

That may be easier said than done though, especially if you are uncertain about financial markets.

Nottingham Building Society found only 38% of cash ISA holders nationwide would consider switching to a stocks and shares ISA.

Harriet Guevara, chief saving officer at Nottingham Building Society, said: “Millions of savers rely on cash ISAs as a low-risk way to build financial stability. Two thirds of our cash ISA customers have used the full £20,000 allowance so far this year. These aren’t people with excess wealth - they’re individuals and families working hard to save for the future.

“What’s more, limiting cash ISA deposits is also at odds with this government’s own pledge to double the size of the mutuals sector, threatening to shrink mutual lending capacity, limit access to homeownership, and stall the long-term growth of building societies that reinvest in their members and local communities.

“If the government’s intention is to encourage more investment, these changes must go hand in hand with better financial education.”

Over the long term investing your money in a well-diversified portfolio tends to bring about higher returns than if you were to lock your money away in a savings account. Be aware, however, that the value of your investments can go up as well as down.

For more information, read our guides on saving vs. investing and how to start investing.

Premium Bonds

One of the UK’s most popular alternative savings vehicles is NS&I’s Premium Bonds. Unlike conventional savings accounts, money held in Premium Bonds does not earn a guaranteed interest rate.

Instead, for every £1 you have in Premium Bonds, you get one entry into the monthly Premium Bonds prize draw. Prizes range from £25 to £1 million.

Any money you win from Premium Bonds is entirely tax free, meaning if you are one of the lucky two people who wins the £1 million jackpot, you will be able to keep the entire amount.

You can save a maximum of £50,000 in Premium Bonds, but the drawback is that this money is not guaranteed to grow as you may not win every, or indeed any, month.

Laura Suter, director of personal finance at AJ Bell, said: “Currently based on the average chance of winning your average returns [from Premium Bonds] would be 3.6%. It’s less than the best rate you can get on traditional savings accounts, but for some the lure of winning big plus the tax-free prizes will be enough to attract their cash.”

Use fixed-term accounts

When you save money in a fixed-term savings account, you lock your money away to grow at a specific, fixed rate until the end of the specified term.

While you still have to pay tax on interest earned, this is not due until the end of your term. This means that if you time it right, you could defer the tax bill to another tax year.

This can be useful if you expect to drop into a different tax bracket in a future year, allowing you to have a lower tax rate on the interest your money earns.

Suter adds: “Equally it can be a good move if you’ve got lots of taxable savings this year, and so have already hit your tax-free limit, but may have less next year. It’s a good idea to track the savings accounts on a spreadsheet, so you don’t lose track of when they mature, or use a cash savings hub, so they are all in one place.”

The long run-up to the Budget gave rise to fevered and increasingly alarmist speculation about its contents. This descended into chaos as frantic lobbying by interested parties, dire warnings by expert observers, and threats of rebellion by the government’s backbenchers led to U-turn after U-turn. Now, at last, the Budget has been delivered, and the speculation is over. What does it mean for the UK stock market?

The answer is very little. The FTSE 100 is very likely to continue climbing, while mid and small caps, which have underperformed in recent years, should recover lost ground. There is very little correlation between the performance of a country’s economy and its domestic stock market, which is why the Australian stock market has more than doubled in the last 10 years while China’s Shanghai index is up 10%.

About 75% of the FTSE 100’s revenues and about 50% of the FTSE 250’s sales stem from outside the UK. Many FTSE 100 companies, such as BAT, Shell and Rio Tinto, are based in Britain but do very little – if any – business here. Others, like Mondi, Airtel Africa and Coca-Cola HBC (formerly Coca-Cola Hellenic Bottling Company) use a London listing as a mere flag of convenience. Companies like Vodafone, National Grid and Compass have evolved from domestic into international businesses; and primarily domestic companies, such as EasyJet, M&S and Next, are increasing their overseas exposure.

Twenty years ago, the blue-chip index was dominated by mega-cap companies that had grown big through mergers in the late 1990s but were then stagnating in terms of business, earnings and share price. Now, those companies, much diminished in relative terms, are working hard to grow, improve profitability and reward shareholders. Even Glaxo and Vodafone have seen notable turnarounds recently, while Diageo reacted quickly to disappointing trading that had halved its share price.

UK-based companies are not expecting the government to do them any favours with regard to the economy, profitability or taxation; their attitude to investing and doing business in the UK is based on pragmatism. AstraZeneca has therefore responded to a withdrawal of government support by switching its attention to the US.

Global investors spot a bargain in UK stocks

UK-listed companies are attracting increasing attention from overseas investors, who are gradually eclipsing domestic ones. In the last couple of years, the chart of the FTSE 100 has accelerated upwards, while there have been “early signs of an earnings reacceleration”, says Chris Watling of Longview Economics.

The prime problem for the UK market has been the lack of participation by domestic investors, but this is likely to change. There have been heavy net outflows from equity funds, especially from UK funds (in 50 of the last 51 months). UK investors have shunned equities, deterred by risk warnings, economic gloom and regulatory hostility, and unaware that cash loses value over time in real terms. Over two-thirds of individual savings accounts (ISAs) are just in cash.

Yet the UK savings rate is over 10%, double the historic average. Interest rates and hence deposit rates are likely to fall further, and equity markets have been rising for three years. Savers will wake up to the reality that they are missing out and, in 2026, should start to discount a change to a more business- and investment-friendly government. Finally, the attention drawn to the FTSE 100 breaking through 10,000 should galvanise investors.

Admittedly, the tenfold appreciation since launch at the start of 1984 is not that impressive in annual terms. Adding back an average dividend yield of 3%, the annualised return has been 8.5% or 5.6% in real terms. The return until 2000 was much better than subsequently, but at its millennium peak of nearly 7,000, the FTSE 100 was severely overvalued and set to fall in half. Taking this into account by estimating a trend level of 4,500 still shows a marked slowdown in annual returns from 10% in real terms before 2000 to only 3.3% subsequently.

Arguably, the change of trend coincided with the deceleration of economic growth in 2008, but it is likely that an unsustainable boom in financial services disguised a more gradual slowdown in the preceding years. In any case, the claim that Britain’s economic problems date back to the Brexit vote in 2016 are a myth, just as was the claim in the 1960s and early 1970s that Britain’s pedestrian economic performance was attributable to being outside the EEC.

Ultimately, sustained outperformance by the UK stock market will require a strong, lower-tax economy to encourage the creation of growth businesses, their access to domestic capital and their listing in London. The market needs to go up because demand for equities exceeds and pulls up supply, not because markets are shrinking (through takeovers and buybacks) faster than investors are taking their money out.

As economist Arthur Laffer points out, “every time we have raised taxes on the rich, three things have happened: the economy underperformed, the share of tax revenues from the rich fell and the poor got hammered. When we cut taxes, the reverse happened.”

Even the prime minister has said that “the UK cannot tax its way to growth”, though his chancellor and most of his party appear to disagree. “If you want to help the poor, create growth,” says Laffer, who quotes John F. Kennedy: “The best form of welfare is a good, well-paid job.”

Better economic news for the UK may be a change of government away, but the good news for investors, whether in the UK or via UK-listed funds, is here already.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Chancellor Rachel Reeves is slashing the amount millions of savers can put into a cash ISA each tax year. From April 2027, under-65s can put no more than £12,000 into a cash ISA each tax year, down from the current £20,000 cap.

Reeves hopes the move will encourage savers to invest more of their cash.

“The UK has some of the lowest levels of retail investment in the G7, and that is not only bad for business, who need that investment to grow; it is bad for savers, too,” she said during today’s Budget speech.

“Someone who had invested £1,000 a year in an average stocks and shares individual savings account [ISA] every year since 1999 would be £50,000 better off today than if they had put the same money into a cash ISA.”

However, the limit was branded “a sucker punch for savers and deeply disappointing for lenders” by Harriet Guevera, chief saving officer at Nottingham Building Society.

She added: “We support the Government’s aim to boost an investing culture in the UK, but restricting choice is not the way to do it.”

Carol Knight, chief executive of The Investing and Saving Alliance (TISA), a not-for-profit membership organisation, said: "The cash ISA has been an incredibly effective tool in encouraging saving, and there is no clear evidence that reducing the cash ISA limit will encourage more people to invest.”

Some welcomed the decision though. James Carter, head of platform policy at Fidelity International, said: "Today’s announcement marks an important step towards  supporting consumers to achieve better long-term financial outcomes  by  creating a better balance of incentive between cash and equities – fostering a culture of retail investment.”

How will the cash ISA limit change?

From 6 April 2027, the annual cash ISA limit will be set at £12,000. This is within an overall £20,000 annual ISA allowance.

The new cash ISA cap will only affect under-65s.

There is not currently a specific cash ISA allowance. You can put a maximum of £20,000 a year into ISAs. This can be put into one type of ISA, or split across different types.

For instance, you could put some money into a cash ISA, some into a stocks and shares ISA, some into an innovative finance ISA, and, if eligible, some into a Lifetime ISA. There is a separate £4,000 per year Lifetime ISA cap.

If you put the maximum £12,000 into a cash ISA in one tax year, you would only have £8,000 of the allowance left to put into the other types of ISA.

On the other hand, if you put £12,000 into a stocks and shares ISA, you could only put a total of £8,000 into the other types of ISA that tax year.

Over-65s are exempt from the changes and can continue putting up to £20,000 into cash ISAs each year, if they wish to.

What is an ISA?

An ISA is a tax-free savings vehicle – you don’t pay tax on savings interest or income or capital gains from investments in an ISA.

There are five types of adult ISA:

• Cash ISAs
• Stocks and shares ISAs
• Innovative finance ISAs
• Lifetime ISAs
• Help to Buy ISAs (you can no longer open a Help to Buy ISA)

The annual ISA allowance is £20,000 for adults. You can put up to £9,000 a year into a junior ISA, a tax-free account for children.

The annual allowances reset each tax year, which runs from 6 April to 5 April the following year.

You can put up to £4,000 into a Lifetime ISA each tax year, provided this doesn’t exceed the overall ISA annual allowance.

Why put savings in an ISA?

ISAs are becoming increasingly important as a way of shielding money from the taxman.

Savings and investments held in an ISA are tax-free.

Outside of an ISA, you can earn a certain amount of interest on your savings tax-free, thanks to the personal savings allowance. However, frozen tax thresholds and higher interest rates mean more savers are being dragged into paying tax on their savings.

In 2025/26, 2.64 million people are expected to pay tax on their savings – up from just 647,000 in 2021/22 – according to HMRC data obtained via an FOI by AJ Bell.

In the Autumn Budget, Reeves also announced the tax rate on savings income will be hiked by two percentage points across all bands from April 2027 – meaning savers face paying even more in tax on their savings interest.

“There’s no doubt that cash ISA use will explode in the next couple of years,” Laura Suter, director of personal finance at AJ Bell said.

“As more people have faced tax on their savings we’ve seen ISAs become more popular, but the double-pronged effect of higher savings tax rates and a looming plan for cash ISAs to be restricted means savers are facing an attack on two fronts.”

Read more: How to earn over 4% on your cash… using a stocks and shares ISA

Will Lifetime ISAs be reformed?

The government addressed possible Lifetime ISA reform in the 2025 Budget document.

A consultation on the implementation of a new, “simpler” ISA product to support first-time buyers in buying a home will be published in early 2026.

Once the new product becomes available, it will be offered in place of the Lifetime ISA, the government said.

Lifetime ISA savers can put £4,000 a year into this account and get a 25% government bonus – worth up to £1,000 a year.

If you want to use the money to buy a first home, the property must cost £450,000 or less, which critics argue is too stringent.

Savers who don’t meet the withdrawal criteria face a 25% unauthorised withdrawal charge.

Millions of savers in the UK are being dragged into paying tax on their savings interest because the personal savings allowance (PSA) has been frozen for a decade, according to new research.

By the end of the 2025/26 tax year, taxpayers will have paid over £28 billion in tax on their savings interest since the PSA was launched, with basic rate taxpayers alone paying £4.7 billion, analysis of HMRC data and forecasts by Yorkshire Building Society found, outlining the impact of a policy that has been unchanged since it was introduced in 2016.

Despite jumps in interest rates and frozen tax thresholds pushing more people into higher tax bands, the PSA remains frozen at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers, while additional rate taxpayers still have no allowance at all. During the same period, the Bank of England base rate has climbed from 0.50% to 3.75%, instantly pushing ordinary savers over their allowances even on fairly modest sums.

The landscape for savers has materially changed over the past decade. When the personal savings allowance was introduced on 6 April 2016, the majority of easy access accounts paid 1% or less. Now most pay 3% or less. This means while in 2016 basic-rate-tax payers would have been able to put away as much as £100,000 in a typical savings account, in 2026, with interest rates hovering around 3%, savers would only be able to save around £33,000 without breaching their allowance. For those earning over £50,271 and paying higher-rate tax, that amount would fall to around £16,000.

At the same time people need bigger savings nest-eggs to be able to reach ordinary milestones. The median average house deposit has jumped from £25,000 in 2016 to £36,500 in 2024/5 – an increase of 46%, according to the English Housing Survey Headline Report.

Tina Hughes, director of savings at Yorkshire Building Society, said: “Ordinary people are being penalised by a system that simply hasn’t kept pace with reality. These aren’t wealthy investors — they’re people putting money aside for a house deposit, families saving for their children, or those planning a well-earned holiday.

“When the PSA was introduced, almost no one breached it. Today, millions do — not because they’re rich, but because the allowance is frozen and thresholds haven’t moved. People doing the right thing are facing rising tax bills and fewer ways to protect their savings. It’s time for a modern, fair framework that gives savers clarity and confidence.”

Millions at risk of 'unnecessary' tax bill

Basic rate taxpayers (who earn between £12,571 and £50,270) in the UK hold £516 billion in non-ISA savings accounts that have large enough balances to breach the personal savings allowance, separate data from Paragon Bank showed in November 2025.

The personal savings allowance shields some taxpayers from having to pay income tax on savings interest – basic rate taxpayers can earn up to £1,000 a year in savings interest, while the allowance is £500 for higher rate taxpayers.

However, 5.2 million UK savings accounts owned by basic rate taxpayers were on track to earn more than the £1,000 allowance in interest in 2025, the data shows, leaving them with a 20% tax bill on the savings interest above the threshold.

The problem becomes even worse for higher rate taxpayers.

Higher rate taxpayers (people who earn between £50,271 and £125,140) have their personal savings allowance cut by half, leaving them with just £500 of tax-free savings interest outside an ISA.

Nine million UK non-ISA savings accounts owned by higher rate taxpayers, worth over £632.7 billion, were expected to earn more than £500 in interest in 2025, Paragon’s research shows, meaning these savers should prepare for an extra tax bill.

Additional rate taxpayers, who pay the highest rate of income tax, don’t get a personal savings allowance at all, meaning any interest they earn outside an ISA is subject to tax.

Brits who earn above the personal savings allowance in interest have increasingly helped bolster the government’s coffers. HMRC expected to generate £6 billion in income tax on savings interest in 2025, up from £2 billion in the 2022/23 tax year.

Additional rate taxpayers are expected to contribute the most (£4.2 billion), followed by higher rate taxpayers (£1.3 billion), and basic rate taxpayers (£500 million).

Andrew Wright, head of savings at Paragon Bank, said: “Savers should act now to protect their hard-earned money by moving funds into a tax-free wrapper such as a cash ISA.”

Using an ISA to shield your savings

The easiest way for UK savers to shield their savings interest from the taxman is by using an ISA.

You can put up to £20,000 into ISAs each tax year. There are different types of ISA – including cash ISAs and stocks and shares ISAs. The appeal of an ISA is that any interest or investment income earned within the ISA is shielded from the taxman.

For example, let’s assume you are a basic rate taxpayer who has built up an ISA holding of £100,000 by saving the maximum amount in a cash ISA for five years.

If you placed the entire amount into the best cash ISA on the market right now, from Plum, you could expect to earn 4.66% interest over the next 12 months.

At the end of the 12 months, assuming the interest rate did not change, this £100,000 would grow by £4,660. Because this money was held in an ISA, you would not be charged any tax on that.

However, if this £100,000 was held and grown in a non-ISA savings account, the £4,660 earned would breach the £1,000 personal savings allowance, meaning £3,660 of your interest earned would be taxable. You would therefore pay the government £732 in tax.

Adult cash ISA balances surged in 2025 as savers moved to protect tax‑free returns ahead of the Autumn Budget, with Paragon Bank analysis showing cash ISA balances increasing by over £50 billion as non‑ISA balances fell.

Between the end of January and end of December 2025 savers took a big shift towards tax-efficient savings ahead of the anticipated reduction in the cash ISA allowance announced in the Autumn Budget, CACI data for the period found.

Over the period, the average adult cash ISA account balance increased from £15,919 to £17,225. Meanwhile the average non-ISA account balance fell marginally from £11,919 to £11,909. The data suggests savers were seeking to maximise tax-free interest before potential ISA threshold changes in the 2025 Budget.

Total adult cash ISA balances rose by £57 billion during the period, with much of the growth driven by strong demand for fixed-term products. Overall, adult cash ISA balances in accounts totalled £436 billion across 25 million accounts at December 2025.

Fixed-term ISAs accounted for £35.8 billion of the overall increase, rising to £237.7 billion as customers locked in rates ahead of an expected reduction in interest rates. Instant access ISA balances also grew, albeit at a steadier pace, increasing by £22.4 billion to £192.9 billion.

In contrast, non-ISA balances fell by £1.8 billion over the same period to £845.6 billion across 71 million accounts. This was mainly driven by fixed-term non-ISA balances falling as savers reallocated money into tax-efficient wrappers.

Andrew Wright, head of savings at Paragon Bank, said: “2025 marked a clear shift in saver behaviour, with many people taking proactive steps to protect their returns by making greater use of tax-efficient savings. Anticipation of changes announced in the Autumn Budget encouraged savers to review where their money was held and to maximise the benefits of cash ISAs while allowances remained unchanged.

“What’s particularly notable is the strength of demand for fixed-term ISA products. Savers were not only responding to potential tax changes but also looking to lock in competitive rates amid expectations that interest rates would begin to fall. This combination of tax planning and rate certainty made fixed-term ISAs especially attractive.”

If you've used up your annual allowance, we look at other ways to shield your savings from tax in a separate guide.

Cash ISA savers may have to put money away for an extra 13 years to build a half a million pound savings pot and 16 more years for £1 million if the tax-free allowance is cut.

A reduced cash ISA allowance is rumoured to be one of the main policy changes in the chancellor’s Autumn Budget this week.

There is speculations that Rachel Reeves could halve the allowance to £10,000 or to £12,000 in an attempt to boost investment ideally into British stocks.

But analysis by Investec has highlighted the impact this would have on cash savers, ultimately making it harder for them to build wealth.

Investec claims it currently takes 19 years to reach a half a million pound cash ISA pot, based on average rates, and 17 years for the top rates.

But it could take as long as 32 years with a reduced allowance.

There may also be fewer ISA millionaires, with the time taken to build a £1 million pot rising from 32 to 48 years with a reduced £10,000 allowance based on average rates.

Here is how a reduced cash ISA allowance would affect savers.

The cash ISA conundrum

Reeves is rumoured to be considering cutting the cash ISA allowance to push more money into the financial markets.

The hope is that this would benefit UK stocks and shares ISAs but there would be consequences for those who favour cash savings.

Currently, the average cash ISA pays a rate of 2.79% a year, according to Investec.

A saver depositing £20,000 a year into the typical cash ISA would take 19 years to reach the half a million-pound milestone, according to Investec Save analysis, with interest compounded and assuming no withdrawals.

This drops to 17 years for those who open a current top 10 cash ISA, paying an average rate of 4.17%.

However, a saver only depositing £10,000 a year into the average cash ISA would instead take 32 years to save £500,000 – an extra 13 years.

This falls to 27 years if using Investec’s one-year fixed rate cash ISA, currently paying 4.27%.

Building a £1 million cash ISA pot would also get harder. The research suggests it would take 48 years to get to £1 million based on a rate of 2.79% and 40 years at 4.27%. That compares with 32 and 27 years currently.

David Hunt, head of deposits at Investec, said: “Halving the annual cash ISA allowance would make it significantly harder for savers to build meaningful long-term wealth. Our analysis shows that saving £500k in a cash ISA could take an extra 13 years under the rumoured changes.

“This highlights just how powerful consistent saving and the effect of compound interest can be over time, but also how sensitive those outcomes are to policy changes. The ISA has been one of the most successful savings vehicles in the UK, encouraging millions to save tax-efficiently for the future. Reducing the annual limit would inevitably slow that progress for ordinary cash ISA savers, particularly those who are disciplined about maximising their yearly contributions.”

The most recent rumours suggest the cash ISA allowance could be cut to £12,000 and even then it would take around 28 years to get to half a million pounds and 44 years for a £1 million tax-free pot.

There are also warnings that the reduced cash ISA allowance could hit building societies that often offer some of the top rates.

Andrew Montlake, chief executive at London-based Coreco, said: “While we understand the government's logic for encouraging growth and investment rather than saving, with any action there is a reaction.

"Cutting the cash ISA limit could have a real knock-on effect that restricts the level of money building societies get through the door.

"This will potentially mean fewer loans for borrowers, especially in niches such as holiday lets and adverse credit where many building societies come into their own.”

Summary

• Chancellor Rachel Reeves delivered her Autumn Budget speech in the House of Commons on Wednesday, 26 November
• The OBR’s forecast was accidentally leaked in a “technical error” prior to the Budget’s announcement, which Reeves said was “deeply disappointing”
• A range of tax hikes were announced as Reeves attempts to balance the books
• The chancellor cut the cash ISA limit from £20,000 to £12,000 per year for under 65s, from April 2027
• She also confirmed a £2,000 cap on National Insurance contributions relief for pension contributions made through salary sacrifice

What was announced in the Autumn Budget? | Autumn Budget winners and losers

Good afternoon and welcome to MoneyWeek’s Autumn Budget live report. Chancellor Rachel Reeves is due to announce her 2025 Autumn Budget at lunchtime tomorrow, Wednesday 26 November. We will be covering the announcements as they happen, as well as bringing you reaction and analysis.

What has Rachel Reeves said about the Budget – and what could be announced?

Chancellor Rachel Reeves gave a rare pre-Budget speech on 4 November, during which she pledged to cut NHS waiting lists, cut the national debt and cut the cost of living.

She promised a Budget “for growth with fairness at its heart… and a Budget that supports businesses – to create jobs and to innovate”.

However, it’s widely expected that a slew of tax hikes will be announced tomorrow.

In the 2024 Labour Party manifesto, the party promised not to raise National Insurance, the basic, higher, or additional rates of income tax, or VAT, so the chancellor will likely need to look elsewhere.

This could mean extending the ongoing freeze on income tax thresholds, from 2028 to 2030.

Another way the chancellor could boost Treasury coffers is a clampdown on salary sacrifice, or targeting dividend tax or capital gains tax.

There could also be a shake-up to property taxes, inheritance tax, and/or business taxes.

It was rumoured Reeves was considering raising income tax rates by 2p, and cutting National Insurance by the same amount, in a move which could raise £6 billion, according to think tank the Resolution Foundation.

