Autumn Budget 2025: Cash ISAs Slashed & Savings Tax Hike Explained

In this episode, Jonny breaks down the Autumn Budget 2025 and what it really means for everyday savers – beyond the headlines about £30bn in extra taxes.

We cover:

• The cut to the Cash ISA allowance from £20,000 to £12,000 for under-65s from April 2027
• Why over-65s keep the full £20,000 Cash ISA limit – and what that means for everyone else
• The 2% rise in savings income tax and how frozen tax bands will drag more people out of the Personal Savings Allowance
• The Stocks & Shares ISA “cheat code” idea (and why HMRC may eventually shut it down)
• Other key Budget changes: EV per-mile charging, mansion tax, pension salary sacrifice cap, National Living Wage rise and the two-child cap being scrapped

If you’re trying to protect your interest from the tax grab – especially as a basic, higher or additional-rate taxpayer – this is a quick, no-nonsense recap to help you understand your options.

Mentioned in this episode:
Check the latest Cash ISA rates and savings deals at https://depositscout.com

Nothing in this episode is financial advice. Always do your own research or speak to a regulated adviser before making decisions about your money.

Connect with us (via LinkedIn)

Jan: https://www.linkedin.com/in/jan-watermann/

Jonny: http://www.linkedin.com/in/jonny-pease

Got a question or topic you want us to cover? Drop us a message at jonny@technicallymoney.com

Transcript

00:00:00:00 - 00:00:20:13
Unknown
okay. So today's autumn budget landed like a bull in a China shop. The headline figures are staggering. We have 30 billion pounds in new taxes by the end of the decade. And this includes, as we all predicted, a freeze on income tax thresholds until 2031, which will drag nearly a million more people into the higher rate tax bracket,

00:00:20:13 - 00:00:24:13
Unknown
and even the cost of our electric vehicles and milkshakes are going to be affected.

00:00:24:13 - 00:00:35:20
Unknown
So I'm just going to try and cut through the noise in this video and talk about what matters most for everyday savers. So that's the cut to the cash Isa allowance and the savings tax hike that hits at the exact same moment.

00:00:35:21 - 00:00:50:16
Unknown
let's quickly recap the budget. So we're all on the same page. So like I said, we're looking at a huge shift towards increased taxation with around 30 billion pounds in tax rises over the next few years, which will push the overall burden to a record high of 38.3% of GDP.

00:00:50:18 - 00:00:56:07
Unknown
Which means, like for every pound, the Treasury takes roughly 38.3 pence in tax.

00:00:56:09 - 00:01:16:03
Unknown
Now for your personal finances, the key hits are these income tax thresholds of frozen until 2031, we have dividends tax rising by two percentage points from 2026. And the big one for savers savings income tax also rises by two percentage points across the board from April 2027.

00:01:16:03 - 00:01:22:00
Unknown
So what does that mean? Well, it depends on what rate of tax you pay for basic rate payers.

00:01:22:00 - 00:01:31:00
Unknown
Tax on your interest goes from 20 to 22%, the higher rate from 40 to 42%, and the additional rate from 45 to 47%.

00:01:31:00 - 00:01:45:11
Unknown
Crucially, though, the combination of those higher tax rates and those frozen tax bands means more savers will lose their personal savings allowance, leaving more people being exposed to tax on interest.

00:01:45:11 - 00:01:50:14
Unknown
So it's going to be even more crucial to ensure that you're taking advantage of a cash Isa.

00:01:50:14 - 00:02:09:01
Unknown
But unfortunately, the tax grab and spending changes go a lot further. And I'll go quickly through some of the headlines. I'm not going to linger very long here, but we've got electric vehicles tax like I mentioned from 2028. So EV drivers are going to face a new pay per mile charge. I think that's set at three per mile for fully electric cars.

00:02:09:03 - 00:02:19:02
Unknown
That's to replace fuel duty revenue, which I was so smug about because I recently bought an EV purely to avoid paying fuel duty. Well, Rachel caught up with me on that one.

00:02:19:02 - 00:02:40:11
Unknown
Then there's the mansion tax, and this will be interesting. Homeowners will, with properties valued over 2 million pounds, will face a new high value council tax surcharge from 2028, starting at two and a half grand a year. I'm pretty intrigued to see how the valuation of properties will work, that that's going to be really interesting. One and pensions are taking a hit,

00:02:40:11 - 00:02:52:21
Unknown
so the salary sacrifice pension scheme will be squeezed from 2029 with a 2,000 pounds annual cap on contributions that are exempt from any.

00:02:52:22 - 00:03:12:11
Unknown
On a post-it note, I guess, but I imagine still people will have mixed feelings on this. The National Living Wage will rise quite significantly to 12.71 pounds an hour for those aged 21 and over. That, I mean, that might have an impact on inflation because the cost of doing business or employing people will go up as a result.

00:03:12:11 - 00:03:17:03
Unknown
So businesses may put the prices of their goods up. We'll see what happens there.

00:03:17:03 - 00:03:28:20
Unknown
And the somewhat controversial two child benefit cap is set to be scrapped from April 2026, which the Labor Party have said will lift more children out of poverty. Which isn't a bad thing at all.

00:03:29:01 - 00:03:39:01
Unknown
through all of this, for people looking to protect their income and savings, two changes dominate the cash Isa allowance cut and the rise in savings income tax.

00:03:39:02 - 00:03:44:01
Unknown
So let's get to the most controversial change. First the cut to the cash Isa allowance.

00:03:44:01 - 00:03:53:06
Unknown
So from the 6th of April 2027, the annual deposit limit for a cash Isa will be cut from 20,000 pounds to 12,000 pounds.