However, the chancellor has reportedly since backed away from this idea.

Read more on potential tax hikes in our guide.

What time is the Autumn Budget?

Rachel Reeves will deliver the Autumn Budget in the House of Commons on Wednesday (26 November) at around 12:30pm, after Prime Minister’s Questions.

Most budget speeches usually last around an hour, but they could be shorter or longer depending on the content. It took Reeves roughly 80 minutes to deliver her first Budget in 2024.

Once Reeves finishes speaking, the shadow chancellor, currently Conservative MP Mel Stride, is expected to give a rebuttal that will last around 20 minutes. The debate then begins in earnest, likely dominating House business for the week ahead.

Daniel Hilton, junior writer

Will the cash ISA limit be cut?

Reeves is set to cut the annual cash ISA limit to £12,000 in the Autumn Budget, the Financial Times reports.

There is currently an overall £20,000 annual allowance for ISAs – this can be split across different types of ISA. For example, you could put £5,000 into a cash ISA and £15,000 into a stocks and shares ISA in a tax year, or you could use the whole annual allowance by putting £20,000 into a cash ISA if you wanted.

It's been suggested such a move could incentivise savers to put their money into a stocks and shares ISA instead, potentially boosting the British stock market.

In March, Reeves said she was seeking to “get the balance right between cash and equities to earn better returns for savers” and “boost the culture of retail investment” in the UK.

However, critics warn against the idea. The Building Societies Association, which represents 43 UK building societies and six credit unions, said building societies use cash ISA deposits to fund mortgages, so cutting the limit could make lending more expensive.

Meanwhile, Dame Meg Hillier, chair of the Treasury Select Committee, said now isn’t the right time to cut the cash ISA allowance. She added: “Instead, the Treasury should focus on ensuring that people are equipped with the necessary information and confidence to make informed investment decisions.”

What would a cash ISA allowance cut mean for savers?

The average amount saved into a cash ISA in 2023/24 was less than £7,000 per person, HMRC figures show, suggesting a £12,000 limit might not have a dramatic impact on most people.

However, it does "risk sending a confusing message to savers", says Adam French, head of news at Moneyfactscompare.co.uk.

“For many families, young professionals and pensioners, the full £20,000 allowance may be out of reach, but the principle that they can build a risk-free cash buffer against a volatile world without worrying about future tax changes still matters.”

The ongoing freeze on income tax thresholds mean more Britons face being dragged into higher tax bands. Combined with higher interest rates, savers will find more of their savings interest becomes liable for income tax, making the tax-free ISA wrapper increasingly important.

“Taken together, this feels less like a coherent plan to boost long-term investment and more like a quiet raid on those who are trying to do the right thing,” French said.

“By leaning on frozen thresholds and a lower cash ISA limit, the government is quietly raising revenue off the back of diligent savers, when it should be encouraging responsible financial decisions and a healthier savings and investment culture.”

Read more: 'I've used my annual ISA allowance. How can I shield my savings from tax?'

The best and worst case scenarios for the financial markets

What’s the best and worst we can realistically hope for in the Budget, and how might the markets respond?

“Arguably the best case scenario for financial markets would be the unveiling of more rosier than expected projections for both UK growth and productivity, and a smaller fiscal gap than previously feared,” says Matthew Ryan, head of market strategy at global financial services firm Ebury.

That would reduce the size of the fiscal deficit, enabling Reeves to maintain credibility by plugging it with narrower, more targeted tax hikes and avoiding the need to breach any of its manifesto pledges.

But the chances of things panning out this way don’t seem strong.

“We are bracing for some curveballs,” says Ryan. “Investors will be on high alert for any unexpected tax increases, and the risk of both higher borrowing forecasts and further above-inflation spending hikes.”

A tax-heavy Budget could see sterling sell off, and given the anticipated negative impact on growth, could lead to faster rate cuts from the Bank of England.

“A more growth friendly budget would have the opposite effect, as easing bets in favour of MPC cuts would amplify upside in the pound,” says Ryan.

Dan McEvoy, senior writer

Help to Save scheme set to be expanded

The chancellor is expected to make the Help to Save scheme permanent from 2028. It had been due to end in 2027.

It is also set to be opened up to parents and carers on Universal Credit from 2028.

Help to Save offers a 50% boost on savings in the scheme – giving eligible savers a potential government bonus of £1,200 over four years.

Soft drink levy extended

The soft drinks industry levy will be expanded to include sugary milk-based drinks, Health Secretary Wes Streeting announced today.

The changes will affect pre-packaged milk-based and milk-alternative drinks with added sugar, such as supermarket milkshakes, flavoured milks, sweetened yoghurt drinks, chocolate milk drinks, and ready-to-drink coffees.

This does not include plain, unsweetened milk and milk-alternative drinks.

The government will also reduce the threshold from 5 grams to 4.5 grams of sugar per 100ml.

Businesses will have until 1 January 2028 to reduce sugar in their drinks, or face the levy.

Health and Social Care Secretary Wes Streeting said: "The levy has already shown that when industry cuts sugar levels, children’s health improves. So, we’re going further.

“A healthier nation will mean less pressure on our NHS, a healthier economy, and a happier society.”

The government expects the changes to raise £40 million to £45 million per year in extra tax receipts, once introduced on 1 January 2028.

What do we know about the Budget so far?

While a lot is still under wraps, the Treasury has confirmed a number of policies in recent days.

Reeves is extending the freeze on NHS prescription charges next year, saving patients in England around £12 million, the government said.

A single prescription will remain at £9.90 and three-month and annual prescriptions prepayment certificates will also be held at the current level for 2026/27.

On Sunday, the Treasury announced all regulated rail fares would be frozen next year, for the first time in 30 years.

The chancellor is also set to confirm the state pension will rise by 4.8% during tomorrow’s speech, affecting 13 million pensioners.

Find out what we know so far about Rachel Reeves’s 2025 Autumn Budget in our guide.

National Living Wage and National Minimum Wage to rise

Chancellor Rachel Reeves has unveiled another sweetener this evening ahead of the Autumn Budget by announcing an increase to the National Living Wage (NLW) and also the National Minimum Wage (NMW).

From 1 April 2026, the NLW will rise by 4.1% to £12.71 per hour for eligible workers aged 21 and over.

This will increase the gross annual earnings of a full-time worker on the NLW by £900, benefiting around 2.4 million low-paid workers, the Treasury said.

The NMW rate for 18 to 20-year-olds will also increase by 8.5% to £10.85 per hour.

This will mean an annual earnings increase of £1,500 for a full-time worker, and marks further progress towards the government’s goal of phasing out 18-20 wage bands and establishing a single adult rate.

The NMW for 16 to 17-year-olds and those on apprenticeships will increase by 6% to £8 per hour.

It is good news for employees but employers may worry about the extra costs after already being hit with National Insurance hikes in the previous Budget.

The benefits of the pay rise may also be offset though by other rumoured policies such as a clampdown on salary sacrifice for pension contributions and an extension of frozen income tax thresholds, putting more people at risk of fiscal drag.

Marc Shoffman, contributing editor

MoneyWeek’s Budget wishlist

That’s all from us this evening – we will be back tomorrow morning for live coverage of Budget Day.

Before we sign off, the MoneyWeek team has shared what they’d like to see in the Budget.

Thank you for joining us for our 2025 Autumn Budget preview. Please join us again tomorrow morning as we prepare to hear what the chancellor will announce.

How do you feel about the Autumn Budget?

Good morning and happy Autumn Budget Day! There are just hours to go until Rachel Reeves delivers her speech in the House of Commons. Tax rises and/or spending cuts are almost certainly on the cards, but it remains to be seen just what the chancellor will announce.

We want to hear from you – how are you feeling about today’s Budget? Vote in our poll below.

What will be in the 2025 Autumn Budget?

Reeves will deliver the Budget speech today at around 12.30pm, after Prime Minister’s Questions.

Some details have already been announced – such as an increase to the national living wage and national minimum wage next year, and an extension of the freeze to NHS prescription charges.

Reeves: 'Britain won’t return to austerity’

Ahead of her Budget speech today, the chancellor has said she will take "the fair and necessary choices" to deliver on the Government’s mandate for change.

In a video, Reeves said: “I’m not going to return Britain back to austerity. Nor will I lose control of public spending, more reckless borrowing.”

She added: “I will take action to help families with the cost of living…cut hospital waiting lists…cut the national debt."

Farmers protesting in Westminster ahead of Autumn Budget

Tractors are assembling outside the Houses of Parliament this morning ahead of the Autumn Budget, in protest against a move that Reeves brought in last year to remove inheritance tax relief above £1 million for farms and rural businesses.

“Whilst much of the focus has been on the anticipated new policies being announced today, tractors in Downing Street again this morning illustrate the impact that is still being felt in rural communities around the changes announced last year to Agricultural Property Relief,” said Hannah Wallbridge, senior associate at regional law firm Gardner Leader.

The changes, which critics argue will force the breakup of smaller, family-owned farms, will take effect in April 2026.

“Unless further changes are announced today, the clock continues to run for those farming families to seek estate planning advice,” said Wallbridge.

Dan McEvoy, senior writer

Could we see exemptions to stamp duty on shares in the Autumn Budget?

One of Reeves’s many headaches in the Autumn Budget today is finding a way to reinvigorate London’s long-suffering stock market.

The London Stock Exchange (LSE) has seen some of the UK’s biggest companies, such as AstraZeneca and Wise, seek new listings overseas this year. There is a not-unjustified perception that UK-listed companies suffer from low valuations, especially in comparison to US-listed counterparts.

Yesterday, Bloomberg reported that Reeves is considering a stamp duty holiday for companies that list on the LSE. If it comes about, it would see companies exempted from the 0.5% stamp duty tax that currently applies to UK-listed shares for three years after their IPO.

“If this Budget rumour proves accurate, it may be the carrot British businesses need to plump for a domestic listing,” said Emma Wall, chief investment strategist at Hargreaves Lansdown.

Reeves is also expected to announce other measures aimed at encouraging Brits to start investing, including a potential cut to the annual cash ISA allowance in order to encourage investments into stocks and shares ISA.

Dan McEvoy, senior writer

When were the longest and the shortest Budget speeches?

Sitting through upwards of an hour of dense talk on the public finances can be somewhat of a slog, even for the most passionate among us.

Spare a thought, then, for some of Parliament’s honourable Victorian members who listened to the longest uninterrupted Budget speech in history in 1853.

The marathon address was given by then chancellor William Ewart Gladstone, who spoke for around four hours and 45 minutes. Such lengthy speeches were characteristic of the four-time Liberal prime minister – he was notable for often giving speeches of up to five hours without a break when he campaigned in Midlothian.

Gladstone’s opposite in almost every sense was the Conservative politician Benjamin Disraeli, Gladstone’s political arch-rival with whom he traded the premiership of the UK across decades.

It is perhaps fitting that Disraeli holds the opposite Budget record, delivering the shortest Budget in history in 1867, lasting just 45 minutes.

That is not to say that Disraeli was not susceptible to speaking at length. When including Budgets with interruptions, Disraeli holds the record for the longest speech, lasting five hours, though this included a break.

Daniel Hilton, junior writer

The lost art of a budgetary tipple

Drinking on the job is probably not allowed in your workplace and, despite the many bars nestled within the Palace of Westminster, is usually forbidden in the House of Commons for politicians – that is, apart from in one circumstance.

The chancellor is the only politician permitted to drink alcohol in the chamber, according to parliamentary tradition, and can only do so when delivering the Budget.

Previous chancellors have made the most of this. William Ewart Gladstone, who first became chancellor in 1852 and later became the prime minister, drank a bizarre mixture of sherry and beaten egg, while his opposite number, Conservative politician Benjamin Disraeli, drank brandy and water.

It is not just chancellors far in the past who embraced the tradition. More recent examples include Geoffrey Howe (gin and tonic), Nigel Lawson (spritzer), Hugh Gaitskell (rum and orange), Hugh Dalton (rum and milk), Winston Churchill (brandy), and Kenneth Clarke (whisky).

These days, the tradition seems to be dead. Every chancellor since Gordon Brown has had plain water while delivering the budget.

Daniel Hilton, junior writer

Balancing the books in the Autumn Budget

The Autumn Budget is, first and foremost, an exercise in balancing the national books. Rachel Reeves has an added challenge on this front as, during last year’s election campaign, the Labour party pledged to not raise any of the “big three” taxes on working people (income tax, (employees’) national insurance and VAT).

Labour’s fiscal rules also commit the government to fund day-to-day spending entirely through revenue as opposed to borrowing by the 2029/30 tax year.

“Chancellor Reeves will want to show a materially higher fiscal consolidation in the Autumn Budget of close to £30 billion, likely extending the headroom against the fiscal rules closer to £15 billion,” said Reto Cueni, chief economist at private bank Syz Group.

Achieving this will require tax increases, and Reeves will likely target ‘non-inflationary’ areas such as tax threshold freezes or reducing capital gains tax exemptions.

“Further tax hikes are a foregone conclusion. Some, including another freeze to the income tax thresholds, are as good as fully priced in by markets,” said Matthew Ryan, head of market strategy at Ebury.

“It will be key for the government to show that over the next two years the budget deficit will be reduced and the UK’s debt burden will finally move down,” said Cueni. “By reducing the fiscal deficit over the next two years, the government can regain fiscal credibility and assure investors that the UK’s government is keeping control of the debt situation.

“This would relax tensions in the gilts market and let yields grind lower,” Cueni added.

Dan McEvoy, senior writer

Reeves leaves Downing Street

Chancellor Rachel Reeves has left Number 11 Downing Street to deliver the 2025 Autumn Budget. She will make the long-awaited speech at around 12.30pm in the House of Commons, after Prime Minister's Questions.

FTSE 100 on the rise ahead of Autumn Budget

Not many people are feeling happy about the Autumn Budget, as speculation over tax rises continue to heat up.

But for the FTSE 100 and bonds market, it’s been more of a joyous morning as stocks and bonds rise with the budget set to draw a line under months of speculation and uncertainty for businesses.

Ten-year UK gilt yields – in effect, the return the government promises to pay buyers of its debt – opened higher this morning at around 4.52%, but have since fallen back to around 4.5%. Bond yields move in the opposite direction to prices.

The FTSE also opened 10.09 points (0.1%) higher at 9,619.62.

The chancellor has been drip feeding some of her policies all week, in particular around the costs of living measures.

But with mounting pressures to reduce debt, some of the hard hitting measures are most likely to be announced this afternoon. Brace!

Kalpana Fitzpatrick, editor

Will the two-child benefit cap be lifted?

The chancellor could look at lifting the two-child benefit cap today – a move which charities say would lift hundreds of thousands of children out of poverty.

The cap limits the extra amount of Universal Credit families can receive to two children and was introduced by the Conservative government in the 2015 Budget.

Households on Universal Credit with a third or more children born from 6 April 2017 do not receive extra amounts under the cap.

There are exceptions to the two-child limit, for example for parents that have had multiple births, like twins or triplets.

Sam Walker, writer

What economic circumstances is Rachel Reeves contending with?

It is no secret that today’s budget will be delivered under some difficult economic circumstances.

The UK economy grew by a paltry 0.1% in the three months to September, the latest official data shows, including a month-on-month contraction of -0.1% in September.

At the same time, unemployment is at the highest level since 2021, climbing to 5% in September. Inflation has also remained much higher than the 2% target, for most of the year. The latest figures show price growth was 3.6% in the year to October.

Amid these dreary figures, the chancellor reportedly faces a £22 billion black hole in the public finances, according to estimates by the Institute for Fiscal Studies (IFS), an influential think tank.

It means the chancellor must find an extra £22 billion just to stick to previous commitments for government spending, while keeping her fiscal headroom at £10 billion.

As the chancellor’s rules stop her from increasing borrowing to meet day-to-day government spending, this budget shortfall will need to be filled by either cutting expenditure or raising taxes.

Daniel Hilton, junior writer

BREAKING: OBR forecast released early

The Office for Budget Responsibility has reportedly published its forecast early. Usually, the forecast is released after the Budget is announced.

There is speculation that the apparent early release may have been an accident. More news to follow.

What are the chancellor’s fiscal rules?

You may hear a lot of references to ‘fiscal rules’ in the chancellor’s speech and the surrounding commentary today.

These are a set of three principles governing the public finances that Rachel Reeves has committed to sticking to as a way to keep the trust of the markets and the public.

They are entirely self-imposed, but the Office for Budget Responsibility (OBR), the UK’s official budget watchdog, calculates whether the government will meet them or not.

Rule 1: “The current budget should be on course to be in balance or surplus by 2029/30” (‘stability rule’).

This rule requires the government to ensure that the day-to-day costs of running the country are met by revenues by the 2029/30 tax year, the final one of the current parliament.

The rule was tweaked in 2024 to mean that borrowing is allowed for the purposes of investment, but still means that day-to-day spending (like of running the NHS) cannot be funded through borrowing.

Rule 2. “Net financial debt should fall as a share of the economy in 2029/30” (‘investment rule’)

This rule requires public debt to be forecast by the OBR to be lower in 2029/30 than 2028/29 in terms of GDP.

Public debt is defined as public sector net financial liabilities, or ‘net financial debt’.

Rule 3. “Some types of welfare spending must remain below a pre-specified level” (the ‘welfare cap’)

This rule adds constraints on roughly half of government welfare spending. It requires total annual welfare spending in this parliament to be at a maximum level of £194.5 billion by 2029/30.

The margin for overspend is 5%. Pension payments and welfare that are ‘most sensitive to the economic cycle’ (like Jobseekers’ Allowance) are excluded from the cap.

Daniel Hilton, junior writer

Prime Minister’s Questions is underway in the House of Commons. Prime minister Keir Starmer will answer questions from MPs for around half an hour. Chancellor Rachel Reeves should then take to the dispatch box soon after, to deliver the 2025 Autumn Budget speech.

Kemi Badenoch, the leader of the opposition, is expected to deliver her response immediately afterwards.

Mansion tax to be introduced on £2 million homes

The Office for Budget Responsibility appears to have confirmed plans for a mansion tax on homes worth £2 million and above.

The plans are set to be revealed by chancellor Rachel Reeves but seem to have been confirmed by BBC News, which has reportedly obtained an early copy of the OBR forecasts when it was published in error.

There was speculation about the new levy in the build-up to the Budget, which is effectively a wealth tax.

But critics will likely label it a levy on London and the South East, where most £2 million homes are situated.

A mansion tax could also cause a freeze at the top-end of the property market. Rightmove data shows sales agreed for £2 million-plus homes are already down 13% year-on-year.

Marc Shoffman, contributing editor

Reeves extends ‘stealth tax’ until 2030, breaking previous commitment

The freeze on income tax thresholds has been extended until 2030, according to the BBC. The organisation has reportedly obtained an early copy of the OBR’s budget report seemingly in error.

MoneyWeek has approached the OBR for confirmation that the forecast has been leaked early, and apparently by accident. As yet, we have not received a reply.

New tax to be levied on electric vehicle drivers

Electric vehicle (EV) drivers are set to pay a new tax for each mile they drive, according to the OBR’s leaked report, as reported by the BBC.

The complete details have not yet been confirmed, but the report says the new mileage-based charge will be “around half the fuel duty rate paid by drivers of petrol cars (raising £1.4 billion)".

Drivers of petrol and diesel vehicles have to pay fuel duty when they fill up, charged at around 53p per litre. The new EV tax is designed to bring their taxation closer in line with typical vehicles.

Household energy bills to be cut

Households gas and electricity costs will be lowered through cuts to green levies on energy bills, the BBC reports.

It will cost around £2.3 billion, according to the OBR.

Two-child benefit cap lifted

The two-child benefit cap, which limits the amount of Universal Credit families can receive, will be lifted, according to the BBC. The OBR has reportedly estimated this will cost £3 billion by 2029/30.

Estimates from the Child Poverty Action Group have suggested lifting the cap would lift 350,000 children out of poverty and mean 700,000 are in less deep poverty.

Government fiscal headroom will grow to £22 billion

The early release of the OBR’s report suggests the chancellor will increase the government’s ‘fiscal headroom’ to £22 billion, up from its current level of £10 billion, the BBC reports.

OBR: Inflation to be higher than expected in 2025 and 2026.

Inflation is set to be 3.5% in 2025, according to the BBC, based on the OBR’s early leaked report.

The new forecast is higher than their previous expectation of 3.2%, which the OBR made in March.

Inflation is also expected to be higher in 2026, reaching a level of 2.5% according to the OBR. This is above their previous expectation of 2.5%.

The OBR maintains its forecast that inflation will be 2% in 2027.

OBR downgrades growth predictions

The Office for Budget Responsibility (OBR), the UK’s independent budget watchdog, has degraded its GDP growth forecast, according to the BBC.

The watchdog now expects GDP to grow by 1.5% on average over the five year forecast period, ending in the 2029/30 tax year, 0.3 percentage points slower than they anticipated in March.

Fuel duty frozen until September 2026

Fuel duty will be frozen at its current rate until September 2026, the BBC reports the OBR says.

The headline rate on standard petrol and diesel is currently 52.95p per litre.

Sam Walker, writer

OBR apologises for leaking forecast early

The OBR has apologised for leaking its forecast ahead of Rachel Reeves’s Autumn Budget announcement.

A statement on the OBR’s website reads:

“A link to our Economic and fiscal outlook document went live on our website too early this morning. It has been removed.

“We apologise for this technical error and have initiated an investigation into how this happened.

“We will be reporting to our Oversight Board, the Treasury, and the Commons Treasury Committee on how this happened, and we will make sure this does not happen again.

“Our Economic and fiscal outlook and supporting documents will be released when the Chancellor has finished her speech.”

Should we have had Budget leaks?

I am seriously thinking of getting my ears checked – at 12:05 I heard the Prime Minister Keir Starmer say details will be released “in 25 minutes” yet a few minutes soon after he said that it seems like the Office for Budget Responsibility then leaked its report to various media outlets, including the BBC.

This report is usually released AFTER the chancellor makes her speech - such a leak has not happened before. Some reports of what Rachel Reeves is about to say are now out - but Reeves has yet to speak.

The OBR has since apologised - but this has clearly been a Budget of leaks, causing anxiety and uncertainty. Are such leaks ever acceptable?

Kalpana Fitzpatrick, digital editor

Pension savers to be hit with salary sacrifice cap

Rachel Reeves is set to announce a cap on salary sacrifice schemes in a new blow for pension savers.

An Office for Budget Responsibility forecast, published in error and seen by BBC News, suggests the Autumn Budget will introduce a £2,000 cap on the amount of earnings that can be exchanged for pension contributions that benefit from a National Insurance exemption. This will come in from April 2029, according to the OBR.

Marc Shoffman, contributing editor

Reeves begins 2025 Budget speech

Reeves has begun her Budget speech. Much of the chancellor’s Budget has been reported ahead of this speech, after the OBR report was published in error earlier today. Reeves called it a “serious error” on the OBR’s part.

Leaked OBR report ‘deeply disappointing’ and a ‘serious error’, says Reeves

Rachel Reeves has slammed the OBR for releasing their Budget report early in error.

She said: “This is deeply disappointing and a serious error on their part. The Office of Budget Responsibility have already made a statement taking full responsibility for their mistake.”

Cash ISA limit cut to £12,000 – but not for over 65s

The annual cash ISA allowance will be reduced from £20,000 to £12,000 from April 2027 as the chancellor bids to push savers towards the stock market. However, over 65s will retain the full cash ISA allowance.

The overall allowance of £20,000 per year isn’t changing, so savers will still be able to spread their money across multiple ISA accounts up this limit.

However, Reeves may still have to convince members of the public to take a more investment-heavy approach with their savings.

Recent research polling by Paragon Bank of 1,400 cash ISA savers, found the majority would not invest in stocks and shares and would switch to regular savings accounts instead, despite this potentially driving up their income tax bill.

Sam Walker, writer

Stamp duty holiday for London IPOs

In a bid to use her Autumn Budget to boost the UK’s beleaguered stock market, Reeves has announced a three-year exemption from stamp duty for companies listing on the London Stock Exchange (LSE).

The LSE has struggled to attract high-profile companies to list on the exchange even when they are based in the UK. Unilever’s anticipated spin-off of its ice cream business will see Amsterdam land the primary listing, while neobank Revolut – Europe’s most valuable private company following a funding round that valued it at $75 billion – appears to favour listing in the US over the UK.

Investors currently have to pay 0.5% stamp duty whenever they buy UK-listed shares, but Reeves has waived this for newly-listed companies.

“This would make buying British more enticing for investors and help redress some businesses’ concerns about demand for UK shares,” said Emma Wall, chief investment strategist at Hargreaves Lansdown. “London has been losing out to New York in recent years, as businesses favour the funding and regulatory environment of the New York Stock Exchange.”

Dan McEvoy, senior writer

OBR downgrades productivity growth forecast

The OBR has downgraded their forecasts for productivity growth. The downgrade will cost the economy £16 billion.

The chancellor said the blame for this lies at the feet of the Conservatives, and promises to defy the forecast.

Chancellor announces multi-million playground makeover

Local communities are set to receive an £18 million funding package to help revamp their playgrounds.

The funding will target 200 children’s play parks across England in a bid to “breathe new life into play areas across England, creating safe, exciting spaces for thousands of children”.

The government says the funding will help ensure every child can enjoy the benefits of playing outdoors as research shows poorer children spend much less time outside than richer ones.

Daniel Hilton, junior writer

Chancellor’s £5 million books boost for secondary schools

Millions of pounds in new funding will become available to secondary schools in England to help them revitalise their school libraries.

The chancellor announced a £5 million funding package that will allow all secondary schools across the country to spend around £1,400 each on books, incentivising children to get off their phones and read instead.

The funding comes at a time when reading for pleasure is in sharp decline among young people, with the number of 8 to 18 year olds saying they enjoy reading in their spare time falling by a third since 2019.

Daniel Hilton, junior writer

Gilt yields swing following pre-Budget leak

Gilt yields – in effect, the interest paid on UK Government debt – initially fell following the leak of the OBR’s report.

Yields on 10-year gilts fell from around 4.50% to 4.43% at approximately 11.45am.

But they have since risen back to above their level before the leak – now standing at 4.52% as of 12.44pm.

Lower yields indicate greater bond market confidence in the UK government as a borrower, and vice versa.

The initial dip perhaps reflects optimism based on the policies announced in the Budget, but the reversion likely implies pessimism over the longer term outlook for productivity.

Overall, though, gilt yields are little changed from before the OBR forecast’s release.

“We’ve seen a relatively orderly reaction in gilts and the pound to the details of the budget so far,” said Matthew Ryan, head of market strategy at Ebury. “Market participants will be breathing a sigh of relief that the chancellor appears to have learnt from past mistakes, and will instead be affording herself a larger fiscal headroom in excess of £20 billion, as opposed to the razor-thin one we saw last year.”

Carrot and stick approach to ISAs

Cash ISAs will be limited to £12,000, and if you want to take advantage of the full £20,000 allowance then you will need to invest the rest.

This isn’t quite as bad as the ‘cut’ we anticipated, and it still leaves savers with a choice.

But this will still require some convincing and education. I’ll also be interested in knowing how this would work in practice, and will we see new ISA products launched? Possibly, yes.

Kalpana Fitzpatrick, digital editor

250 new Neighbourhood Health Centres to be built

The government is set to open 250 new ‘Neighbourhood Health Centres’ in the country to help improve healthcare access.

The centres, which will bring together GPs, nurses, dentists and pharmacists under one roof, will be first built in the most deprived areas of the country.

The government hopes that opening the new centres will cut NHS waiting lists and “bring an end to the postcode lottery of healthcare access”.

Daniel Hilton, online writer

Reeves extends income tax threshold freeze

Chancellor Rachel Reeves has extended the freeze on income tax thresholds from 2028 to 2031.

The move means workers will pay more tax when their salaries increase, as more of their pay is dragged into higher tax bands, leading some to label it a ‘stealth tax’.

She said: “The previous Conservative government froze personal tax thresholds from 2021 to 2028 and today I will maintain all income tax and equivalent National Insurance thresholds at their current level for a further three years from 2028.

“I know that maintaining these thresholds is a decision that will affect working people. I said that last year, and I won't pretend otherwise. Now, [...] I'm asking everyone to make a contribution.”

It means tax bands in England, Wales and Northern Ireland will remain at the following levels until the end of the 2029/30 tax year:

Source: HMRC

Income tax bands are different in Scotland.

Tax thresholds have historically risen with inflation, meaning workers paid tax on the same proportion of their earnings in real terms each year.

However, since the 2022 tax year, thresholds have been frozen at their 2021/22 levels. This raises tax receipts through a phenomenon known as ‘fiscal drag’.

The government had previously stated this freeze would end after the 2027/28 tax year, but today’s announcement means fiscal drag will continue for longer than expected.

Figures from HMRC recently showed that in the last year alone, more than a million Brits were dragged into higher tax bands because of the threshold freeze.

Daniel Hilton, writer

Class 2 National Insurance contributions abolished for people living abroad

The government is removing access to the cheapest Class 2 Voluntary National Insurance contributions (VNICs) for individuals living abroad and increasing the initial residency or contributions requirement for VNICs to 10 years.

Tax hike for property, dividend, and savings income to rise

The chancellor has confirmed rumours that tax on income from property, dividends and savings interest will be increased, rising by two percentage points.

The change will affect all taxpayers with income from these sources, on both the basic and higher rate of income tax.

Reeves said the measure will narrow the gap between the tax on income from assets and income from work.

“Even after these reforms, 90% of taxpayers will still pay no tax at all on their savings,” she added.

Daniel Hilton, writer

Mansion tax confirmed for £2 million homes

Rachel Reeves has confirmed details of a new mansion tax for homes worth £2 million and above.

From April 2028, owners of properties identified as being valued at over £2million by the Valuation Office (in 2026 prices) will have to pay a recurring annual charge on top of their current council tax.

There will be four price bands with the High Value Council Tax Surcharge rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year. This measure is estimated to raise £0.4 billion in 2029-30.

The levy is likely to cause blockages at the higher end of the property market though.

Tom Bill, head of UK residential research at Knight Frank, said: “Until the revaluations take place, buyers and sellers face years of uncertainty, especially around the £2 million threshold. Even once completed, new valuations can be challenged, which would prolong the limbo.

“The policy may also raise less than expected, especially because it is deferrable. If opposition parties say they would scrap it, many homeowners will look at the opinion polls and wait it out. When you factor in the cost of carrying out the valuation and the potential lost stamp duty revenue from a stickier market, the sums raised could look like a rounding error for the Treasury.

“More properties will inevitably get dragged into the mansion tax net, which means the proportion of terraced houses, flats and semi-detached homes will grow over the years, particularly in the capital. The term ‘mansion tax’ will increasingly feel like a misnomer.

“Overall, it feels like politics has trumped economics. One the one hand, the policy is designed to keep backbenchers happy and ensure the near-term survival of the chancellor and prime minister. On the other hand, it throws a spanner into the works of the housing market for not much money in return, which is important in the context of a Budget where spending is front-loaded. The UK already pays the highest percentage of property taxes among OECD countries.”

Marc Shoffman, contributing editor

£2,000 salary sacrifice cap confirmed

Chancellor Rachel Reeves has confirmed plans to introduce a £2,000 cap on the amount of earnings that can be exchanged for pension contributions that benefit from a National Insurance exemption.

It will be introduced from April 2029.

Introducing the cap could reportedly raise up to £2 billion a year but it will have an impact on the amount employees can save into a pension from their post tax income, ultimately affecting their take-home pay if they want to continue putting money into their workplace scheme.

Contributions above the cap will be taxed in the same way as other contributions.

Employers may also have less incentive to offer benefits, plus this could raise fears of other salary sacrifice schemes being targeted in the future such as bike to work and company car benefits.

AJ Bell has previously warned that the pensions of higher earners could be £50,000 smaller due to the salary sacrifice changes.

Steve Hitchiner, chair of the tax Group at the Society of Pensions Professionals (SPP) said: “Restricting salary sacrifice for pensions will affect the take home pay of millions of employees – especially basic rate taxpayers – and is a tax on working people, in spirit if not in name. It is also another sizeable cost to employers and, perhaps most importantly its restriction will reduce pension saving.”

Marc Shoffman, contributing editor

Cash ISA cuts – pros and cons

Cuts to the annual cash ISA allowance was shaping up to be one of the most divisive policies ahead of the Autumn Budget. Reeves appears to have struck something of a compromise by cutting the annual allowance to £12,000, but exempting over-65s who, understandably, may want to take fewer short-term risks with their money.

“This is a carefully considered solution that promotes the benefits of investing in the stock market for the long term, whilst addressing concerns of older savers who prioritise financial certainty,” said Richard Stone, CEO, Association of Investment Companies.

But Harriet Guevara, chief savings officer at Nottingham Building Society, calls the cut to the cash ISA limit “a deeply disappointing outcome for both savers and lenders”.

“We support the government’s aim to boost an investing culture in the UK,” she added, “but restricting choice is not the way to do it.”

Dan McEvoy, senior writer

EVs to be subject to new 3p per mile tax

Drivers of electric vehicles will now have to pay a flat tax of 3p per mile, bringing taxation of EVs more in line with typical vehicles.

Fully electric vehicles will be subject to the 3p per mile tax, while plug-in hybrid vehicles will have to pay 1.5p per mile.

It is estimated that the new tax will cost the average driver of a fully electric car approximately an extra £250 a year.

Daniel Hilton, writer

Electric vehicle grant extended

After announcing the new set of EV taxes, the chancellor eased the pain slightly by extending the UK’s new electric car grant until 2030.

The grant currently subsidises the price of a new EV by between £1,500 and £3,750 depending on the model.

Daniel Hilton, writer

Reeves confirms no change to income tax

It was widely trailed before the Budget but Reeves has now confirmed herself that income tax – as well as the other two ‘big three’ taxes – won’t be raised (beyond the extension to the income tax threshold freeze).

“I can confirm that I will not be increasing National Insurance, the basic higher or additional rates of income tax or VAT,” said Reeves.

“I have kept everyone's contribution as low as possible through reforms to make our tax systems stronger, closing loopholes, ensuring that the wealthiest pay their share, and building a tax system that is fairer,” she added.

Dan McEvoy, senior writer

Rail fares to be frozen for the first time in 30 years

Rail fares will be frozen at current levels for the first time in 30 years, meaning all regulated rail tickets, including season tickets, peak returns, and off–peak returns, will remain the same price next year.

The Treasury says the freeze could save commuters on more expensive routes upwards of £300 a year, assuming they commute to the office three times a week.

Without a freeze, rail fares were set to increase by 5.8% in 2026.

Daniel Hilton, junior writer

Two-child benefit cap to be lifted

The government has confirmed the two-child benefit cap will be lifted, which charities have said could lift hundreds of thousands of children out of poverty.

The cap limits the amount of extra Universal Credit families with children can receive. The cap was first introduced by the then Conservative government in 2015.

Helen Barnard, director of policy at charity Trussell, said: "This move will protect hundreds of thousands of children from growing up facing hunger and hardship.

"It shows that the chancellor has listened to families and food banks across the UK who have been imploring her to act."

Sam Walker, writer

State pension to increase by 4.8%

Thirteen million pensioners will receive a pay rise next April after the chancellor confirmed the state pension will rise by 4.8%.

Those on the full new state pension will see their weekly payments go up from £230.25 to £241.30 (£12,547 a year) under the triple lock mechanism – a rise of more than £550 per year.

The full basic state pension weekly amount will go up from £176.45 to £184.91 (£9,615 a year) – an increase of just under £440 a year.

Because the new tax year starts on 6 April 2026, you won’t get the new rate until your first pay date after this date.

Sam Walker, writer

Fuel duty frozen until September 2026

The chancellor confirmed the freeze to fuel duty will be kept in place until September 2026.

The freeze has been in place since 2011/12, meaning the headline rate on standard petrol and diesel is 52.95p per litre.

Sam Walker, writer

Reeves to cut energy bills by £150 by ending green levies

The chancellor has announced that the average annual energy bill will be cut by £150 from April 2026 onwards.

This will be done by removing the “Eco scheme”, a green levy added to energy bills, first introduced by the Conservatives.

Daniel Hilton, writer

Kemi Badenoch: Budget is a “total humiliation” and Reeves should resign

Kemi Badenoch, the Leader of the Opposition and leader of the Conservatives, will now respond to the Budget.

She opened her speech by calling the Budget a “total humiliation” and slammed the chancellor for “coming back for more” taxes.

She said: “Last year, she put up taxes by £40 billion, the biggest tax raid in British history. She promised that she wouldn't be back for more. She swore it was a one-off. She told everyone that from now on, it would be stability, and she would pay for everything with growth. Today, she has broken every single [promise].

“If she had any decency, she would resign,” she added.

Daniel Hilton, writer

Deutsche Bank: ‘Cost of living’ Autumn Budget increases headroom and reduces borrowing

Zooming out, today’s Autumn Budget – despite seeing the third-largest amount of tax increases since 2010 – appears to achieve three things, according to Sanjay Raja, chief UK economist at Deutsche Bank.

Firstly, it should keep government borrowing on a downward trajectory. “The UK’s budget deficit is expected to drop from 4.5% of GDP to 3.5% next fiscal year,” says Raja. “It is expected to drop to just under 2% of GDP by the end of the decade.”

Secondly, it has surprisingly doubled the chancellor’s fiscal headroom from £10 billion to just under £22 billion.

Thirdly, Raja expects the Budget to be disinflationary. “Budget policies are projected to reduce CPI by 0.4 percentage points in 2026/27,” says Raja. “This is reflected by a partial extension of the fuel duty freeze, reducing green levies, and a one-year freeze to rail fares.”

Dan McEvoy - senior writer

Administrative burden for pensioners on just state pension to be eased

Retirees whose sole income is the state pension will be spared the burden of having to pay very small amounts of income tax from April 2027 if the state pension exceeds the personal allowance, the chancellor announced.

It comes as the state pension is set to breach the tax-free personal allowance in 2027, according to the OBR. Without the policy, retirees whose only income is the state pension face having to pay income tax for the first time, via simple assessment.

No concrete method for implementing this has been confirmed yet, but the government says it is “exploring the best way to achieve this and will set out more detail next year”.

Daniel Hilton, writer

Benefits fraud: Plans to save over £1 billion on benefit fraud and error

Budget documents confirmed the government will extend a taskforce cracking down on fraudulent Universal Credit claims.

The Targeted Case Review scheme, first set up in 2022, will now close in 2031.

Fraudulent benefit claims cost the government £6.5 billion in the 2024/25 financial year, with £5.2 billion made up of fraudulent Universal Credit claims.

It comes as the DWP aims to keep a lid on the ballooning welfare bill, with forecasts predicting health and disability benefits will cost the government £70 billion by the end of the decade.

Sam Walker, writer

Hundreds more planners to get Britain building

The government will pump £48 million of additional funding into recruiting an extra 350 planners in England.

The planners will reportedly be brought in across both graduate and experienced roles.

Reeves is also said to be planning to unveil plans for a new Planning Careers Hub to retain planners and draw more people into these types of roles.

Sam Walker, writer

Care leavers guaranteed up to £13,500 in student loan support

All care leavers, young people who have left the care system, will be guaranteed the full student maintenance loan amount of £13,500 per academic year.

Just 14% of care leavers go to university, compared to 50% for the wider population, and they are much more likely to drop out.

The government says this is often due to financial barriers – the new loan guarantee will seek to address this issue.

Daniel Hilton, junior writer

Autumn Budget summary

Well there you have it. No rabbit in the hat though. The Autumn Budget started in an unusual way as the Office for Budget responsibility leaked its report a whole 20 minutes before the chancellor’s speech.

While this was certainly a Budget that protected vulnerable households, shielding them from the increasing cost of living. But, for everyone else, taxes are up and those with more wealth will pay more.

Here’s a quick summary:

• Cash ISA reforms. For cash savers, savings will be limited to £12,000. To take advantage of the full £20,000 allowance, you will have to invest the rest. Over 65s will see no change and keep the full £20,000 allowance.
• Salary Sacrifice pensions capped. There will be a £2,000 salary sacrifice cap confirmed - the amount of earnings that can be exchanged for pension contributions that benefit from a National Insurance exemption.
• Mansion Tax. Owners of properties worth over £2 million will have to pay a recurring annual charge on top of their current council tax. There will be four price bands with the new ‘High Value Council Tax Surcharge’ rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year.
• Tax hike on income from property, dividend, and savings by two percentage points. The change will affect all taxpayers. But she claimed 90% of taxpayers will still pay no tax at all on their savings.
• Income tax threshold freeze extended, from 2028 to 2031.
• People based abroad will no longer be able to make Class 2 National Insurance contributions.
• Two-child benefit cap to be lifted, which Reeves said will help tackle child poverty
• Electric vehicle (EV) grant extended to 2030, but EVs will be subject to new 3p per mile tax.
• Energy bills to drop by £150 from April 2026 as green levies cut.

Kalpana Fitzpatrick, digital editor

Lifetime ISA reform?

Budget documents have revealed the government will publish a consultation in early 2026 on the roll out of a new, "simpler", ISA product to help first-time buyers get a home.

Once launched, this new ISA product will be offered in place of Lifetime ISAs.

Currently, savers can add £4,000 per year into a LISA and get a 25% bonus on top from the government, up to a maximum of £1,000 a year. Any savings must be used to put down a deposit for a house that costs £450,000 or less or for retirement, otherwise you pay a 25% penalty.

However, the savings product has its critics, with some arguing the £450,000 limit for a house is not high enough for people buying in areas where property prices are above the UK average, such as London.

The £450,000 limit has also been frozen since the LISA was launched in 2017, despite house prices growing significantly since then.

Sam Walker, writer

A twist in the cash ISA limit shake-up

How much did the Budget raise taxes by?

The full Budget has now been delivered by Rachel Reeves, and the supporting documents from the Treasury and Office for Budget Responsibility (OBR) have been published.

Thanks to a slew of tax hikes, the chancellor will now have £26 billion more in tax revenue in 2029/30, according to the OBR, bringing the tax take to an all-time high of 38% of GDP in 2030/31.

The biggest chunk of this comes from the extension of the freeze on income tax thresholds until 2031, raising £8.3 billion in 2029/30.

The charging of National Insurance on salary sacrificed pension contributions is estimated to bring in around £4.7 billion in 2029/30. Increases to income tax rates on property, savings, and dividends will bring in a further £2.1 billion in 2029/30.

The rest of the revenue will be raised by the other measures announced in the Budget.

Daniel Hilton, writer

What do you think about Reeves’s Budget?

Over to you – what do you think about the announcements today? Have your say by voting in our poll below.

Recap: the Autumn Budget headlines

Here’s a quick recap of some of the major headlines that have come out of today’s Autumn Budget announcement:

• Mansion tax to apply to properties valued at over £2 million
• Cash ISA limit cut to £12,000
• Salary sacrifice on pension contributions limited to £2,000 before National Insurance payments kick in
• Higher tax rates on income from property, savings and dividends.

Of course, there are plenty of holes to pick in the specific measures that Reeves has taken. Not everyone is going to be happy when an extra £26 billion in taxes are announced.

As MoneyWeek’s digital editor Kalpana Fitzpatrick says, when considering the Budget’s winners and losers Reeves seems to have taken pains to ensure that the most financially vulnerable are shielded, and those that can pay will pay.

And the markets seem encouraged. The extra fiscal headroom has seen government borrowing costs fall markedly through today, while the FTSE 250 has gained nearly 1%.

Thank you for joining us

So, there we have it. Rachel Reeves has unveiled the 2025 Autumn Budget, increasing taxes by around £26 billion, according to the Office for Budget Responsibility (OBR).

From the new mansion tax to the tax hikes on property, savings, and dividend income, MoneyWeek writer Daniel Hilton covers the key takeaways from the Budget in a separate piece.

Thank you for joining us for our 2025 Autumn Budget coverage today.

Keep following MoneyWeek for further analysis and reaction to the Budget. You can get our top stories delivered directly to your inbox by signing up for the MoneyWeek newsletter.

Good morning and welcome back to MoneyWeek’s 2025 Autumn Budget coverage.

Chancellor Rachel Reeves delivered a wealth of tax hikes in yesterday’s speech.

As well as targeting wealthy homeowners with a new mansion tax (effective from April 2028), the chancellor extended the freeze on income tax thresholds by three years. She also capped National Insurance contributions relief on salary sacrifice into pension schemes to £2,000. The latter measure will come in from 2029.

Stick with MoneyWeek as we bring you more reaction and analysis today.

Rachel Reeves defends extension to tax threshold freeze

Rachel Reeves has addressed her decision to freeze income tax thresholds by three years. The Conservative government had frozen the thresholds until 2028, but the Labour chancellor extended the measure until 2031 in the Autumn Budget yesterday.

“I recognise that freezing thresholds does mean that we are asking ordinary people to contribute a bit more,” Reeves told BBC News today.

The chancellor said she had “kept the contribution to a minimum by changes elsewhere” and acknowledged that continuing the threshold freezes would impact working people.

“I’m not seeking to deny that," she added, "but I believe I made the fair and necessary choices yesterday to ensure we can cut the cost of living, cut NHS waiting lists and also reduce our debt and borrowing and hopefully give space to the Bank of England to cut interest rates further.”

Inheritance tax thresholds frozen until 2031

The inheritance tax (IHT) nil-rate bands will be frozen for a further year until April 2031, from April 2030, Budget documents reveal.

The IHT nil-rate band has been frozen at £325,000 and the residence nil-rate band is held at £175,000. It means families risk paying more IHT in the future as the value of assets rises.

Recent polling by Hargreaves Lansdown found 7% of people were most concerned about changes to IHT being announced in the Budget.

Sarah Coles, head of personal finance at the investing platform, said yesterday: "Nobody likes the idea of the taxman dipping into your pockets after you’ve died, so today’s news won’t be welcome."

Sam Walker, writer

Savers at risk of paying more tax as cash ISA cut and savings tax rate to be hiked

Millions of savers may face paying more tax on their savings in coming years, due to the chancellor’s cut to the cash ISA allowance.