00:03:53:08 - 00:03:59:21
Unknown
The crucial thing here is that this reduction only applies to savers aged 65 and under.

00:03:59:21 - 00:04:05:02
Unknown
Over 65 will keep the full 20,000 pounds cash allowance.

00:04:05:02 - 00:04:18:14
Unknown
But, and this is critical, the limit for stocks and shares Isa remains at 20,000 pounds for all ages, and the government says that this is to encourage more people to invest in UK assets, which,

00:04:18:16 - 00:04:29:00
Unknown
you know, we can argue about that because, you know, some people will say, you know, British savers, a risk averse and not Warren Buffet and will be too frightened to invest.

00:04:29:02 - 00:04:52:13
Unknown
So as a result, they'll just end up with, you know, greater tax liability on their savings. I think there is a point there. And I think over the next few years, it's going to be really important for the government to double down on financial education, to try and inform people about the various products, investing products that are available, like ETFs, equities and government backed securities.

00:04:52:15 - 00:05:16:20
Unknown
You know, they need to show people the long term gains that can be made, from investing instead of just leaving cash deposited to be eaten away by inflation. You know, I think only then will people be, you know, less frightened about the risks of investing and possibly will take advantage of these stocks and shares. ISIS, but the people who choose not to I mean, they'll just end up with their money not sheltered.

00:05:16:20 - 00:05:21:12
Unknown
And that will just lead to a double tax whammy. Because just think about the timing here, right

00:05:21:12 - 00:05:25:21
Unknown
at the exact moment the tax free cash ISIS space is shrinking

00:05:25:23 - 00:05:31:06
Unknown
the tax on their regular non ISIS savings is going up by two percentage points.

00:05:31:10 - 00:05:38:10
Unknown
this means more and more of our hard earned interest will just be eaten up by more tax.

00:05:38:12 - 00:05:45:20
Unknown
So this makes holding cash outside of an Isa even less attractive, especially for higher rate taxpayers.

00:05:45:20 - 00:05:58:02
Unknown
and look if you're not yet taking advantage of an Isa, definitely check deposit scout.com. We try to update the table frequently and list the most competitive and compelling rates available, including this one from Money Box.

00:05:58:02 - 00:06:01:08
Unknown
So I'll put a link to deposit Scout in the description box below.

00:06:01:10 - 00:06:07:21
Unknown
one question I had that I wanted to I wanted to bring up because this is a potential cheat code, right?

00:06:07:23 - 00:06:16:18
Unknown
If the stocks and shares Isa allowance stays at 20,000, what's stopping us from opening one? Depositing the full 20 K and just holding it as cash?

00:06:16:18 - 00:06:32:08
Unknown
Because right now with providers like trading two on two, for example, they allow you to earn 4.06% on on invested cash. And that could be a perfectly legal loophole to maintain 20,000 pounds of cash in a tax free wrapper.

00:06:32:08 - 00:06:42:05
Unknown
I'm pretty sure, though, in two years, when this becomes real, the HMRC will look to close this. But right now, as it stands, what's stopping us from doing that?

00:06:42:05 - 00:06:51:12
Unknown
this isn't something we have to worry about right now for today. I think your action plan depends on your age, and this isn't financial advice, it's just simply meant as discussion.

00:06:51:14 - 00:06:54:01
Unknown
But I think the urgency to act is high.

00:06:54:01 - 00:07:05:17
Unknown
First, if you're under 65, do consider taking advantage of your 20,000 pounds cash isa allowance in this tax year and the next year. So that's 20 2627.

00:07:05:17 - 00:07:20:22
Unknown
Do this while you still can. After that, we have to be prepared to use the stocks and shares Isa to invest and utilize the full 20,000 pound allowance, which, to be fair, is still comparatively to most countries, quite generous.

00:07:20:22 - 00:07:45:14
Unknown
Secondly, for over 65 years you keep your full 20 K cash isa allowance, but the rising savings tax still means you should aim to move any taxable non Isa cash into a tax free wrapper. You've just got to make sure you're taking full advantage of that 20,000 pound threshold. And again check out Deposit scout.com for some options.

00:07:45:16 - 00:07:48:13
Unknown
On the political side of things.

00:07:48:15 - 00:08:05:15
Unknown
Well the bigger picture here is that Rachel Reeves ended her budget speech by declaring I thought this is funny, that she she'd announced all these tax rises while keeping every single one of her manifesto, manifesto commitments.

00:08:05:17 - 00:08:19:02
Unknown
But the reaction, if you just just looking through the news outlets has been brutal. She's been accused of delivering a budget of broken promises and left us with a giant 30 billion pound tax rate

00:08:19:02 - 00:08:20:17
Unknown
and the shadow chancellor some.

00:08:20:17 - 00:08:46:03
Unknown
Mel Stride, her conservative counterpart, has said it's clear she has broken her manifesto. And I think he has a point like, come on, when you impose higher income tax rates on savers, landlords and freeze thresholds for longer, you are actively increasing the tax burden on working people. And this budget isn't about cutting taxes to spur growth. It's the opposite.

00:08:46:03 - 00:08:59:11
Unknown
It's about pushing taxes to record levels to pay for record levels of government spending when we desperately need more cuts. And honestly, I think this will stall the economy and just punish people who work hard and try to save responsibly.

00:08:59:11 - 00:09:04:02
Unknown
But that's the thought for another day. Let me know what you think. I'd love to hear from you in the comments

00:09:04:02 - 00:09:07:01
Unknown
And again I'll put a link to Deposit Scout in the description box.

00:09:07:01 - 00:09:09:13
Unknown
For anyone that's looking to get a cash Isa.

00:09:09:16 - 00:09:11:02
Unknown
speak to you soon and take care.