From April 2027, under 65s will only be able to put £12,000 a year into a cash ISA, rather than the current £20,000 per year limit.

7.1 million people put money in a cash ISA in 2022/23, with just over two million (28%) putting more than £12,000 into this type of account, analysis by InvestEngine shows.

These two million savers could now face paying tax on savings interest once they exceed their personal savings allowance, if they continue saving above the new £12,000 cash ISA limit.

Savers who are 65 or older can continue putting up to £20,000 – the overall ISA allowance – into a cash ISA, if they wish to.

The personal savings allowance lets basic rate taxpayers earn £1,000 in savings interest outside of an ISA. The allowance is cut to £500 for higher rate taxpayers. Additional rate taxpayers don’t get a personal savings allowance.

The tax rate on savings income will rise by two percentage points across all bands from April 2027, meaning basic rate taxpayers will need to pay a 22% levy on savings interest above the personal savings allowance – unless the money is in a tax-free savings vehicle, such as an ISA or Premium Bonds.

The top easy access savings account currently pays an interest rate of around 4.5%.

If a basic rate taxpayer put £12,000 in a cash ISA, and held £8,000 – the difference between £20,000 and the new £12,000 limit – in a top non-ISA savings account, they would face having paid hundreds of pounds in tax after five years, analysis suggests.

Figures by InvestEngine and MoneyWeek compare how much tax on savings interest would be due in five years based on the previous savings tax rate and the hiked rate after April 2027.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “For committed savers, that want to continue saving more than £12,000 into a cash ISA, investing their money in the financial markets is one solution, provided they don’t need access to their money in the short term.”

The overall ISA allowance remains at £20,000, meaning if you maximise the cash ISA allowance, you could still put £8,000 into a stocks and shares ISA in the same tax year.

Haine added: “Equities have historically delivered higher real returns – that beat inflation – than cash over the long term.”

A time horizon of at least five years is recommended for investing in equities via a stocks and shares ISA.

Jessica Sheldon, deputy digital editor

OBR: New per mile EV tax will significantly slow sales

The government’s new 3p per mile tax on fully electric vehicles will mean hundreds of thousands fewer electric cars will be on UK streets by 2030/31 than expected, according to analysis by the Office for Budget Responsibility (OBR).

The new levy, which will come into effect in April 2028, will mean average drivers of fully electric cars could pay an extra £225 a year to the taxman. A reduced rate of 1.5p per mile will be paid by those with plug-in hybrid cars.

The UK’s fiscal watchdog said they expect the tax to raise around £1.1 billion in the 2028-29 tax year, and £1.9 billion in the following tax year.

However, they added that the measure is “likely to reduce demand for electric cars” as it increases the average lifetime cost of running an EV.

This will lead to a significant slowdown in sales, with the OBR expecting 440,000 fewer electric car sales by 2030/31.

Melanie Lane, chief executive of EV charging provider Pod, said the policy “will shake consumer confidence and potentially jeopardise investment in the sector at a critical moment”.

The chancellor announced the electric car grant will be extended until at least 2030, potentially further complicating government incentives to switch to zero-emissions vehicles.

Lane added: “We are already falling behind on the ZEV mandate that expects one in three cars sold to be zero-emissions next year and confirmation of additional mileage costs from 2028 will penalise motorists and manufacturers who are fulfilling their end of the bargain.”

Details of how the policy will be policed are yet to be published, but the government has started a consultation. They say they expect mileage to be self-reported, possibly at a car’s annual MOT.

Daniel Hilton, writer

Has the Budget cleared the path for UK stocks?

UK-listed stocks gained yesterday in the wake of the Budget and the OBR forecast. The FTSE 100 gained nearly 0.9% and the FTSE 250 – which is more exposed to the UK economy as it contains more small, domestically-focused companies compared to the large multinationals of the FTSE 100 – gained 1.2%.

“Expectations running into the budget were very low, sentiment very weak, and valuations of especially domestic and smaller companies in the UK [were] very suppressed,” said Richard Knight, portfolio manager at Merchants Trust.

There were a number of key wins the Budget was able to score as far as UK stocks were concerned. Increased fiscal headroom ought to alleviate some of the concerns about future tax rises. The Budget is also thought to be disinflationary on balance, which should encourage future interest rate cuts from the Bank of England.

Rate cuts would be “a significant positive stimulus for the UK economy and stock market” according to Knight. “We are seeing great opportunities in midcaps in particular, as they are over-sold, and sensitive to the pessimism around the UK, a great degree of which is priced-in to market valuations,” he added.

See our explainer on what the Budget means for the UK stock market for more information.

Freeze on income tax thresholds could cost taxpayers £1,300

The government's extension to a freeze on income tax thresholds could add an extra £1,292 to someone's tax bill by 2031.

Someone with a yearly income of £15,000 today faces stumping up an extra £259 over the three years between 2028 and 2031, according to analysis by AJ Bell.

Someone on £45,000 a year will take a hit of £683, while a taxpayer with an annual income of £47,000 will have to fork out an extra £1,292.

Laura Suter, head of personal finance at AJ Bell, said: "While it’s a nifty way for the government to raise money, the cumulative effect of the freeze means people are seeing their tax bills rise dramatically when compared to a system in which thresholds had increased by inflation each year."

Test your Autumn Budget knowledge

As taxpayers digest what the announcements will mean for them, Rachel Reeves and Keir Starmer have been defending the tax-raising Autumn Budget.

Starmer told Sky News today: “We kept to our manifesto in terms of what we promised but I accept the challenge that we've asked everybody to contribute."

The prime minister said the Budget measures would help protect the NHS, put money into schools and bear down on the cost of living.

From tax threshold freezes to a cut to up-front tax relief on VCT investments, how closely were you following the headlines?

Test your knowledge by taking part in our Autumn Budget quiz.

That concludes our live coverage of the Budget – one of the most eventful we can remember. We will continue unpacking what the Budget will mean for you, so keep a close eye on the MoneyWeek website. Sign up to the MoneyWeek newsletter to get the top stories delivered directly to your inbox.

Thank you for joining us.

Speculating about what will be in this year’s Budget is fairly pointless, not least because the plans clearly change every few days. But the persistent chatter that the chancellor would like to coerce or persuade private investors to hold a minimum level of UK stocks in their individual savings accounts (ISAs) is worth a brief thought. To declare my bias, I think this idea is daft and not just because of the headache of deciding what’s British enough. International miner Anglo American after it moves its headquarters to Canada? An investment trust with half its assets in Asia? An exchange traded fund that tracks the S&P 500? The ISA rules are already full of nonsense – we don’t need any more.

The idea that ISA tax relief should be a quid pro quo for investing in British stocks misses the point. ISA and pension tax relief exists to get people to put aside money for their retirement and other needs. That money should be invested according to the balance of risk and reward for each investor. If that means no UK stocks, that is still the right outcome. If the government wants to save the UK market, it should work out why firms don’t want to list and investors don’t want to invest voluntarily, and fix that. Coercion is never going to be a better option than solving the underlying problems.

ISA investors are already heavily invested in the UK stock market

Yet it still raises a good question. What is a neutral level of investment in British stocks? Well, the UK is about 3.5% of the MSCI World index of developed markets. That’s a starting point. However, these indices have their own skews: they are affected by the high valuation of US markets (America is now 73% of the MSCI World) and by restrictions such as free float. For a different perspective, look at equal weight indices, where valuations and free float don’t matter: instead, they broadly reflect the number of stocks in each market and so the number of opportunities available for investment. The MSCI World Equal Weighted index has about 5.5% in the UK (the US is about 41%).

So one way of looking at this is that neutral exposure to the UK is somewhere around 5%. It would be less if we factor in emerging markets, but we get into some complications over access restrictions, so let’s keep this simple.

How much does a typical ISA investor hold? You’d think this would be easy to answer, but it’s not. While HM Revenue & Customs asks ISA managers to report how much is held in different investments, the categories it asks for are a baffling, outdated and overlapping hotchpotch that at no point simply says “UK shares”. However, ISA investors have 23% of their total holdings in UK equities and by inference about a third of their equity holdings in the UK, according to data compiled by the Investment Association and provided to Bloomberg. You can find other figures, but the story is consistent: ISA investors are already overweight the UK. Maybe that makes sense – the UK has held its own against the world ex USA in recent years. But we don’t need to be forced to hold more.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

More parents are putting money in Junior ISAs (JISA) as they rush to shield their earnings from potential tax threats in the Budget, new data suggests.

October 2025 was the biggest ever month for people opening JISAs with investment platform Hargreaves Lansdown – on average, £870 was paid into these newly opened accounts.

Junior ISAs have been growing in popularity this year, Hargreaves Lansdown data suggests, with four out of the top five months for new Hargreaves Lansdown JISA openings falling in 2025.

It has come amid mounting speculation that the wealthy will be targeted with higher taxes in the upcoming Autumn Budget on 26 November, amid rumours the cash ISA allowance could be cut too.

Parents appear to be alive to these concerns and are considering the most tax-efficient way to shield and transfer their wealth to their families.

With a Junior ISA, parents and grandparents can give money to children while keeping it in a tax-free wrapper.

You are able to contribute up to £9,000 to a Junior ISA every tax year. You can open a cash junior ISA or a stocks and shares junior ISA, or both. You don’t need to pay capital gains tax or income tax on returns or savings interest accrued in an ISA.

The child is the legal owner of the JISA but is not able to withdraw any money from the account until they are 18.

A JISA is a great way for parents and grandparents to build up a nest egg for their children tax-free, and they can also reduce inheritance tax liabilities. We look at how this works.

How can JISAs help shield you from inheritance tax?

A JISA can be appealing for grandparents who want to reduce inheritance tax liabilities by giving gifts during their lifetime.

Contributions into Junior ISAs are considered gifts for inheritance tax purposes. Via the annual exemption, you can give up to £3,000 every year without needing to worry about the money being subject to inheritance tax after they die. This can be given to one person or split between different people. You can also carry any unused annual exemption forward to the next tax year, but only for one tax year. There is also a small gifts exemption – read more in our piece on how to avoid inheritance tax.

You can put more in a junior ISA, but the contributions would become subject to inheritance tax if you die within seven years of the gift being given. Find out more about the seven year rule on gifts and the taper rate in our guide.

Transferring wealth by contributing to a JISA can also be better than giving it as a cash gift, as money held in a JISA is protected from extra taxes on interest or capital gains.

The question you will have to ask yourself is whether the recipient will be mature enough at age 18 to make smart decisions with the cash instead of splurging it.

JISA alternatives

Another tax-efficient way of transferring your wealth is contributing to your child or grandchild’s pension.

Junior self-invested personal pensions (SIPPs) have become more popular in recent years as some parents and grandparents have used them as a way to both support their children far into the future, and shield them from paying inheritance tax.

The downside is that the recipient won’t be able to access the money until they reach the Normal Minimum Pension Age, which is currently 55 but rising to 57.

However, investing for their retirement early means your cash could have several decades to grow and compound, so it could constitute a significant boost to their pension pot.

Any adult can contribute £2,880 annually to the Junior SIPP, which, once 20% tax relief is factored in, brings the total yearly contribution to £3,600. The Junior SIPP reverts to the recipient’s control when they turn 18.

Similar to JISA contributions, Junior SIPP payments count as gifts for inheritance tax purposes, so unless they are within inheritance tax gifting allowances, they could be subject to the levy if you die within seven years.

The average value of the UK’s biggest stocks and shares ISA pots are worth 17 times more than their cash equivalents, new figures show, as the Treasury reportedly mulls ways to get ordinary Brits investing more.

All ISAs allow savers to put away up to £20,000 a year, in either cash or shares or both, to grow free of any income tax, dividend tax or capital gains tax. But there are stark differences between cash ISAs and stocks and shares ISAs in how much they grow.

Of the top 25 highest value cash ISAs, the average is worth £640,000, according to data from HMRC obtained in a Freedom of Information request by investment firm InvestEngine.

By contrast, the average value of the top 25 highest value stocks and shares ISAs is £10,980,000 – more than 17 times higher.

It means there is a more than £10 million difference between the average across the highest value cash and stocks and shares accounts.

Even when looking at smaller amounts, stocks and shares accounts have pulled ahead dramatically in the value stakes.

Only 30 cash ISAs have over £500,000 in them, compared to 38,680 stocks and shares ISAs, the figures showed.

While 1,530 cash ISAs have over £250,000 in them, for stocks and shares it’s 244,570.

Andrew Prosser, head of investments at InvestEngine said the numbers underline how investing is clearly the most effective way to grow your long-term wealth and to potentially become an ISA millionaire.

“While cash ISAs will always have an important role, especially for shorter-term financial needs, the figures set out clearly the value of long-term investing, with the highest-value stocks and shares ISAs now worth 17 times that of the top cash ISAs on average,” he said.

We compare cash ISAs vs stocks and shares ISAs in a separate article

Cash ISA reform

The gap between the potential returns on offer from stocks and share ISAs vs cash ISAs has also caught the attention of the Treasury, with chancellor Rachel Reeves trying to turn the British public from a nation of savers into investors.

Reeves reportedly has her sights on ISA reform as the way to do it – potentially with a cut to the cash ISA limit from to as low as £4,000 – with an announcement expected in the upcoming Budget on 26 November.

The chancellor told broadcasters in February: “It’s really important that we support people to save to achieve their aspirations. At the moment, there is a £20,000 limit on what you can put into either cash or equities (ISAs) but we want to get that balance right.

“I do want to create more of a culture in the UK of retail investing like what you have in the United States, to earn better returns for savers.”

There was around £360 billion saved in cash ISAs as of the 2023/24 tax year. Cash ISAs accounted for about 66% of all ISA subscriptions in that period. Only around 3.6 million people hold both investment and cash accounts. Just 4.2 million use ISAs solely to invest.

Cash ISA savers’ ‘won’t switch’

However cash ISA savers have shown a reluctance to want to switch from the safety of cash ISAs.

Research polling 1,400 cash ISA savers – four fifths of whom were aged 65 or over – by Paragon Bank found the majority would not invest in stocks and shares in light of a cut to cash limits. They would switch to regular savings accounts instead, potentially driving up their income tax bill.

MoneyWeek spoke to one reader who said, after losing £5,000 playing the stock market, cutting the cash limit on ISAs still wouldn’t make him invest.

But the government is hoping its Leeds Reforms can help tip the balance. Banks will soon start sending investment opportunities to savers with cash sitting in low-interest accounts for the first time. There will also be a nationwide advertising campaign to highlight the opportunities of investing for people who are able to do so.

Under current trends, moving £2,000 from these low-interest accounts to stocks and shares could make millions of people more than £9,000 better off in 20 years’ time, by the government's reckoning.

Saving vs investing

The numbers are on the chancellor’s side – if she can convince a sceptical British public.

As the Budget, and with it, potential ISA reform, approaches, the data obtained via the FOI reveals a clear and growing divide between saving and investing, Prosser said.

“The difference reflects how consistent investing has proven to be the most effective route to building meaningful, long-term wealth,” he added.

“As the chancellor looks set to adjust ISA rules to encourage more people to invest, it’s these kinds of numbers that truly help demonstrate the potential that investing holds.”

Alongside ISA reform, measures to improve financial education and increase its accessibility should also feature in the Budget,” Prosser said.

“This approach has far greater potential to drive participation in investing than simply placing restrictions on savings and ultimately foster a better investment culture in the UK.”

The number of ISA millionaires has soared to a record high of 5,070, according to official data.

A Freedom of Information (FOI) request by money app Plum reveals the number of ISA millionaires tracked by HMRC jumped almost 5% during the 2022/23 tax year from the 4,850 millionaires recorded on 5 April 2022.

The number of armchair investors sitting on seven-figure ISA pots has increased more than 1,000% in just seven years.

According to HMRC’s figures, the top 25 ISA investors are sitting on pots averaging an eye-watering £11,305,000 – up by £2.425 million (27%) in the space of just 12 months.

Meanwhile, the average ISA millionaire is sitting on a pot of £1,346,000, as at 5 April 2023.

Rajan Lakhani from Plum comments: “The ISA millionaire club just got bigger, with 220 new members joining its ranks, thanks in part to the US-driven AI-gold rush.

“Those at the top of the tree have – in some cases – seen their pots grow by more than £2 million in just 12 months, without a single penny of tax to pay on their gains.”

The figures come just days before chancellor Rachel Reeves’s Autumn Budget, which could contain changes to ISAs. There are rumours that the £20,000 cash ISA limit could be cut – although we won’t know for certain until the Budget is announced on 26 November.

However, it is stocks and shares ISAs, rather than cash ISAs, that have turned investors into ISA millionaires, or in some cases ISA multi-millionaires. Previous figures show that 94% of ISA millionaires reached this milestone by focusing solely on stocks and shares ISAs.

The rise of the ISA millionaire

ISA millionaire numbers have now increased by 1,026% since 2016 when they stood at just 450.

Since ISA millionaire figures were first tracked in 2016, there’s only been one dip recorded during that time, which was in 2020 when markets initially went into a major downturn at the beginning of the Covid pandemic.

Source: Plum. *Millionaire numbers counted by HMRC on 5 April each year

Of the 5,070 ISA millionaires recorded on 5 April 2023, 4,800 investors were sitting on pots valued at between £1 million and £1,999,999, while 200 individuals had pots between £2 million and £2,999,999.

Thirty had ISAs worth £3 million to £3,999,999, and 50 boasted ISA portfolios in excess of £4 million. (The figures are rounded to the nearest 10 in the FOI, and therefore do not add up to 5,070).

Lakhani notes that the flexibility of ISAs have made them “particularly attractive to younger investors, who don’t want to lock their money away until their late 50s, which is the case with pensions”.

In terms of the upcoming Autumn Budget, he adds: “Nobody is expecting changes to the tax-free status of ISAs themselves, or a change to the £20,000 allowance for stocks and shares ISAs.

“However, Reeves is reportedly considering lowering the annual allowance for cash ISAs specifically, a proposal which is dividing public opinion sharply.”

How to become an ISA millionaire

ISA millionaires usually use a stocks and shares ISA and invest their money, rather than keeping it in savings with a cash ISA.

They likely start early, invest consistently, and take some risk to reap greater returns.

Adrian Murphy, chief executive of the financial adviser Murphy Wealth, comments: “If you want to build wealth in a significant way, you have to build a risk-adjusted portfolio of stocks and shares.

“Historically, a balanced portfolio of stocks and shares has delivered far higher returns over most reasonable timeframes [than cash ISAs, which] often fail to beat inflation.”

According to Plum, someone starting from scratch today, maxing out the current £20,000 annual allowance each year into a stocks and shares ISA could expect to reach millionaires’ row in around 22 years, assuming annualised returns of 7% after fees.

Lakhani says the rise of the “Magnificent Seven” (Wall Street’s leading tech stocks including Nvidia) has helped balloon the pots of armchair investors in the UK in recent years.

We look in more detail at the shares, funds and investment trusts that ISA millionaires hold.

Stephen Charles, 74, doesn’t know exactly what he invested in 10 or so years ago. A retired secondary school English teacher from Forest Gate, east London, his speciality is Shakespeare not stocks. He went to a financial adviser with “quite a lot of money” seeking to make it grow – instead, over a number of years, he lost £5,000.

“We were told this portfolio was fairly safe. We were going for safe options,” Stephen recalled. “It was a shame we didn't just save that money in a cash ISA or regular savings account, it might have given us a higher return.”

Like 14.4 million Brits (according to analysis this year by investing platform AJ Bell) he’d only put money into cash ISAs, rather than a stocks and shares ISA, before his unsuccessful dabble in the stock market. Now a cash ISA from Coventry Building Society – which he says offers “really good customer service” – is the only place he puts spare money.

All ISAs allow money in them to grow via interest or investment returns entirely free of capital gains tax, dividend tax or income tax. Low risk, high control and very easy to use, cash ISAs are appealing to those who want to hold money in cash, rather than invest.

“After our losses, we're reluctant to get involved with stocks and shares again,” Stephen said. Behavioural finance terms it a bias towards safety. “If you need to withdraw money from a cash ISA, it is easy to do so at any time,” he added. “And of course it's easy to put money in.”

This last part may soon become less true. There’s currently an overall £20,000 ISA limit, but for months, it’s been rumoured chancellor Rachel Reeves wants to slash the cash ISA limit to potentially as low as £4,000 in the Autumn Budget on 26 November. Savers like Stephen could find they have fewer options to generate tax-free, risk-free returns.

Saving versus investing

With his wife, also a retired teacher, Stephen tucks away several hundred pounds a month in cash ISAs and has done so every year since Labour chancellor Gordon Brown introduced Individual Savings Accounts for cash and shares in April 1999 to replace PEPs and TESSAs.

Statistically, the couple could have made more investing. A one-off £1,000 when ISAs launched would now be worth £5,000 in the global funds sector, while £1,000 annually in the same could have grown to £92,000, number crunching by AJ Bell found.

The same one-off payment into a cash ISA in 1999 would be worth £2,079 today, while £1,000 annually in cash would have grown to £36,290.

Laura Suter, director of personal finance at AJ Bell, said: “These figures highlight the hidden cost of playing it safe. While keeping money in cash can feel comfortable, over time it’s an almost guaranteed way to lose purchasing power. Inflation quietly eats away at savings, and even the average cash ISA will have struggled to keep pace.”

Stephen understands higher returns are possible if you risk your money a bit. “I get that's true,” he said. “But our experience is you can also lose money. And that makes us wary.”

Figures suggest his reluctance is representative of most UK savers. HMRC data shows 22.3 million adults hold an ISA but two thirds (66%) of all ISA subscriptions in 2023/24 were into cash. Only around 3.6 million people hold both investment and cash accounts. Just 4.2 million use ISAs solely to invest.

Reeves’ plan to cut cash ISA limits

Some in financial services and, reportedly, the Treasury, see the popularity of cash ISAs as a problem. Current Labour chancellor Rachel Reeves seemingly wants the self-confessedly “risk averse” Charles’ and millions like them to switch to investment.

Reeves’ rumoured plan? Cut the cash amount savers can put into an ISA – potentially from £20,000 to £10,000 or even less – in a bid to get more people investing in British companies to boost their own nest eggs and UK economic growth. No thanks, said Stephen.

“We wouldn't do that. We wouldn't start saving into a stocks and shares ISA rather than the cash ISA. And if we reach the cash ISA limit, we'd probably look for other means of saving,” he said.

Savings interest on money held outside an ISA, however, is liable for tax after you reach your personal savings allowance – £1,000 a year for a basic rate taxpayer and £500 for a higher rate payer. Additional rate taxpayers have zero allowance.

Like many savers, the couple feel they don't know enough about investing. Their final salary Teachers’ Pensions scheme meant they retired at 60 having never needed to worry about how their retirement savings were invested, unlike those with modern defined contribution pension pots. “We're no experts,” Stephen said.

Leeds Reforms

The government has a plan for this too. Under the Leeds Reforms “working people will be equipped with the support they need to invest and grow their savings”, it was announced in July.

Banks will be tasked with sending investment opportunities to savers with cash sitting in low-interest accounts for the first time. Major financial institutions are backing an advertising campaign that will highlight the opportunities of investing for people who are able to do so.

Under current trends, moving £2,000 from these low-interest accounts to stocks and shares could make millions of people more than £9,000 better off in 20 years’ time, by the government's reckoning.

However a nationwide survey of 1,000 cash ISA holders by savings app Moneybox found 87% need a significant savings buffer to feel comfortable investing – with an average threshold of £27,617.

Almost nine out of 10 (88%) of those polled are calling on the government to protect the cash ISA tax-free savings allowance in the upcoming Budget. Just 9% said cutting it would prompt them to start investing more.

Cecilia Mourain, chief savings officer at Moneybox, said: “Millions of people rely on the cash ISA to build their financial future and any changes should be carefully considered.

“A strong cash foundation enables households to weather shocks and pursue long-term goals, from homeownership to retirement.”

Cash saving at risk

Critics say cash ISA money is essentially languishing virtually dormant and should be put to work in the investment markets.

Building societies – which use cash ISA holdings to lend out to mortgage borrowers – dispute this. They also argue the simplicity of the ISA is one of its greatest strengths – savers can put in up to £20,000 every year, switch between the stock market or cash, or have a mix of the two.

Jeremy Cox, head of strategy at Coventry Building Society, said: “Upsetting this balance by reducing the cash ISA allowance is going to make it far more complex in one fell swoop.

“In nudging people toward investing more, the chancellor needs to be careful she doesn't throw the baby out with the bathwater and discourage people from building up their cash savings too.”

Stephen agreed: “I guess I'm quite old fashioned, I inherited habits from my parents of saving rather than spending. But I think we're probably quite typical of a certain type of saver. And I'm just not sure it's particularly appealing for us to invest in stocks and shares.

“I think saving should be encouraged by the government, rather than going down the route of trying to take more risk with our money.”

Overcoming this quiet British resistance multiplied by millions of risk averse Stephens could develop into (another) Budget headache for the chancellor.

MoneyWeek has contacted the Treasury for comment.

Deciding whether to put your money into a cash ISA or a stocks and shares ISA can feel like a head-scratcher – but it doesn’t have to be.

The two serve very different purposes, and can work well alongside each other. The important thing is having a clear idea of what you want out of the savings in your cash ISA, and what you’re planning to do with the money you invest into a stocks and shares ISA.

In brief, cash ISAs make a good home for money that you can’t afford to lose. That could include an emergency savings pot, or cash you’re putting aside for a big purchase within the next few years.

But because it pays relatively low levels of interest, cash hasn’t historically been the best way to grow your wealth over the long term. For that reason, any money that you aren’t likely to need in an emergency or within a one to two year timeframe could be put into a stocks and shares ISA where, despite the risk of greater short-term volatility, it will hopefully increase in value more over the long term.

“When it comes to choosing between a cash ISA and a stocks and shares ISA, the key question is: are you saving for the short term or the long term?” said Laura Suter, director of personal finance at investing platform AJ Bell. “If you’re setting money aside for an emergency fund, typically three to six months’ worth of expenses, then a cash ISA is a solid option.”

This way, any money you need at short notice or in the case of emergency is protected and easily accessible.

But for long term goals such as retirement plans or home improvements, Suter believes a stocks and shares ISA is more effective than a cash ISA.

“Markets tend to rise over time and outperform cash, despite short-term fluctuations,” she said.

The advantages of cash ISAs

Above all else, cash ISAs offer you security and peace of mind that any money you contribute will at least hold its value in nominal terms.

Stock markets can be volatile, and your investments can fall in value, particularly over short term periods, so investments in the stock market could be worth less than the amount you initially invested, depending on when you withdraw the money

That means cash ISAs are a great place to store money that you think you might need within the short to medium term.

If you are planning a significant purchase within the next one to two years, or building an emergency pot, then a cash ISA might be a better option than a stocks and shares ISA.

It’s recommended people hold an easy to access emergency savings pot which covers three to six months of essential spending, before considering locking investments away longer-term.

The advantages of stocks and shares ISAs

Advocates of investing often highlight that in real terms, cash holdings tend to be eroded by inflation over time, despite a recent period when the best cash ISAs typically offered above-inflation rates – around 4.66% as of May 2026, for example. On the other hand, despite greater volatility over the short term, stock markets have historically tended to rise in value more than cash over the long term.

According to figures obtained by investment platform InvestEngine through a Freedom of Information (FOI) request to HMRC, an individual who had maxed out their cash ISA allowance every year since ISAs were launched in 1999, earning interest in line with the average interest rate banks lend money to each other, would have accumulated £418,176 by February 2026.

In contrast, someone who invested their full £20,000 annual allowance each year in a stocks and shares ISA – such as an exchange-traded fund (ETF) tracking global stock markets – would now be an ISA millionaire, with £1,357,964 in their account, more than three times higher than the equivalent in a cash ISA.

This divergence reinforces “how investing early and consistently in a diversified portfolio can make a meaningful difference to long-term, tax-free wealth as part of a broader financial plan”, according to InvestEngine’s head of investments Andrew Prosser.

In a bid to encourage Brits to take advantage of this long-term wealth-building potential of investments, the government announced a reduction in the cash ISA limit for under-65s. From the start of the 2027/28 tax year, these savers will be limited to putting £12,000 per year into cash ISAs, rather than the overall £20,000 annual ISA allowance.

It means under 65s will need to put £8,000 into a stocks and shares ISA in order to maximise their annual £20,000 allowance. Over 65s can continue using the full ISA allowance of £20,000 with cash ISAs, if they wish to.

HMRC also confirmed that certain ‘cash-like’ investments, potentially including money market funds, would be excluded from the stocks and shares ISAs allowance to prevent cautious savers circumventing the limit.

Do you need to choose between a cash ISA and a stocks and shares ISA?

Despite the new cash ISA limit, there is no need to “choose” between either a cash ISA or a stocks and shares ISA. The two are not mutually exclusive, and as above, it makes sense to put some of your money into one and some into the other.

The government is expected to make further changes to help people allocate their excess funds however works best for them.

From April 2026 a new ‘Targeted Support’ service will be available, which could equip more people to make the right financial decisions for themselves. “This includes understanding the benefits of moving excess cash into a stocks and shares ISA, potentially benefitting from much higher returns, albeit at the expense of the ‘no loss’ security of cash savings,” said Steven Cameron, pensions director at Aegon.

Cash appears to still be king among the UK’s savers with two-thirds of cash ISA savers saying they would not switch to a stocks and shares ISA even if the limit was reduced, according to new research.

Speculation has been swirling for months chancellor Rachel Reeves will cut the amount of cash savers can put away in an ISA from £20,000 to potentially £10,000 or even £5,000. Current cash ISA savings would be unaffected.

The headline driver behind a cut to the cash ISA limit, if it goes ahead in the Autumn Budget, is to get Britain investing more in British companies via stocks and shares held in an ISA, where gains on cash and investments grow tax-free.

But research polling 1,400 cash ISA savers – four fifths of whom were aged 65 or over – by Paragon Bank found the majority would not invest in stocks and shares in light of a cut to cash limits. They would switch to regular savings accounts instead, potentially driving up their income tax bill.

Almost two-thirds (62%) said they would not consider moving their money to a stocks and shares ISA if the cash ISA limit were reduced. Instead, 57% would opt for a regular savings account, potentially exposing themselves to tax on interest earned.

Other alternatives included Premium Bonds (16%), stocks and shares ISAs (18%), spending the money (16%), or gifting it to friends or family (13%).

Two-thirds (67%) said that the risk of losing money concerned them most about diverting savings into a stocks and shares ISA, followed by stock market volatility (65%). Fees and charges concerned 37%, with a fifth citing a lack of knowledge.

Andrew Wright, head of savings at Paragon Bank, said: “The vast majority of cash ISA savers are reluctant to expose their money to the risks associated with equities, despite the potential tax implications.

“Ultimately, it demonstrates that if the cash ISA threshold is reduced in the upcoming Budget, we’re likely to see an increase in savers paying more tax on their savings interest.”

Cash ISA tax grab?

Savers are also dubious about the motives behind the rumoured move. In March, when speculation first landed about cutting the cash ISA limit, asked about the potential reduction Reeves said she was seeking to “get the balance right between cash and equities to earn better returns for savers” and “boost the culture of retail investment” in Britain.

But nearly three-quarters (72%) of savers asked in the Paragon Bank survey believe any cut to the cash ISA would in fact be designed to increase tax revenue from savings. Just over half (54%) believe it is intended to increase investment into equities.

Basic rate income taxpayers can earn £1,000 a year in interest before being taxed, but this reduces to £500 for higher rate taxpayers and there is no personal savings allowance for additional rate taxpayers.

Many cash ISA savers, far from needing to be nudged into investing by government policies, have said they already typically invest in a balanced portfolio of investments in other asset classes, according to the survey.

While half also hold cash in Premium Bonds, 27% invest directly in company shares and a fifth (21%) invest via investment funds or trusts. Other investments included company or government bonds (7%), property (6%) and alternative investments, such as wine or art (2%).

The primary reason for choosing a cash ISA remains its tax-free interest, cited by 93% of respondents. When asked about their savings goals, just over half (51%) said they save for general purposes, over a third (38%) for financial security, a quarter (28%) for retirement, and just over one in 10 (15%) for emergencies.

The survey also suggested overwhelming support for maintaining or increasing the current £20,000 cash ISA annual allowance, with 57% of savers stating the limit is appropriate and a further 39% calling for it to be raised. Only 1% felt the threshold should be reduced.

Nearly two-thirds of those asked said they already saving between £15,000 and £20,000 annually – close to the current maximum cash ISA allowance.

Cash ISAs are the most widely used type of ISA. In the 2023/24 tax year, 66% of all ISA contributions were to cash ISAs, bringing total cash ISA holdings to £360 billion, according to government figures.

Savers paying income tax on their nest eggs with no ISA allowance left have some other options if they want to shield their money from HMRC.

Over two million people are forecast to pay income tax on their savings interest in 2025/26 thanks to frozen income tax thresholds, a fixed personal savings allowance (PSA) and higher interest rates on saving accounts, according to research by investment platform AJ Bell.

Higher and additional-rate taxpayers are particularly vulnerable as their PSA’s are lower than basic-rate taxpayers.

Despite inflation slowing to 3%, people’s hard-earned cash is still being eroded in real terms and even though savings rates have steadily fallen since 2023, returns could nevertheless be high enough to breach the PSA.

Alice Haine, personal finance analyst at investment platform Bestinvest, said: “While inflation has eased to 3% and is expected to fall to the Bank of England’s 2% target by April, that’s not only the issue savers need to consider.

“Many could still end up paying tax on the interest they earn, particularly on the most-competitive accounts, if their returns push them above their personal savings allowance.”

The prospect of having to pay tax on savings interest has seen the popularity of adult ISAs boom, with 15 million people paying into one in 2023/24, the highest amount since 2010/11.

The annual ISA allowance allows individuals to shelter up to £20,000 a year without paying tax on interest earned – or investment returns if you choose to use a stocks and shares ISA.

But what if you have already used up your ISA allowance for the year? Are there other tax-efficient options?

What is the personal savings allowance?

The PSA allows most people in the UK to earn a certain amount of savings interest tax-free each tax year. The allowance depends on your income tax band.

Basic rate taxpayers can earn up to £1,000 interest on their non-ISA savings and for higher rate taxpayers the limit is halved to £500. Top rate taxpayers do not have a PSA.

Premium Bonds

Premium Bonds offer savers the security of a government-backed bank, tax-free returns and the hope of a bumper £1 million jackpot win each month. Instead of paying interest, Premium Bonds with National Savings and Investments (NS&I) offer the chance to win monthly cash prizes of up to £1 million.

You can own up to £50,000 worth of Premium Bonds; each bond costs £1 and you have to hold a minimum of 25.

The Premium Bonds prize rate has been falling and is currently 3.6%, but will drop to 3.3% in April. Currently, there are 2,713,707 unclaimed Premium Bonds prizes worth £114,769,950 waiting to be claimed.

If you are one of the two lucky jackpot winners of the month that has won the £1 million prize you’ll have a visit in person from NS&I's Agent Million – an individual who informs lucky winners that they have scooped the biggest prize in the monthly draw.

Of course, you could win absolutely nothing and receive zero return on your money.

Pensions

A pension is a tax efficient wrapper that you can begin paying into when you start working either in a workplace scheme or a private pension – or both. You can actually start contributing from birth using a Junior Sipp (self-invested personal pension).

Taxpayers automatically get 20% added to personal pension contributions through pension tax relief, while higher and additional rate taxpayers claim their extra relief through a self-assessment tax return.

Returns on money invested in your pension are free of capital gains tax and income tax, so your savings can grow faster. Further, you can take out up to 25% of your pension completely tax-free.

There are limits to how much you can pay into a pension each year. The annual limit is £60,000 a year for adults and £3,600 for children. However, if you’re a high earner and your income is more than £240,000 a year, the tax relief you can get on contributions is limited to a reduced annual allowance, known as the tapered annual allowance. The £60,000 annual allowance reduces by £1 for every £2 over £240,000.

However, the trade-off for these unrivalled tax breaks is that you can’t access money saved in a pension until the age of 55 – rising to 57 in 2028.

VCTs

A VCT (venture capital trust) is a type of investment that allows you to back small UK businesses. A VCT itself is a fund that invests in a basket of typically 50-80 privately owned fast-growing companies chosen by a fund manager.

You buy shares in a VCT and for every pound you invest you can get up to 30p back in tax relief. This is being reduced to 20p from April. There’s tax-free capital gains and tax-free dividends and you can invest up to £200,000 into a VCT each year. To qualify for the tax break you must hold the investment for at least five years.

There are risks of course. VCTs invest in early-stage businesses, which are much more likely to fail, and charges can be high. Investments in VCT schemes are not protected by the industry safety net, the Financial Services Compensation Scheme (FSCS).

Enterprise Investment Scheme (EIS)

The EIS is another tax efficient way to back small UK businesses. You can invest in a single company or a fund that holds a basket of around 10 firms and get income tax relief at 30%. Returns are free of capital gains tax if held for three years and you can invest up to £2 million a year in qualifying companies.

EIS investments allow you to elect for all or part of your EIS shares bought in one tax year to be treated as though they were bought in the previous tax year.

While there is a risk of investing in smaller businesses, you can claim loss relief (at your marginal tax rate) if things go wrong. There is no inheritance tax due so long as you have had the EIS investment for two years when you die.

Recent analysis from wealth management firm Rathbones found UK investors who have used up their ISA and pension allowances are increasingly turning to VCTs and EIS’s to tax-wrap their cash.

Isabella Galliers-Pratt, senior investment director at Rathbones, said: “Once they’ve used ISA and pension allowances, the next question we hear from clients is: where does my next pound go?

“As wealth increases, investors are more willing and able to take on higher levels of risk. Greater financial resilience gives them the confidence to explore opportunities beyond mainstream wrappers.”

Offshore bonds

This is an investment tax wrapper held outside the UK in which you can invest a lump sum or make regular payments. You can choose from a range of investments including funds, discretionary investment managers and bank deposits.

The income and gains of the underlying investments are not taxed within the bond – the tax charge applies when there are withdrawals.

The amount of tax you’ll have to pay will be based on your marginal rate at that time. Though income from the bond could push you into a higher rate.

The rules of offshore bonds allow you to access up to 5% of the original capital per year without any immediate tax to pay. This withdrawal allowance is cumulative so if you don’t draw 5% in the first year you own it, in the second year you could draw up to 10%. This is something to consider with the help of a financial adviser.

Other considerations:

Paying off debts

If you have any debts then it might be more financially viable to pay them off rather than worry about tax bills.

Loans, credit cards and overdrafts are almost always the most expensive kind of debt. If you don’t use any regular borrowing you could consider paying down your mortgage.

Gifting for estate planning

If you’re in the fortunate position of having used your tax allowances for the year on savings and investment vehicles you deem appropriate, and still have money you don’t need attracting tax, you may wish to consider some estate planning.

Inheritance tax is charged on an estate, which is the property, money and possessions left behind to loved ones who will pay 40% on anything above the threshold.

You can leave up to the £325,000 threshold before loved ones face a tax bill. This tax-free threshold can be increased via the residence nil rate band.

The good news is that there are plenty of measures individuals can take to reduce the amount that HM Revenue & Customs (HMRC) can claim when it eventually comes to assessing IHT.

So if you have more money than you think you might need, you could consider handing over some of your wealth while you’re still around.

The ‘annual exemption’ allows you to give financial gifts, tax-free, to the value of £3,000. You can also give £250 to any number of people every year, but you can’t combine it with your annual £3,000 exemption. You can also give away all types of assets, including cash, property and shares tax-free, as long as you live for seven years after making the gift. Known as a “potentially exempt transfer”, it must be an outright gift from which you can no longer benefit.

There is a way of giving away unlimited cash without using the seven-year rule – as long as it’s from surplus income and doesn’t reduce your standard of living or force you to dip into your capital to cover day-to-day costs.

You might also consider setting up a trust which can mitigate inheritance tax. A financial adviser can help with this and all things surrounding estate planning, as well as making a will.

Chancellor Rachel Reeves is being urged to remove stamp duty from UK-listed shares held in an ISA to help direct more money into the London stock market.

She is reportedly looking at reforming the current ISA regime in an effort to build a culture of retail investing in the UK, similar to that in the US.

Measures reportedly being considered include cutting the cash ISA limit to £10,000 per year – there’s currently an overall £20,000 annual ISA allowance. It’s suggested this change would encourage savers to put more money into stocks and shares.

Reeves is also said to be looking at changing the stocks and shares ISA, potentially adding a minimum UK shareholding requirement that could effectively force investors to put a portion of their ISA holdings into UK stocks.

Scrapping stamp duty on UK shares has also been mooted, something the investment industry has long been lobbying for.

We look at what a proposal like this could look like, and what it could mean for you.

How much stamp duty do you currently pay on shares?

In both the cash and stocks and shares ISAs, you are shielded from paying income tax or capital gains tax from the money you earn from your savings or investments.

For cash savers this means you do not have to pay tax on savings interest, and for investors it means you do not have to pay tax on investment gains.

However, ISA investors must still pay stamp duty when buying shares. Currently, you must pay 0.5% in stamp duty when you buy a share, and it usually comes as part of the overall cost of the trade.

If the chancellor got rid of stamp duty on UK shares held in ISAs, it would reduce the overall cost of gaining exposure to the UK stock market and would theoretically make retail investors more likely to invest in the UK rather than the US or other global markets.

The cost of axing stamp duty on UK shares could be minimal compared to the benefit

Rumours that Reeves is considering removing stamp duty on UK shares were welcomed by many investment companies who believe the measure is a far better way to incentivise investment in Britain than implementing a minimum UK shareholding requirement.

Instead of a top-down mandate for ISA investors to put their money into UK shares, supporters believe removing stamp duty on British stocks provides a natural incentive for investors to choose them. It is the carrot rather than the stick.

Tom Selby, director of public policy at AJ Bell, told MoneyWeek that stamp duty “explicitly disincentivises investment in British companies at a time when government policy is aimed at doing precisely the opposite”.

Nine in ten investors said they would increase their holdings in UK equities if the stamp duty on shares was scrapped, a recent survey by investment platform Tradu found, indicating there is appetite among investors.

The issue of cost will be a major factor influencing the chancellor’s decision, especially considering the upcoming Budget is likely to increase taxes.

While the cost of axing stamp duty entirely would be in the billions, just removing the tax from UK shares held in an ISA would be minimal, perhaps as little as £120 million, according to AJ Bell.

“In government spending terms, that is pretty much a rounding error and would remove a nonsensical barrier to ISA investors buying shares in UK businesses,” added Selby.

The reform also comes at a time when London’s stock market is struggling to keep pace with other major exchanges, especially in America. Getting more people to invest in London-listed stocks could mean the UK stock market would increase its competitiveness.

Brendan Callan, CEO of Tradu, said: "If we’re serious about boosting investment in UK stocks, we need to abolish the share tax altogether. Doing so could see nine in ten retail investors increase their holdings in UK equities.

“If the government truly wants to prevent the UK economy from stagnating, it must take bold, decisive action to tackle both the behavioural and financial barriers to investing, not tinker around the edges.”

Not scrapping stamp duty on UK shares could also have larger economic impacts too, investment bank Peel Hunt has warned.

Charles Hall, head of research at Peel Hunt, said in a research note seen by MoneyWeek that stamp duty is harming the UK’s competitiveness in comparison to the US.

It came after reports indicated pharmaceutical firm AstraZeneca is considering a move to the New York Stock Exchange (NYSE).

If the firm moves to the NYSE, Peel Hunt believes its investors could save around £200 million a year in stamp duty payments. If this goes ahead and other large firms follow, the UK could lose £4.5 billion in tax revenue, according to the analysis.

Hall said: “There is a global battle for capital, talent and companies. We believe losing our companies to the US due to stamp duty would be a massive own goal.”

He called on the government to respond, saying: “The obvious answer in our view is to scrap stamp duty, as it would trigger a material improvement in UK equity valuations, drive higher CGT receipts, enhance activity in UK capital markets, and increase spending power.”

On the other hand, if the current regime stays in place, Hall warns that an increasing number of firms could start to leave the London stock market.

Investec has launched its first fixed-rate cash ISA in 20 years, and is going head to head with other providers with one of the best deals as savers rush to maximise their annual allowances.

The South Africa-founded bank and wealth management group’s new one-year fixed cash ISA pays out 4.27% AER interest.

You can open the ISA with a minimum investment of £1,000.

David Hunt, head of deposits at Investec, said: “The launch of our 1-Year Fixed Rate Cash ISA is a major milestone for Investec Save as we continue to expand options for savers.

“Demand for cash ISAs is growing with a record £14 billion deposited in April this year alone and fixed-rate accounts are particularly popular as they enable savers to secure a rate for a fixed period and not have to worry about any decreases.”

We look at who can get the ISA, how it works and how it compares to other best cash ISAs.

How Investec's ISA works

Interest on the Investec account is calculated daily and paid out annually.

As it is a one year fixed account, you need to leave your money untouched for a year.

Once the ISA is opened, you’ll have seven days to pay the minimum £1,000 deposit.

You won’t be charged a fee if you close your account within 14 days of opening it and any balance plus earned interest will be transferred to your linked account. Cancel your account after this window and a fee may be deducted from your balance equal to 90 days’ interest.

The account can be opened and managed online, via Investec’s website or its app.

If you’re a new Investec customer, you’ll need the sort code and account number of your UK current account to hand as this is linked to the ISA.

While some accounts do let you transfer in ISAs, Investec’s ISA is for new accounts only.

How does Investec’s cash ISA compare to other accounts?

Investec’s new ISA is the second best one-year fixed rate ISA on the market after Vida Savings, which is offering a marginally higher interest rate of 4.28% on its one-year bond.

But it is a smaller provider and you can open the account with a smaller deposit.

Vida ISA lets you invest with a lower minimum of £100 and the bank is also covered by the Financial Services Compensation Scheme (FSCS).

How to decide what savings account is best for you

While some of the best cash ISA rates are on one year fixed deals, this account may not be suitable for you if you are looking to withdraw money from it before the 12 month period ends.

If you think you may need easy access, then an easy access cash ISA is a better option, where you can earn as much as 4.45% via Plum, for example.

But, the rate is variable and could drop if the Bank of England cuts the base rate.

You can currently add up to £20,000 into an ISA, though there are Autumn Budget rumours that chancellor Rachel Reeves may reduce this allowance for cash ISA holders in a bid to get more savers to start investing with stocks and shares ISAs instead.

Chancellor Rachel Reeves is reportedly considering a minimum UK shareholding requirement for stocks and shares ISAs.

The chancellor is eyeing up reforms to the stocks and shares ISA, the Financial Times reported on 17 October, as she tries to incentivise more Brits to invest in the UK stock market and build a culture of retail investing in the country.

It could mean Brits are effectively forced to have a portion of their investment portfolio in UK-listed equities, eliminating the full geographical freedom that the current stocks and shares ISA permits.

The assumed goal would be to get British savers to inject more cash into the UK stock market, which has struggled to keep up with the United States.

A boost to the stock market would, in theory, lead to a pick up to UK economic growth.

The minimum UK shareholding requirement is one of a number of proposals being considered by the chancellor, the FT reports, with another being a suggestion to remove stamp duty from London-listed stocks held within ISAs.

Reeves is also reportedly looking at halving the cash ISA limit to just £10,000.

The case for a UK shareholding requirement

The theoretical merits of imposing a minimum UK shareholding requirement to the stocks and shares ISA is that savers would be incentivised to buy UK-based equities, and therefore keep the economic benefits of shareholding in the country.

When rumours of a cash ISA cut first circulated in early 2025, critics argued that such a measure would do little to boost economic growth in the UK because savers would be more likely to place their money into foreign, primarily US-based, equities which have historically provided much stronger returns.

If there were a mandate to put a proportion of your stocks and shares ISA into UK shares, they would be prevented from doing this.

Questions remain whether investors would actively decide to invest in equities that are anticipated to bring about worse returns when they could invest outside of the ISA system, albeit while missing out on the tax benefits.

The case against the proposal

Adding a minimum UK shareholding requirement is reminiscent of the failed ‘Brit ISA’ proposed by the previous Conservative government, says Tom Selby, director of public policy at AJ Bell.

Selby says that to revive the “fundamentally flawed UK ISA proposal” would be the wrong step for the chancellor to take.

He said: “Any move towards mandating UK asset allocations within ISAs would be a pretty naked political gimmick, adding huge complexity to the system with no obvious benefit to investors or the economy.

"Given 40-50% of ISA assets are already invested in UK companies or UK-focused funds, the government should be focusing policy interventions on making it easier for people to transition from short-term cash saving to long-term investing and letting investors’ natural ‘home bias’ deliver capital benefits to UK plc.”

Instead, he urged Reeves to press forward with removing stamp duty on UK shares within the ISA instead.

Selby added: “Stamp duty is a tax that explicitly disincentivises investment in British companies at a time when government policy is aimed at doing precisely the opposite.

"While the multi-billion-pound annual cost of scrapping stamp duty across the board might make the chancellor wince, creating a specific carve-out for ISAs to support her retail investing drive could be achieved at a fraction of this cost – we estimate somewhere in the region of £120 million. In government spending terms, that is pretty much a rounding error and would remove a nonsensical barrier to ISA investors buying shares in UK businesses.”

Emma Wall, chief investment strategist at Hargreaves Lansdown, echoed enthusiasm for the suggestion to waive stamp duty on UK shares in ISAs.

She added: “We think that there are better ways to promote retail investment than a UK mandate however, as we find among our clients the majority of trades are into UK shares already, and that better client outcomes are delivered through an unfettered approach to regional asset allocation.”

ISA regime does not need more rules, it needs simplification, says AJ Bell

AJ Bell has urged the chancellor to focus on simplifying the ISA system overall, arguing it is too complicated and can easily confuse consumers if they decide to transition from cash savings to investing in the stock market. The investment platform says this confusion is a contributing factor in why Brits hoard money in cash.

There are around three million people in the UK with £20,000 or more invested in cash ISAs and no money invested in stocks and shares ISAs, using a conservative estimate, research by AJ Bell suggests.

If just half of that money was invested, an additional £30 billion of investment would be unlocked, potentially boosting the UK stock market and possibly bringing better long-term returns than if that money was saved in cash.

Selby says the chancellor should not punish cash savers but instead make it easier for them to invest.

He suggested Reeves “address the negative impact the siloed ISA structure has”, by combining cash ISAs and stocks and shares ISAs into a single main ISA product.

“As well as simplifying the overarching ISA framework, this reform would make it easier for people to transition from holding cash to investing for the long term, supporting wider efforts to boost retail investing, improve financial resilience and drive economic growth," he added.

Rachel Reeves is reportedly mulling a cut to the cash ISA annual allowance in a bid to encourage savers to put more of their money into the stock market.

The chancellor will deliver the Autumn Budget in the House of Commons on 26 November as she attempts to get the economy back on track.

Among some of the options she’s said to be looking at is a cutting of the cash ISA annual allowance. Currently, the overall ISA allowance is £20,000.

Earlier rumours suggested it could be cut to as low as £4,000 but more recent leaks indicate the limit may be reduced to a more generous £12,000.

However, recent polling revealed a reduction in the allowance would be an unpopular move among Brits.

Cash ISAs are the most widely used type of ISA. In the 2023/24 tax year, 66% of all ISA contributions were to cash ISAs, bringing total cash ISA holdings to £360 billion, according to government figures.

Separate Bank of England data reveals £28.75 billion was deposited into cash ISAs between April and September, up from £28.59 billion over the same six months in 2024.

A recent report put forward at the Treasury Select Committee warned Reeves that not only would cutting the cash ISA allowance discourage more of an investment culture in the UK, it would hurt Brits in other ways.

“Building societies depend on cash ISA savings as a critical funding source for their mortgage lending. If this was reduced, it would mean a less competitive market for financial products and consequently higher prices for consumers,” the report said.

Dame Meg Hillier, chair of the Treasury Select Committee, said: “This is not the right time to cut the cash ISA limit. Instead, the Treasury should focus on ensuring that people are equipped with the necessary information and confidence to make informed investment decisions. Without this, I fear that the chancellor’s attempts to transform the UK’s investment culture simply will not deliver the change she seeks, instead hitting savers and mortgage borrowers.”

The Treasury also highlighted the government’s Leeds Reforms, announced in July, under which banks will send investment opportunities to savers with cash sitting in low-interest accounts for the first time in a bid to highlight the opportunities of investing for consumers who are able to do so.

Under current trends, moving £2,000 from these accounts to stocks and shares could make millions of people over £9,000 better off in 20 years’ time, the government said.

The latest cash ISA rumour is one of several potential reforms to ISAs that could be announced in the Budget.

Earlier this year, the chancellor was reportedly considering imposing a £4,000 or £5,000 annual limit for cash ISAs. Currently, you can save or invest a total of up to £20,000 per year across different ISAs, and you don’t have to pay tax on the interest or investment returns.

The chancellor told the BBC in May she is not looking at reducing the overall ISA limit of £20,000.

In March, Reeves said she was seeking to “get the balance right between cash and equities to earn better returns for savers” and “boost the culture of retail investment” in Britain.

The top cash ISA currently on the market pays 4.55% interest, but well-diversified investments have historically brought higher returns.

At a recent Investment Association dinner, City minister Lucy Rigby said: “Someone who put away £1,000 in a cash ISA every April since 1999 would now hold about £34,000. If they had instead invested in a stocks and shares ISA instead, they could now have around £83,000 – over twice as much.”

Revival of cash ISA limit plans “really disappointing”

Some critics have slammed the idea of cutting the cash ISA limit.

Andrew Gall, head of savings at the Building Societies Association (BSA), which represents 43 UK building societies and six credit unions, said it was “really disappointing that the chancellor seems only to be listening to the investment businesses who would benefit from the changes”.

Gall argued that cutting the cash ISA limit will undermine the “brilliant savings product”, make lending more expensive, and will make the ISA system more complex and expensive to administer.

"Starting to save is a crucial part of the journey to investing – undermining cash ISAs risks undermining the very investment culture that we should be trying to build on top of its strong foundations,” he said.

When rumours of a cash ISA limit first circulated earlier this year, the BSA warned building societies use cash ISA deposits to fund mortgages and said a reduction in how much can be saved in one could therefore make lending more expensive.

Kevin Mountford, co-founder of Raisin UK, believes a cut to the cash ISA limit would be a step in the wrong direction by the government.

He said: “At a time when more people than ever are paying tax on their savings interest, restricting access to tax-free cash savings could feel like a step backwards for ordinary households.”

In contrast, investing and trading platform IG said it supports a potential reduction in the cash ISA limit, arguing the product has “not only failed to improve people’s wealth but have steadily eroded it,” and adding that it is “completely incompatible with long-term wealth creation”.

Michael Healy, UK managing director at IG, said: “The chancellor is absolutely right to take aim at this outdated product – and she should go further by abolishing the cash ISA allowance altogether.

“We should not be incentivising or rewarding the hoarding of cash, particularly at a time when our stock market is teetering on the brink through lack of investment. Britain needs more people investing and more money directed towards growth, and abolishing the cash ISA is a sensible place to start.”

Just 12% of Brits are in favour of a reduction to the £20,000 cash ISA allowance, while 48% oppose the change, according to recent polling by AJ Bell.

Increases to income tax are also unpopular among Brits, with 48% saying they’re against rises.

Reeves had been reportedly weighing up raising income taxes but has now U-turned on the plans after receiving better-than-expected economic forecasts from the Office for Budget Responsibility (OBR).

Tom Selby, director of public policy, said: “With an increase to income tax rates now reportedly off the cards, voters will be wary of the raft of other potential tax-raising measures on the table ahead of the Budget.

“However, the fact a cash ISA cut comes in just as unpopular as a hike in income tax rates may give Reeves pause for thought on whether such a move is really a good idea.”

Reeves eyes stocks and shares ISA reform

On top of potential limits to the cash ISA allowance, the Financial Times reported the chancellor is also considering introducing a minimum UK shareholding requirement in the stocks and shares ISA.

If Reeves presses ahead with the proposal, British investors would effectively be forced to put a proportion of their investment portfolios into the UK stock market, eliminating the geographical freedom that is currently available in the stocks and shares ISA.

A requirement to invest a portion of ISA holdings in the UK would provide a boost to the UK stock market, and therefore help stimulate economic growth.

The plans are reminiscent of the previous Conservative government’s scrapped ‘Brit ISA’ plans, which would have allowed investment of an additional £5,000 annually in UK equities.

Reports indicate Reeves is also looking at other measures to direct more ISA holdings into the UK stock market, including a proposal to remove stamp duty from London-listed stocks held within ISAs.

When could a cash ISA limit be introduced?

As mentioned previously, if a reduction in the cash ISA limit is announced, it will likely be in the Autumn Budget.

The Budget is set to be delivered by Reeves in Parliament on 26 November at around 12:30pm. However, if a reform like this is pushed through, it's highly unlikely it will be implemented immediately.

Instead, the earliest a cash ISA limit is likely to be introduced is the start of the next tax year in April 2026.

Will I lose access to my cash already in an ISA?

It is extremely unlikely the government would make any changes to the ISA rules retrospectively. This means any cash savings you already have in an ISA are safe – the chancellor isn’t going to force you to move them into a stocks and shares ISA, or steal them away for the Treasury.

Any reforms to the ISA regime will likely come into play next April 2026 at the earliest, in line with the new tax year.

The average investment trust generated higher returns than cash in every ten-year period throughout the last decade, according to the Association of Investment Companies (AIC).

Rather than putting your savings into cash, it might be better to start investing, and investment trusts could be a particularly reliable place to start putting your money to work.

Brits have around £46 billion sitting in cash ISAs paying interest of 1.5% or less, according to data from Yorkshire Building Society. With inflation hitting 3.8% during July and August, the real value of these savings is being eroded alarmingly quickly.

The AIC analysed Morningstar data going back to 1996, and found that the average investment trust outperformed cash over every individual 10-year period during this timeframe.

It also found that the average investment trust outperformed savings accounts in 84% of three-year periods and 95% of five-year periods, as well as 100% of ten-year periods.

^{Source: The AIC / Morningstar}

“Since 1996, there hasn’t been a single ten-year period in which the average investment trust has done worse than cash,” said Nick Britton, research director at the AIC. “The best ten-year return for trusts in that period is 217% and the worst is 55%, which is still better than the best ten-year return for cash of 39%.”

Britton highlighted that past performance is not a guide to future performance and that over shorter time periods, it becomes less likely that investment trusts would outperform cash. Investment trusts beat cash in two out of three one-year periods over the past 30 years.

“Investment trusts should be considered by those who can invest for at least five years, and preferably ten or longer,” he added.

Investing in equities over cash

The problem with holding your savings in cash is that, while you’ll generate a predictable return, this return will be fixed. Increases in inflation can quickly start to eat into the long-term value of cash savings.

Investing in the stock market, on the other hand, increases your risk in the short term, but over the long term it gives you a better chance of generating above-inflation returns. That’s because, while the global stock market has its ups and downs, it tends to grow over time and to do so at a rate that beats inflation.

“Investing in the stock market is often seen as risky but over the long term, it has protected savings from inflation a lot more effectively than cash,” said Britton.

It is important to have a cash buffer to cover unexpected costs, and the predictability of cash means that this is the best place to hold this buffer; you don’t want to find yourself forced to dip into your investments while the market is enduring a downturn.

“Exactly how much emergency cash saving you need will depend on your personal circumstances,” said Claire Exley, head of financial advice and guidance at Nutmeg. “Think about your fixed bills, do you have dependents, how easy would it be for you to get another job if you needed to? As a starting point, we would usually suggest having between three and six months’ essential spending saved in an account you can easily access.”

Beyond this, though, it is worth considering putting your money to work in the stock market.

“Investing will usually allow your money to work harder than it would in cash savings,” said Exley. “Historical data tells us that over the long term, investments deliver better returns than cash savings.”

Why buy an investment trust?

An investment trust offers certain advantages over other forms of investment fund, though it should be noted that any investment should be made with consideration to your individual goals and circumstances.

They are closed-ended funds which means that they have a fixed number of shares which trade independently of changes in the value of the assets they hold (their net asset value, or ‘NAV’).

While that means investment trusts can trade at a discount to their NAV, it also makes them a superior vehicle for investing in long-term, illiquid areas such as infrastructure projects. Investment trust managers, unlike those of open-ended funds, will never be forced to sell their assets at a discount in order to meet investor redemptions.

Investment trusts can also borrow money to amplify their returns (known as gearing), and unlike other types of funds they can reserve up to 15% of their capital every year.

This allows them to smooth out dividend payments and maintain them during tougher years, making them potentially more reliable as a source of income. Anyone considering switching from cash to investing might find this reliability of income reassuring.

If you’re new to investment trusts and looking for inspiration to get started, read our explainer on the best investment trusts for beginners.

Britain’s biggest investment platform, Hargreaves Lansdown, has launched its first-ever cash ISA product, offering customers the ability to save up to £1 million in a single cash product.

The new easy-access cash ISA, launched in partnership with challenger bank Shawbrook, will initially pay a variable interest rate of 3.45%.

Its interest rate will never go more than 65 basis points below the Bank of England’s base rate, meaning the product is set to occupy a competitive place in the ISA market.

While this guarantee does not necessarily mean the account will be among the highest-paying cash ISAs, it does mean savers are unlikely to be stung by the poorest rates available.

Mark Hicks, head of active savings at Hargreaves Lansdown, said the account will offer clients a “consistently competitive savings rate”.

The savings will be held by Shawbrook Bank and will be protected by the Financial ­Services Compensation Scheme (FSCS), which protects up to £85,000 per person, per bank, building society or credit union. Hargreaves Lansdown will directly control the interest rate offered to customers.

How does Hargreaves Lansdown’s cash ISA compare to others on the market?

What differentiates Hargreaves Lansdown’s new cash ISA from the many other options already on the market is its guarantee to never pay an interest rate more than 65 basis points below the Bank of England base rate.

At present, the base rate stands at 4% after the Bank of England’s Monetary Policy Committee (MPC) decided against an additional interest rate cut amid high inflation.

With the base rate at this level, the lowest possible interest rate that Hargreaves Lansdown can offer on their new cash ISA right now is 3.35%, though this minimum level will change in line with shifts to the base rate.

However, Hargreaves Lansdown’s 3.45% interest rate is far from the best available rate on the market at the moment.

The top easy-access cash ISA rate is almost a full percentage point higher at 4.38%, offered by Trading 212.

The rate offered is certainly not poor, being significantly higher than the average no notice cash ISA rate of 2.77%, according to Moneyfacts.

Hargreaves Lansdown already offers customers the ability to save in cash ISAs paying up to 4% interest on their platform through other banks, but the new product is the first to be done directly through Hargreaves Lansdown.

Hicks said: “While clients will be able to access better rates on our savings platform on an individual bank basis, this product will provide consistency and diversification benefits to savers who don’t want to have to continually switch products around to generate a competitive rate.”

He added: “Cash ISA providers often pay bonus rates to attract clients, but these rates expire, leaving them with a longer-term, lower rate. [The new product] will allow us to accelerate the growth of our platform, provide better client outcomes and give savers greater choice from a brand they trust.”

Cash ISA savers can get up to £500 cashback as part of a new switching incentive from Barclays, but there is a catch.

The bank appears to have kicked off ISA season early by aiming to tempt savers with an attractive cashback deal.

You could get up to £500 cashback by transferring your cash ISA to Barclays.

But there is a big caveat. You will only get the full £500 if you transfer £100,000 or more.

Here is how Barclays’ ISA transfer cashback offer works.

What is Barclays ISA transfer cashback offer?

Savers could get up to £500 cashback by transferring their cash ISA to Barclays.

There are a few requirements though.

You will need to have a Barclays current account for the money to be sent to and be over 18. Accounts must be opened by 28 November to be eligible for the reward.

The transfer can be made into a new or existing Barclays cash ISA either through the ISA transfer service in the Barclays app or via online banking.

The money can also come from multiple accounts but Lifetime ISAs, Help to Buy ISAs and other Barclays ISAs are excluded.

Once the transfer is complete, the cash will be sent to the current account within 60 business days after 28 November 2025.

However, while £500 looks like an attractive sum, and is higher than any cashback deal for current account switching, the amount you'll get actually depends on the ISA balance you transfer in.

How much cashback can you get when transferring a cash ISA to Barclays?

The more you transfer, the more cashback you will earn. There is a £100 reward for those transferring between £25,000 and £49,999.99.

This rises to £200 for those moving £50,000 to £99.999.99.

You will only get the full £500 if you transfer £100,000 or more.

What cash ISA rates does Barclays offer?

Barclays has a range of easy access and fixed rate ISAs.

Its best rate is a 4% one-year fixed rate cash ISA but it is only available for premier and wealth management clients.

This is only available to those with a gross annual income of at least £75,000 and at least £100,000 of savings or investments with the bank.

Alternatively, Barclays has a one-year fixed rate cash ISA at 3.7% for all customers.

It is important to shop around and not just chase the cashback though.

Savers could earn more interest on a cash ISA with other providers.

Trading 212 offers 4.38% on its cash ISA, while Plum has a product at 4.37%.

Cashback rewards are also higher for those investing through a stocks and shares ISA, rather than keeping their money in cash.

For example, Charles Stanley offers up to £1,500 cashback on stocks and shares ISA transfers.

You would need to transfer £100,000 to get at least £1,000 back, which is more than the Barclays cash ISA offers, plus the returns from the stock market could be higher over the long-term.

Savers rushed into cash ISAs last year to take advantage of some of the highest interest rates on the market for savings since the financial crisis, according to latest government figures.

Cash ISA subscriptions grew by 67% – a jump of £27.9 billion – in the 2023/24 tax year, HMRC’s data showed. This took the total ploughed into cash ISAs for the year to £69.5 billion.

By comparison, money invested in stock and shares ISA rose by a much more modest 11% – amounting to £3.1 billion – totalling £31.1 billion.

These figures don’t reflect the dash-to-cash ISA ‘stuffing’ in early 2024/25. This is when rumours swirled that chancellor Rachel Reeves might slash the cash ISA allowance ahead of the Spring Statement, with some suggestions the limit could go as low as £5,000. Billions were hurriedly parked into cash at that time, and the next HMRC release is likely to show another surge in cash ISA take-up.

Instead the surge in 2023/24 was down to a higher Bank of England base rate pushing up the interest rates on offer for cash ISAs.

Jason Hollands, managing director of investment platform Bestinvest, said: “Over 9.9 million people subscribed to cash ISAs in 2023/24, the highest number in eight years. It’s unsurprising this was the case given UK interest rates climbed to 5.25% during that year, their highest level since 2008.”

Rachael Griffin, tax and financial planning expert at Quilter, said higher interest rates have “clearly made cash ISAs more appealing”, offering returns not seen for over a decade. But she added this is a “temporary reprieve”.

“Rates have already started to drift lower and, with the Bank of England expected to hold today before eventually cutting, the generous cash deals of the past year are unlikely to last,” she said.

Cuts to cash savings rates

The Bank of England Base Rate cut last month to 4% has resulted in a cascade of savings rate cuts, according to Moneyfacts analysis, with rates steadily trending downwards since the Bank began lowering rates in August 2024.

Since the start of August 2025, the average easy access savings rate has fallen by 0.08%, from 2.68% to 2.60% and the average easy access ISA rate fell by 0.08% from 2.90% to 2.82%.

The Moneyfacts average savings rate fell to 3.46% in September, down from 3.5% month-on-month. It is down from 3.8% since September 2024, and lower than 4.29% in September 2023. The rate was last above 4% in January 2024 (4.04%).

Rachel Springall, finance expert at Moneyfacts, said: “Savers pay the price of cuts to the Bank of England Base Rate, and the 0.25% reduction in August has been no exception. Overall, savings rates continue on the downward trend.”

How does inflation affect cash savings?

Savers need to remember that cash provides short-term safety but long-term stagnation, Quilter’s Griffin said.

This is because, where cash rates don’t keep up with the rate of inflation – currently 3.8%, nearly double the Bank of England’s 2% target – its value is being silently eaten away so it is worth less over time.

“Inflation will steadily erode the value of money left sitting in cash, whereas investments stand a far better chance of beating inflation and growing wealth in real terms,” Griffin explained.

However, ISAs will still be sought after by savers looking to protect their pot from tax, regardless of rate cuts. There will be many savers impacted by fiscal drag, and as a result, basic rate taxpayers who edge up into the higher-rate tax bracket at 40% will have their Personal Savings Allowance (PSA) halved from £1,000 to £500.

“This will just add fuel to the fire for demand in ISAs, yet the future of the cash ISA allowance remains up in the air as rumours continue to circulate for a review in the upcoming Budget,” said Springall.

Could the cash ISA limit be cut?

For now, it seems, the chancellor’s plans to cut the Cash ISA allowance have been put on ‘pause’ but that does not mean reform of ISAs is off-the-table completely for the remainder of this parliament.

Hollands said: “It should be noted that several alumni of the Resolution Foundation, a think tank which has previously advocated capping ISAs to £100k per person, are now in influential positions in the government.

“ISAs should not be taken for granted given the increasingly painful tax burden in the UK, with much diminished annual exemptions for capital gains and dividends, and higher rates of CGT introduced at last year’s Budget,” he said.

As the tax environment is only likely to toughen in the near term given the hole in the public finances, those able to make use of ISAs to protect wealth from taxation should do so as fully as possible, Hollands added.

Retiring early is usually the preserve of the very wealthy or those who have invested and saved heavily.

But with rising living costs, stopping work sooner than your expected retirement age could be challenging for many workers.

The average retirement age in the UK is 65 years for men and 64 years for women. Yet having financial freedom earlier is on the minds of many, it would seem. Around one in six people (16%) hope to retire before they turn 60, according to research by Hargreaves Lansdown in April 2025.

MoneyWeek spoke to one reader who told how, at age 30, he plans to stop working before he is 50 and how he is doing it.

James Goodwin, who works for a small telecoms business in Leeds, is pumping up his ISA and investing more to get there.

“I’ve been investing in my ISA for five years already and I’m keen to reach a point where I have the choice not to work,” says James. “I might well carry on working when I get there, but it’s all about reaching that stage where you can choose.”

James, who lives in York with his wife Huiqiong, 33, says they both save as much as possible each month to put into their investments. In some years, he’s used his full £20,000 ISA allowance, but has reduced stocks and shares ISA contributions this year to build up a larger cash reserve.

Now they intend to invest around £10,000 to £20,000 per year.

“I spend a lot of spare time – even when I’m on holiday – researching our investments,” he says. “I would say I’m a value investor so I look for where a company’s share price is low compared to its intrinsic or true value.”

James is building his portfolio with UK stocks, including financial and hospitality companies.

He’s got his eye on a couple of investment trusts next. “The idea is to spend the next 15 years or so ploughing money into investments, and hope that they will yield enough to cover our living expenses to allow me to stop working. I realise there will be times when we can’t save as much, perhaps if children come along, but we will continue to save what we can.”

James, who writes an investment newsletter on his website firmreturns.com, pays into his company pension but has chosen to invest spare savings in an ISA held with AJ Bell so he’s not restricted on when he can use it to draw an income.

“When the time comes that I am financially comfortable enough to retire, I’d like to be a full-time investor – and maybe even seed my own fund, which wouldn’t feel like work,” he says.

Much of James’s success when it comes to retiring early will be selecting the right investments that will help him reach his goal.

Once he gets there, James dreams of a “fairly low-key” lifestyle – spending time reading, writing, hiking and socialising. “My wife would probably add some travelling to that list,” he adds.

The couple have had to make some sacrifices along the way. They could afford a larger house, but they chose a “smaller" one to keep housing expenses down, James says.

The couple also sold their car last year. Although it was convenient, they couldn’t justify the expense for the amount they drove.

Holidays abroad have also been put on hold – they only travel internationally to visit relatives, "where the largest cost is the flight tickets,” James says.

Cutting back on these higher expenses has meant the couple can continue to enjoy small luxuries in life – such as occasional meals out and trips to the cinema – without having to compromise on the amount they are saving.

If you want to start investing, we explain how to invest in our beginner’s guide.

How much do you need to retire early?

“The key to early retirement is building up enough money to ensure you have the lifestyle you want to enjoy,” says Alistair McQueen, head of savings and retirement at Aviva. “Though that number is different for everyone.

“You’ll also need to make sure that money will last. After all, even if you retire at 55 you could need to fund 30 years or more of retirement.”

Only half (48%) of mid-retirees aged 65-75 are confident they are on track to make their private pension savings last for life, recent research by Aviva and Age UK has found.

The latest Retirement Living Standards report from Pensions UK (previously the Pensions and Lifetime Savings Association or PLSA) estimates that a single person now needs £43,900 a year in post-tax spending – equating to more than £52,000 in gross income – to enjoy a “comfortable” retirement.

According to calculations by Fidelity, someone starting at age 25 would need to save £459 each month to reach that goal by 65.

Delaying contributions significantly increases the challenge: a 35-year-old would need to save £841 monthly, while a 45-year-old would need £1,703 a month – almost four times the commitment required at 25.

Ed Monk, associate director at Fidelity International, says: “Many people are taking positive steps towards improving their retirement prospects – whether that’s increasing contributions or planning to retire early. But intention alone isn’t enough. With the cost of retirement rising and expectations shifting, it’s vital that savers understand what kind of lifestyle their savings can realistically support.

“The PLSA’s updated benchmarks provide a useful reference point, and there are clear steps investors can take – whether they’re 10 years away from retirement or making final decisions – to ensure their savings align with the lifestyle they want in later life.”

If you do give up work, there’s always the option to change your mind and rejoin the workforce to start earning again.

“After the pandemic there was a surge of under 65s quitting their jobs, but many of these have returned to work as they realised that either they needed to go back to work financially, or for a strong daily sense of purpose,” says McQueen.

How to retire early

Here are some ideas on how to build wealth to increase your chances of financial freedom early.

Start investing early

The earlier you invest, the more time your money has a chance to grow.

You might not feel that retirement is a priority when you start the world of work, but your future self will thank you if you think long-term from the beginning.

Pay down your mortgage

Not having a mortgage to pay will be a big contributor as to whether you can afford to stop working. Repayments would be a large outgoing from your retirement savings.

You might consider using the 25% tax-free lump sum from your pension to pay off the remainder of your mortgage if that will cover it. But if you retire before you can access your pension then that won’t be an option for a while.

Max out pensions

Valuable tax breaks offered by pensions mean you can boost your retirement savings.

If you’re a basic rate taxpayer, every pound you pay in becomes £1.25, while for higher rate taxpayers it becomes £1.66.

The more money you can spare to pay in, the bigger your final pension pot will be. The earlier you invest, the more time your money has to grow. Find out from your employer if you can increase pension payments beyond the current level set and if they are matched by your employer, as this will boost your pension further.

While you can’t access money saved in a pension until 55 (rising to 57 in 2028) it’s still worth taking full advantage of the valuable pension tax relief. Remember, your fifties is still early retirement for most.

Build non-pension assets

While pensions are an extremely tax-efficient way of building wealth, they can’t be accessed until 55.

Should you want to stop work earlier, you would need non-pension assets, such as ISAs or buy-to-let property, to support your lifestyle until you can access your retirement pot and eventually your state pension.

The state pension age is currently 66 years old for both men and women but will start gradually increasing again from 6 May 2026.

Seek advice

If you need help with planning an early retirement you can speak to a financial adviser who can help map out a plan using cash flow modelling. This is a tool where you can understand if you have enough money to meet your retirement goals, testing different scenarios.

McQueen adds: “Retiring is one of the most important financial decisions you will make and not one to be rushed so getting help can allow you to consider all the variables at play including how long you might live, any social care you might need and any inheritance aspirations you have to leave money for loved ones when you’re gone.”

Find an adviser in your area at unbiased.com.

If you’re over 55, Pension Wise is a free and impartial government service that helps you understand the options for your pension pot.

Building up an ISA portfolio can take years of consistent investing. It doesn’t have to disappear to the taxman when you pass away.

There is a valuable tax break between spouses and civil partners that lets a surviving partner inherit an ISA, known as additional permitted subscriptions (APS).

It is only available if you are married or in a civil partnership, but more and more people are taking advantage of this.

Data from Hargreaves Lansdown (HL) last year showed almost a third (33%) more people inherited ISAs held on the investment platform through an APS - and the number is up by two thirds in two years (68%).

But there are risks to taking on someone else’s investment strategy as you need to be sure it reflects your risk appetite and also the type of stocks and funds you are happy to have money in.

We look at the best cash ISAs and the best performing stocks and shares ISAs in separate articles.

Is an inherited ISA free from inheritance tax?

If an ISA is inherited from a deceased spouse then it will be free from inheritance tax and is treated as an APS, which we explain more about below.

But if the ISA is left to children or someone else, the value forms part of a person’s estate when they pass away for inheritance tax calculations.

It would only be exempt if the overall value of the estate falls below the £325,000 inheritance tax threshold. Otherwise the ISA’s value would be subject to inheritance tax.

This is why the APS is a useful tax perk for married couples and civil partners.

What is an ISA additional permitted subscription?

The additional permitted subscription is a special tax break for married couples and civil partners. If you leave savings and investments in ISAs to your spouse or civil partner, you pass on your ISA allowance to them too.

This is equal to the value of the ISA on the date of death, or the value of those assets once probate is complete – whichever is higher.

It means a spouse or civil partner who is left assets that used to be in an ISA could potentially wrap everything back up in this allowance, without using up their usual annual allowance.

Even if they weren’t left the ISA, they can claim the additional permitted subscription and use it to wrap around other assets.

So for example, if your spouse died with an ISA valued at £50,000, you could contribute £70,000 (£50,000 plus £20,000) to your ISA for the 2025/2026 tax year.

To register an additional permitted subscription for an ISA, you need to apply to the ISA providers of your deceased spouse or civil partner. You'll need to provide information about their ISAs and your relationship to the deceased.

The process typically involves filling out an application form with the ISA provider and providing necessary documentation like the grant of probate.

What should I do with inherited investments?

In practical terms, the surviving spouse may be able to open a stocks and shares ISA with the same provider, and shift the inherited ISA investments over without selling up – in what is known as a transfer in specie. This is common practice.

Timing is important though. The money has to be used three years after the death or 180 days after the estate is finalised, whichever is later.

After this period the money will lose its ISA tax wrapper status. This means any returns won’t be tax-free if the APS money isn’t used in another cash ISA or stocks and shares ISA product.

So it is worth moving the money.

There usually aren’t any exit penalties – but check whether the new or existing platform fits your needs, especially around fees and service.

When HL clients inherit investments in this way, half of them (48%) don’t make any changes to their portfolio within the first year. Around one in seven (15%) make their first trade within two weeks of inheriting.

Jude Dawute, managing director at wealth manager Benjamin House, said the key is not to either rush in or neglect the portfolio entirely – but to do a simple review as soon as possible.

“When someone inherits an ISA, the key thing to realise is that the original investments were aligned with the deceased partner’s goals — not necessarily yours. So the first step is to review whether those holdings still make sense,” he said.

For instance, if they were invested for long-term growth but your needs are short-term income, then switching may be appropriate.

Dawute said: “Having those conversations between couples while both are alive – about what happens to pensions, ISAs, debts, etc. – really helps avoid confusion or hasty decisions later.”

The risks of selling out of an inherited ISA

Making changes to an inherited ISA can make perfect sense if you have different objectives to your late spouse, or your circumstances have changed significantly enough to mean a different kind of investment portfolio is more suitable.

The risk is that in some cases of early sellers, people who inherited investments might not be as familiar with investments as their spouse, and might be selling just because they don’t have the confidence to hold them.

Coles said: “This can have unforeseen and damaging consequences. If they switch investments designed to produce income into cash, for example, and continue to draw the same income as before, they could eat into their savings far faster than they were expecting.”

Should I keep my late partner’s ISA investments?

At the other end of the spectrum, around half of people are still holding exactly the same portfolio as their spouse had.

This can be a sensible approach, especially where a couple have planned together, and built a portfolio that meets both their needs.

After a bereavement, it’s often sensible not to make any sudden changes until you have had a bit of time to come to terms with your new circumstances.

However, there remains a risk that some of these investors haven’t made a change either because they don’t feel they understand enough, or because they feel their spouse would want them to stick with them.

“It’s why, at a time like this, it’s so vital that whoever is left behind is armed with all the knowledge and support they need,” said Coles.

In some cases, this will mean working together on investments, and talking about how they work and what they are designed to do, while you’re both in good health.

Coles said: “That way you have made decisions together, and one of you has the confidence to continue doing so alone.”

In other cases, the surviving spouse could benefit from financial advice, where a professional can give them all the help they need to find the right solution for them.

For too long, people have been made to fear investing. It’s time to stop the fearmongering.

We’ve all heard the warnings: ‘it’s too risky’, ‘you’ll lose your money’, ‘crypto is better’. And then there are people who just ask me ‘will it make me rich quick?’

The answer to the last question is no - sorry. As for the other comments, they are simply wrong and out of context.

It comes as no surprise however that this is how investing is viewed. Britain has become a nation obsessed with saving pennies, spending hours chasing petty cash or being made to feel anxious about finances.

I love a frugal attitude, but I also prefer to be smart with time and money.

I fully support chancellor Rachel Reeves’ push to encourage savers to invest. While Reeves may have delayed any decision over the cash ISA, her Mansion House speech implied that some sort of ISA reforms could be on the way. The Leeds Reforms, announced this week, will also help and I’m pleased there will be a campaign to help savers decide for themselves whether investing is right for them.

To get there, we do perhaps need some cash ISA reform. It doens't have to be a cut to the tax-free allowance. Instead, making stocks and shares as easily accessible and making a single ISA which combines both could help.

Who needs financial education?

We’ve heard a lot about introducing financial education in schools - and yes, money skills are essential and it should be a topic at school. I’m waiting for the government to yet mention the need to introduce this into the curriculum from primary age.

But for now, school-age education will not fix the faltering economy and neither will it help encourage savers to shift their long-term holdings from cash into investment products, such as the stocks and shares ISA.

Real education is needed. People who hold tremendous power in influencing consumers’ financial decisions are fuelling fear and anxiety to the point where savers are unable to make the right decision for themselves.

It wasn't too long ago I saw a piece in a national paper from a senior figure telling readers ‘cash is king’. But sadly, cash really isn't king when it comes to growing your money for your future.

I've also seen pundits on TV describe investing in stocks and shares ISAs as ‘a risky-based investment’, with the implication being that investing is only a good thing for young people. But, the message is surely about knowing what risk is, taking the right level of age-based risk, and investing accordingly. It’s not just for ‘young’ people in their twenties!

By the way, it is worth noting that if you save into a pension you are investing.

Yes, you can lose money in investing, but the fact is, most people are already losing money on cash savings due to inflation.

With investing, over the long term, most people tend to do better.

How much money can you make with investing?

I don’t think it is possible to put a figure on investment returns, not in the same way as you can with cash interest rates.

There are years when investors could face a loss and other years they could see strong returns - but if you are consistent for many years, you will benefit from something known as pound cost averaging.

The government said yesterday in its Leeds Reform announcement: “According to some industry estimates, more than 29 million adults across the UK have cash sitting in a low-interest rate account offering around 1% - while the average return for stocks and shares over the last 10 years is around 9%.

“If those savers invested £2,000 today, they could have £12,000 in 20 years’ time. This compares to £2,700 if they held this money in a cash account offering 1.5% at the current interest rate, making them over £9,000 better off.”

Nice numbers and they are not impossible to achieve, though it is worth understanding that past performance is no guarantee of future performance.

There is no promise of guaranteed returns when you invest, but if you can build a strategy where you have some cash set aside for everyday costs, unexpected costs and short-term goals, plus money in investments for the future, then you could be onto a winning plan when it comes to building wealth.

If you are looking to get started with investing, do take a look at my book - Invest Now: The simple Guide to Boosting your Finances. We also have a beginners guide to help you start investing.

And if you think you may need financial advice, here’s what you need to know about seeing a financial adviser.

More than 1,000 children have at least £100,000 in their junior ISA (JISA), with 50 sitting on £200,000 or more, according to a Freedom of Information request sent to HMRC by NFU Mutual.

The data, which outlines savings in the 2022 to 2023 tax year, shows that some parents are making the most of the annual tax wrapper to ensure their children get a head start with their savings.

Even if your child isn’t among the top JISA holders, setting one up for your child could be well worth doing.

Investing £55.50 a month could result in you giving your child a £18,000 head start by the time they turn 18, according to research by Fidelity International earlier this year. This assumes a modest annual growth rate of 5%.

How does a Junior ISA work?

Parents can put up to £9,000 a year in a junior ISA without paying any tax on interest or returns.

When they were first introduced in November 2011, the junior ISA allowance was £3,600. This was gradually increased to £4,368 in 2019 before being hiked to the current limit in 2020.

Children who have had a JISA set up for them will be able to take control of their account at age 16, but are only allowed to withdraw money from it when they turn 18.

HMRC says around 2 million junior ISA accounts are subscribed to in Britain, with 42.2% in cash rather than stocks and shares.

A table showing the largest junior ISA values in the 2022/23 tax year can be found below.

Source: NFU Mutual FOI to HMRC, June 2025

Can a junior ISA help your child get a head start in life?

With over 1,000 children receiving a six-figure head start in life, and thousands more being set to receive smaller sums, Chris Hood, personal finance expert at NFU Mutual, says JISAs are a “great way to help save for a house deposit or university fees in a tax-efficient environment”.

He adds: “It is important that the overall investing time horizon is considered as this allows an opportunity to take on more risk in the portfolio and achieve potentially greater returns.”

Hood adds that the number of accounts that hold six figures or more shows “the potential for JISAs to grow into large sums when the investments are given many years to mature and to ride out short term stock market volatility”.

“This can give children the confidence to invest for the longer term and to understand the benefits that long term investing has the potential to bring.”

Meanwhile, Hood says junior ISAs could also be useful for parents and grandparents who want to lessen their inheritance tax burden as they can reduce the amount in their estate by making gifts.

How to build your child’s JISA savings

While you will likely have had to max out the JISA allowance for the past 14 years to see the huge sums outlined above, it can be quite simple to grow your child’s savings.

One way you can do this is by putting money into a market-leading cash JISA, which currently pays 4.15%, according to Moneyfacts.

You can also invest in stocks and shares in a JISA. Ed Monk, associate director, Fidelity International, says many parents “are missing out on the opportunity to make their money work harder” for their children.

“While saving in cash accounts may seem like the safest option, inflation can erode the real value of those savings over time,” he adds.

Instead, Monk says that by starting early and investing consistently, “even small amounts can add up to a substantial sum” that can provide a financial boost for your children.

Monk provides five tips to help build up a JISA fortune for your child. He says starting early is essential because “the earlier you begin, the more time your investments have to grow”.

He suggests parents set realistic contribution goals that they are able and willing to meet – “even small amounts can make a difference, for instance, contributing £25 a month from birth could result in a pot of £8,119 by age 18”.

Diversifying JISA investments is also key, according to Monk, as a well-diversified portfolio could help reduce risk. He suggests parents “consider funds that invest across different sectors or regions to balance exposure”.

To help your child’s nest egg grow as much as possible, Monk also recommends using the full allowance if that’s possible as maximising the investment “can accelerate growth significantly”.

“For example, fully utilising the allowance from birth to age 18 could result in a pot worth £243,561, based on monthly contributions of £750 and assuming an annual growth rate of 5%,” he says.

Finally, Monk stresses that it is important to stay consistent with your investment. He adds that though market fluctuations can be unsettling, “you have a lot of time to invest for your child if you start as soon as they’re born,” allowing fluctuations to iron out.

“Sticking to regular contributions can help smooth out short-term volatility and maximise long-term growth potential,” he concludes.

How did the largest JISA holdings get so big?

Data from HMRC shows there were around 1.25 million junior ISAs in the 2022 to 2023 tax year, holding a total value of £1.5 billion, but the average annual subscription was just £1,220.

The average parent would have only paid £14,640 into their child’s junior ISA over the 12 years between the introduction of the JISA and the end of the 2022/23 tax year.

The total pot will have grown thanks to returns on investments or from cash interest, but these returns are unlikely to be large enough to make the value of the nest eggs among the highest in the UK.

This means that Britain’s top junior ISA savers will have likely maxed out their junior ISA limit for each year, amounting to a maximum investment of £62,836.

The table below shows every time that the junior ISA limit was increased since its introduction in 2011.

Source: HMRC

Data has shown that junior stocks and shares ISAs have outperformed junior cash ISAs, providing around £13,300 more over an 18-year period when adjusted for inflation.

For more about where to open a junior stocks and shares ISA, read our guide to the best junior stocks and shares ISA platforms.

How do junior ISAs work?

A junior ISA is a savings account that can be set up in the name of a child by their parents or guardian.

The merit of a JISA over a normal savings account is that you do not have to pay any tax on interest or investment returns from the money held in the JISA.

Up to £9,000 a year can be put into a JISA on behalf of a child, with the money being legally theirs. When they turn 16, the child can control the JISA account, but are only able to withdraw money held in it when they turn 18.

The prospect of cuts to the Cash ISA allowance could leave the most cautious of savers unsure of where to put their money but there are low risk alternatives.

Chancellor Rachel Reeves is said to be considering cutting the cash ISA allowance in the Autumn Budget tomorrow (26 November)npossibly to £12,000 or by halving it to £10,000. Currently, savers can put up to £20,000 into a cash ISA each tax year, and earn interest tax-free.

There were previously rumours that Reeves would slash the cash ISA limit in her Mansion House speech back in July, potentially to as low as £4,000. But she reportedly changed her mind after heavy lobbying from building societies, who warned that such a move could push up mortgage rates.

The rumours have returned ahead of the Autumn Budget and any reductions mean savers may have to pay tax on some or all of the interest on future savings.

This may already be having an impact on investor behaviour, with Investment Association (IA) data showing rising inflows into funds that provide cash-like returns at the expense of equity funds.

However, you may not need to worry too much about a reduced cash ISA allowance. That’s because it is possible to generate tax-free, cash-like returns without a cash ISA.

Here are some alternatives to cash ISAs for cautious savers and investors that can be held in a stocks and shares tax wrapper.

Money market funds?

The closest you may get to cash on the markets is money market funds.

These invest in short-term debt such as bank deposits, government loans and corporate loans. Fund managers will select a mixture of different investments to manage the money on your behalf, aiming to preserve your money while giving a cash-like return.

The main risks are that the returns may not beat inflation and you would most probably do better with an equity fund over the long-term.

Money market funds saw inflows of £524 million in September, according to the latest IA data.

You can buy a money market fund within a stocks and shares ISA. Many of these funds are currently paying an income of more than 4%, or even 5%.

Mark Burges Watson, co-founder of the money app Kaldi, told MoneyWeek: “If the chancellor cuts the cash ISA allowance, many savers will be left wondering what to do with the rest of their overall tax-free ISA allowance – especially if they’re not comfortable taking on stock market risk. But there’s a solution that few people are talking about: money market funds.”

The funds have become popular with investors since interest rates rose, after years of low returns. And now they’re enjoying another moment in the spotlight as rumours swirl of a cash ISA limit cut.

Indeed, money market funds are some of the best-selling funds on Fidelity’s platform this year. Last month, a trio – Royal London Short Term Money Market Fund, Legal & General Cash Trust and Fidelity Cash Fund – were among the top 10 most popular funds.

At Interactive Investor, the most popular active open-ended fund is Royal London Short Term Money Market – which has also topped the list of its most-bought funds for nine months in a row.

Andrew Prosser, head of investments at InvestEngine, said: "A money market fund is typically made up of short-term debt from governments, banks and companies with strong balance sheets and investment-grade credit ratings.This means they offer relatively stable, if slightly lower, returns compared to other types of investments. But most importantly, any returns invested through an ISA are tax-free.

"With interest rates still at 4%, these types of funds are becoming more popular and can be seen as a substitute for a savings account. Savers can invest in money market funds through their stocks and shares ISA – and they can, if they wish, hold their entire £20,000 annual allowance in just one fund.”

Is there another way to invest in cash using a stocks and shares ISA?

Most investment platforms allow customers to “park” their money in cash before deciding where to invest.

So, if you’re a new investor wondering how to allocate your money, you could leave it in cash earning interest while you decide.

Interest rates vary a lot, as our investigation into interest rates on investment platform cash balances reveals.

Some pay just 1% or 2%, while others, like AJ Bell’s Dodl ISA pay more (currently 4.06%). Bestinvest and Trading 212 also tend to pay competitive rates of interest.

Other alternatives include bonds, which let investors essentially loan money to governments or companies and provide a fixed rate of return.

You can invest directly in bonds or a fund manager can build a diversified portfolio for you.

The latest IA figures show there were £818 million of inflows into fixed income funds in September 2025.

The returns are more or less guaranteed unless the government or company goes bust. Plus there is no capital gains tax when you invest in government bonds, known as gilts.

But the returns will typically be lower than equities and may not beat inflation.

Laura Suter, director of personal finance at AJ Bell, added: “It’s worth remembering that bond funds can move up and down in value. If markets start to think interest rates will rise (or not be cut as fast as previously expected), bond prices usually fall. So, while they’re generally lower risk than shares, they’re not risk-free.

“That said, bonds can play an important role in smoothing out the bumps in your portfolio. Government bonds in particular often move in the opposite direction to shares, which can help balance things out when stock markets are volatile. There are lots of flavours of bond funds to choose from. Some stick mainly to government bonds, while others focus on corporate bonds issued by companies. Strategic bond funds have more freedom to move around the market and pick where they see the best opportunities.

Treasury bills or T-bills, which sit between cash savings and traditional bonds, can also be held in a stocks and shares ISA.

These are short-term loans to the the UK government, backed by the state, and the main risk is that the government defaults.

The loans are typically for one, three or six months but rather than paying interest, they’re sold at a discount and repaid at face value. So, if you buy a £1,000 T-bill for £980, you’ll receive £1,000 when it matures, with the £20 difference being your return.

Suter added: “T-bill rates don’t have a fixed return like a bank account. Instead, the price you pay for them is determined at weekly government auctions. Investors submit bids, and the final rate depends on demand at that auction. That means you won’t know the exact return until after your bid is accepted – but in a high-interest-rate environment, recent yields have remained competitive.

“However, one thing to note is that once you’ve bought one, your money is locked in until maturity – there’s no early exit. Unlike other government bonds or shares, you can’t sell them on a secondary market. This works in a similar way to fixed-rate savings accounts.”

Cautious investors may also benefit from a multi-asset fund

Your money is spread between different asset classes such as bonds and shares to give a diversified portfolio. Investors can opt for different risk levels of these funds to suit their needs, with the lower risk end of the spectrum investing more in bonds, money market options, cash and cash alternatives.

Inflows into mixed asset funds rose from £180 million in August to £264 million in September, the IA said.

Revolut customers will now be able to invest in exchange-traded-funds (ETFs) directly through the bank’s app as the fintech launches its first stocks and shares ISA.

The ISA will allow the bank’s 11 million UK customers to invest between £1 and £20,000 into the easy access tax-free wrapper.

As well as ETF options from Vanguard and BlackRock, users will also have access to other ETF providers via the Revolut app.

With diverse offerings, users can invest across various sectors and geographies with the convenience that comes with ETFs.

Yana Skrebenkova, CEO of wealth and trading UK at Revolut, said the introduction of the stocks and shares ISA was part of an effort by the bank to “break down the barriers” that stop Brits from investing.

She added that the ISA offering will “give our UK customers access to more low-cost investment tools alongside their day-to-day spending, without navigating multiple platforms.”

When will the Revolut ISA be available?

The Revolut stocks and shares ISA will be available within a matter of weeks – and those with an ISA elsewhere, can also transfer their ISA in.

If you are considering an ISA transfer, be sure to let your providers know and follow the correct procedure or you could lose the tax shield.

Revolut said launching its stocks and shares ISA was part of a wider drive to help normalise investing and help customers build long term wealth.

This rhetoric is similar to that of Rachel Reeves in recent months who has said she wants to build a "culture of investing” in Britain.

To achieve this, the chancellor is expected to announce a cut to the cash ISA limit at her Mansion House address on 15 July in an attempt to direct more money into the stock market via the stocks and shares ISA.

How does Revolut’s stocks and shares ISA compare?

By allowing customers to invest in stocks and shares from their banking app, Revolut will compete with fellow digital bank Monzo, which also launched an ETF offering earlier this year.

Monzo’s currently has 11 funds managed by BlackRock on offer, plus the option to ‘Build your own’ ETF.

While you can also have a stocks and shares ISA with a number of platforms, having one attached to your banking app could make it easier to start investing and manage your money.

A Lifetime ISA (LISA) could be a good option if you're looking to amass a mortgage deposit so you can get onto the housing ladder.

While there are several types of ISA, Lifetime ISAs are specifically aimed at those looking to buy their first home or save for retirement. As well as its tax wrapper, the account is an attractive option for savers because it comes with a 25% government bonus on contributions up to £4,000 annually. The maximum government bonus is £1,000 per tax year.

Research from wealth management platform Moneybox – the UK’s largest provider of Lifetime ISAs – showed that £139.6 million in LISA bonuses were paid out by the government in 2025 to its users alone, and that Moneybox LISAs helped 50,000 first-time buyers take their first step on the property ladder over the course of the year.

“The LISA’s monthly government bonus is a big part of what makes it work,” said Brian Byrnes, director of personal finance at Moneybox. “It keeps people motivated, builds momentum, and helps turn long-term goals into real progress.”

Despite the up to £1,000 per year boost, LISAs have come under intense scrutiny recently. The rules around them are strict, and mean savers could lose out in certain circumstances. This has led to proposals for reform as well as calls to scrap certain elements of LISAs. In the 2025 Autumn Budget, the government said it would publish a consultation in early 2026 on the “implementation of a new, simpler ISA product” to help first-time buyers purchase a home.

We explain how LISAs work, what reform could look like, and ask who LISAs might work for – and who they don’t.

How does the Lifetime ISA work?

Like all ISAs, the Lifetime ISA is a tax-efficient way to save money because any interest and investment gains are tax-free.

The unique appeal of the LISA is that you also get a 25% government bonus of up to £1,000 per tax year. For example, if you pay £2,000 into your LISA in a tax year, you’ll receive a £500 top-up, while if you pay in £4,000 you’ll get the full £1,000.

To open one, you must be aged between 18 and 39. You can then pay in up to £4,000 each year until you turn 50. This money counts towards your annual ISA limit (£20,000 for the 2025/26 tax year). Like other adult ISAs and junior ISAs, you can hold cash or stocks and shares in a LISA.

The money you build up can be used to buy a first home that’s worth up to £450,000. Or, you can use the money later in life, with penalty-free withdrawals permitted once you turn 60. You can also access the account fee-free if you’re terminally ill and have less than 12 months left to live.

The downside is you will get penalised for making a withdrawal for any other reason. The exit charge is 25% of your pot. Not only does this effectively take away the government bonus, but it also eats into some of your own money too.

For example, if you have built up a pot of £10,000, your government bonus would take it to £12,500. An ‘unauthorised withdrawal’ would mean you lose that bonus, plus £625 of your own savings, as 25% of £12,500 is £3,125. So, your initial £10,000 pot would become £9,375.

The exit fee also applies if you try to use the cash on a property costing more than £450,000.

“Anyone who exceeds the £450,000 limit, even by just £1, will be hit with the 25% exit charge on the Lifetime ISA, as their purchase will no longer be within the rules,” notes Laura Suter, director of personal finance at AJ Bell.

The exit fee was previously reduced to 20% during the coronavirus pandemic after an outcry over its unfairness – but it reverted back to 25% in April 2021.

LISA reform: what has been proposed?

Following a review last year, the Treasury Committee, a cross-party group of MPs, published a damning report on LISAs in June 2025.

The report concluded that confusion around the LISA withdrawal charge put savers at risk of losing a significant part of their savings if forced to unexpectedly withdraw the money in unforeseen circumstances, rather than using it for a house purchase or retirement, as intended.

MPs also questioned whether the dual purpose of the LISA – focused on both homeownership and retirement – made the product overly complex and risked deterring savers from more productive pension saving.

This led chancellor Rachel Reeves to announce potential changes to the LISA at her Autumn Budget in November.

This could include scrapping the retirement option to create a new LISA focused specifically on home buying.

But a new property-focused product could also face criticism.

“Our data shows that the Lifetime ISA is doing what it was designed to do – helping first-time buyers onto the property ladder while building strong saving habits along the way,” said Moneybox’s Byrnes. “Replacing it with yet another first-time buyer ISA risks adding complexity rather than solving the real issues. Without clear, meaningful improvements, there’s a danger this becomes more ‘policy theatre’ than genuine reform.

“Any changes… must protect the confidence of the 1.5 million people already using a LISA to save for their future,” Byrnes added.

Why are Lifetime ISA rules unpopular?

There are a few reasons behind calls for LISA reforms – not least because the £450,000 house price cap is considered outdated.

When the Lifetime ISA first launched, the average UK house price was £220,000, according to official data from HM Land Registry. Today, average prices are £268,421, based on HM Land Registry data from January 2026 – a 22% increase. The LISA limit has never been updated to reflect the significant increase in prices.

Furthermore, regional disparities in house prices have created a sense of unfairness.

Some parts of the country have such high average house prices that first-time buyers may struggle to use their LISA funds to purchase the property they want. The average house price in London is £554,000; well above the £450,000 LISA limit. With an average house price of £380,000, a typical house in the South East is also close to the LISA limit.

Research from Moneybox found that Bristol, Belfast and Sheffield were the cities that saw the highest levels of house purchases using ISA funds. London didn’t make the list of the top ten cities for LISA-enabled house purchases.

Having already struggled to get on the housing ladder thanks to sky-high prices, those living in these areas could then be penalised further by the LISA exit fine.

Despite this, the state of the government’s finances could make reform unlikely in this area.

The LISA review concluded last year: “The house price cap for the Lifetime ISA ensures that government spending supports those who need financial assistance the most. Any increase in the price cap is an increase in government spending.

“Before considering any increase in the house price cap, the government must analyse whether the Lifetime ISA is the most effective way in which to spend taxpayers’ money to support first-time buyers.”

Is the Lifetime ISA worth it?

A 25% bonus on top of your savings sounds very attractive. It’s a much higher annual rate than you would be likely to get from other forms of ISA. However, you need to make sure you are comfortable with the risks. An increasing number of savers have been burned by the rules around withdrawals in recent years.

According to the latest annual HMRC LISA statistics, published in September 2025, there was a 30% increase in the number of people making ‘unauthorised’ withdrawals in 2024/25 versus the year before. There were 129,200 people who raided their LISAs, facing a combined £102 million in withdrawal charges, or an average of £790 per person.

Those who needed to raid their pot to pay for immediate spending may have been better off building a larger emergency fund first, held in an easy-access savings account.

The key consideration is whether this savings product matches your financial goals. If you are saving for a first home, a good first step could be weighing up how much the property is likely to cost, and how secure your finances are overall. If you think you might end up breaking the rules, a different savings vehicle might be a better option for you.

Is the Lifetime ISA worth it when saving for retirement?

If you are thinking about using a LISA to save for retirement, there are even more factors to consider.

First of all, you need to weigh up whether your money could be put to better use in a traditional pension, where you can potentially benefit from employer contributions and pension tax relief.

You also need to be careful about what sort of LISA you are using. A cash LISA is not an efficient use of your money for this purpose. Given the length of your investment horizon when saving for retirement, a stocks and shares LISA is likely to be far more productive.

But LISAs can be a good option for some self-employed workers, offering a more flexible alternative to a pension. The government bonus can also help compensate them for their lack of employer pension contributions.

“The sweet spot of the LISA can rest in its ability to boost retirement savings among the self-employed. This is a group that has long under-saved into pensions,” said Helen Morrissey, head of retirement analysis at investment platform Hargreaves Lansdown.

“The 25% bonus on a LISA acts in the same ways as basic-rate tax relief on a pension and the money can be accessed if needed, subject to a penalty. Added to this, any income can be taken tax free.”

The ongoing freeze in tax thresholds has dragged a further half a million people into higher tax brackets and the figure looks likely to get higher.

The government may have so far kept promises not to raise income tax rates but chancellor Rachel Reeves has continued the freeze on tax thresholds, which is pushing more people into paying higher rates as their earnings rise.

New projections from HMRC, suggests there are now 7.08 million higher rate income tax payers, a 38.7% increase compared with the 2022 to 2023 tax year.

The number of additional rate income tax payers has also increased by 115.3% to 1.23 million, according to HMRC.

Most people are basic rate taxpayers, at 30.8 million, but this figure is only up 6.8%.

HMRC estimates that the average income tax liability across all income ranges is expected to increase by around £1,170, from £7,100 in 2022/2023 to £8,270 this tax year.

Rather than raising taxes, this has been achieved through stealth taxes in a process known as fiscal drag.

Source: HMRC.

What is fiscal drag?

Raising taxes is never a popular policy but the previous Tory government came up with a stealth way to collect more tax by freezing thresholds in 2022 until at least April 2028.

The Labour government has stuck with this policy, on top of raising capital gains tax and adding VAT to private school fees.

Previously, income tax thresholds rose with inflation but freezing them means workers can be quickly moved into higher tax brackets when they get a pay rise without the actual rate of tax rising.

Additionally, higher earners have been hit by falling capital gains and dividend allowances and a reduced personal savings allowance.

Research by AJ Bell shows receipts to HMRC are up £78 billion from these stealth taxes since 2022 and the taxman is expected to take a further £20 billion this year.

Laura Suter, director of personal finance at AJ Bell, said: “The deep freeze on income tax thresholds means the Treasury tax take continues to spiral.

“Last year’s general election saw Rachel Reeves repeatedly commit not to raise income tax on working people. While the government has stuck to the promise for now, the impact of the stealth tax first initiated by the previous government is still being felt by taxpayers."

While everyone from basic rate taxpayers to pensioners are hit by the frozen tax thresholds, Suter said it’s those who drift into higher tax bands as a consequence who feel the most pain.

Suter added: "Once you move over the £50,270 mark your next pound of earnings is hit with a 40p deduction, rather than the 20p paid by basic rate taxpayers, meaning you see much less of any salary increases in your payslip at the end of the month.

“Although the 45% additional rate tax bracket is theoretically only applicable to super high earners, there are now a whopping 1.23 million people paying tax on incomes above the additional rate threshold.”

Here is how higher earners are getting hit by the ongoing frozen tax thresholds.

Earnings

Average salaries may be rising but the frozen thresholds mean more people are becoming higher rate taxpayers.

HMRC took £228 billion from income tax in 2022/2023 and this is projected to increase to £298.6 billion – a 30% rise.

Rachael Griffin, tax and financial planning expert at Quilter, highlights that Labour has pledged to unfreeze thresholds in 2028, but warns that whether it can afford to follow through is another matter.

She said: “After four years of fiscal drag, the Treasury has become increasingly reliant on the quiet revenue boost these freezes deliver. Reversing that would come at a significant cost, particularly with pressure on public services and spending already high.”

Wealth taxes

It is not just salaries that are pushing people into higher tax brackets.

Dividend allowances have been cut over the past decade, from £10,000 in 2016 to £2,000 in 2019 and it is now just £500.

That affects anyone taking earnings as dividends from a limited company or if you are taking income from shares outside an ISA.

It has been good for the Treasury though, with HMRC data showing its dividend tax intake is set to increase by 26% to £18.6 billion.

That is before you even account for cuts to the capital gains allowance, which dropped from £12,300 to £6,000 in 2023 and is now at £3,000.

This means more of the profits from the sale of assets such as a second property will will go to HMRC.

We look at ways to cut your capital gains tax bill in a separate article.

Savings rates

Higher earners already get a lower tax-free personal savings allowance (PSA) of £500, but that means they have seen any benefits from putting money into the best savings accounts for high interest quickly disappear, as savings interest outside of the PSA is taxable.

This has helped HMRC triple its tax take from savings to £6.05billion.

With the Moneyfacts average savings rate currently at 3.53%, Adam French, consumer expert at Moneyfactscompare.co.uk said higher rate taxpayers with more than around £14,500 saved could expect to earn more than £500 in interest this tax year and could therefore find themselves footing an unexpected tax bill.

He said: “The latest statistics from HMRC show how important it is for savers to be aware of their tax liability. Especially many of those who have fallen into paying the higher-rate tax of 40%, who’s PSA has been halved from £1,000 to £500 as a result.”

How to reduce your tax bill

Taking a pay cut probably isn’t an option but you could keep your tax bill down by increasing your pension contributions through salary sacrifice.

It is important to make use of the dividend and capital gains tax-free allowances and plan how you take income and also make use of tax-free savings accounts such as an ISA.

French added: “Plenty of savers can avoid this tax bill by making use of their yearly ISA allowance, with cash ISAs keeping the savings of millions of people free from tax.

“They shouldn’t expect a raw deal either with some of the top paying easy access cash ISAs paying as much as 5% interest once introductory bonuses are taken into account.”

Stocks and shares ISAs allow you to invest with any returns shielded from the taxman.

But, to make the most of your investments, it's important you pick one that is right for your needs.

Many savers remain cautious about investing and households are holding onto record amounts in cash, but more people are looking at investing for the first time.

Last month, the government also launched a new campaign, fronted by a savvy squirrel, to help first time investors.

The average stocks and shares ISA fund grew by 11.2% in the year to February 2026, while the average cash ISA rate returned 3.5% over the same period, according to data firm Moneyfacts.

If you are looking to open a stocks and share ISA, here’s everything you need to know to get started and pick the right one for you.

What is a stocks and shares ISA?

A stocks and shares ISA allows you to invest in shares, funds, investment trusts and bonds with no tax on any gains or income from assets held in the account.

Everyone over the age of 18 who is a UK resident for tax purposes can open a stocks and shares ISA and invest up to £20,000 each tax year (6 April to 5 April) in it. You can hold different types of ISAs, as long as you do not exceed the £20,000 allowance in total.

For example, if you’ve added £10,000 to a cash ISA in the 2026/27 tax year, you can only put up to £10,000 into a stocks and shares ISA.

Should you open a stocks and shares ISA?

If you’re considering opening a stocks and shares ISA, make sure you are doing it for the long term, as investment can take time to grow.

Alice Haine, personal finance analyst at Bestinvest, says: “A stocks and shares ISA is more appropriate for those with long-term financial goals, such as saving for a child’s education or supplementing retirement income.

“This is because when you are investing in the financial markets, you typically need a time horizon of at least five years to give your portfolio enough time to ride out any short-term volatility.”

How to find the best stocks and shares ISA

Once you’ve decided on your investment goal and time horizon, you can start looking at whether you want to do the investment picking for your stocks and shares ISA yourself or get a fund manager to do it for you.

DIY investing vs ready-made portfolios

DIY investing requires a more hands-on approach and you’ll need to spend some time researching and selecting assets that match your attitude to risk.

If you are starting out, most platforms have a list of funds that they suggest are good for beginners, so you can pick from that list if you want ideas.

Every month, MoneyWeek also looks at the top funds, stocks and trusts DIY investors are pumping their money into.

You'll be able to build your own portfolio, typically choosing from individual shares, funds, bonds, ETFs, and investment trusts.

AJ Bell, Hargreaves Lansdown, and Bestinvest are some examples of DIY investment platforms where you can build your own stocks and shares ISA.

Some platforms, typically robo-advisers, provide you with ready-made portfolios. You will be asked a few questions to determine your attitude to risk and then placed into a matched portfolio.

Unlike DIY investing, your choice is limited as you do not get to pick your investments. So, if you want specific funds or stocks, then pick an ISA with a platform that lets you decide on your investments. But, if you want to take a more hands-off approach, a robo-adviser may be for you.

Wealthify and Moneyfarm are examples of investment platforms offering a robo-advisor service.

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As well as knowing how you want to invest, it’s also important to look at fees.

We look at the fees and charges of some of the most popular DIY and managed stocks and shares ISAs platforms.

Figures correct as of 13 May 2026

The above figures are annual platform fees and there are other investment costs to consider. You can see what the costs are and what platform might be best for you by using this Boring Money tool.

What’s the minimum amount I can invest in a stocks and shares ISA?

Most stocks and shares ISAs have minimum deposit amounts to open them, but some are fairly low.

Bestinvest’s stocks and shares ISA has a minimum initial deposit of £50, for example. You can open a stocks and shares ISA with Hargreaves Lansdown from £100 or with a direct debit from £25 per month. Fidelity starts at £1,000.

You don’t have to deposit lump sums to invest in an ISA, and can instead make regular contributions either on an ad hoc basis or through regular deposits – such as on a monthly or quarterly basis.

A simple way to do this is to set up regular savings using a standing order. Someone wanting to maximise their ISA allowance in full could set up a monthly direct debit of £1,666, which adds up to just under £20,000 over the course of 12 months.

We look at lump sum vs regular investing in a separate piece.

Bestinvest’s Haine says: “By investing every month, investors benefit from pound‑cost averaging.

“Rather than committing a lump sum at a single price point — such as during a perceived dip — they buy smaller amounts at regular intervals, regardless of the market level at the time. This helps cushion the impact of volatility over the short to medium term.”

How can I withdraw from a stocks and shares ISA?

To withdraw from a stocks and shares ISA, you need to sell down your investments. This process usually takes three to seven days and is easy to do online via your investment platform or using your provider’s app.

But remember not all stocks and shares ISAs allow “flexible withdrawals”.

What are flexible withdrawals?

A flexible withdrawal means you can withdraw money from the ISA and then return that cash to the ISA without it impacting the current year’s £20,000 allowance.

“Flexible withdrawals'' can be returned within the same tax year and they can only go back into the same flexible ISA they were withdrawn from – not another ISA, even if that ISA is also flexible.

When an ISA isn’t flexible, any withdrawals you make won’t be added back to your annual allowance and you effectively lose that part of your allowance.

Do note, some investment platforms class ISA fees as withdrawals which can chip away at your annual allowance.

However, some will also let you replenish a flexible ISA by the amount of fees they have deducted throughout the tax year.

For someone with a £500k ISA paying 1% in annual fees, that could mean adding back £5,000 at the end of the tax year – effectively restoring a quarter of the annual ISA allowance.

Are stocks and shares ISAs worth it?

Stocks and shares ISAs provide a number of benefits that make them worth considering for investors, or savers who want to become investors.

They can offer a route to generate more than a cash ISA, although capital is at risk with investing.

There are also tax benefits. Filing a self-assessment tax return can be a cumbersome process, particularly if you need to add in investment income or capital gains – which can be quite laborious to calculate.

With income or gains on investments held within an ISA totally tax-free, there’s no need to declare it on a return, making the process that little bit simpler.