Changes to Isas, pension contributions and investment income to bring higher tax bills

A range of measures that will mean higher tax bills for millions of savers and investors were announced by the chancellor in her budget statement.

- Rupert Jones, Shane Hickey

Alongside two widely trailed measures - cutting the maximum that can be put into a cash Isa each year and clamping down on salary sacrifice pension schemes - were two surprises: an exemption from the new Isa rules for those over 65, and an increase in income tax on savings interest and property and share dividend income.

Rachel Reeves announced a shakeup of the tax-efficient individual savings accounts, which the Treasury claimed would “drive better returns for savers, and incentivise investment”.

Reeves has kept the overall maximum that people can deposit across different Isas at £20,000 a year, but, as expected, she slashed the annual cash Isa limit by 40%. From 6 April 2027, the maximum people can put into cash Isas will be capped at £12,000, except for over-65s, for whom the original limit will still apply.

The Treasury is keen to encourage a shift from cash into stock-market-based investments - in particular, British companies - with Reeves having talked about wanting to create “more of a culture in the UK of retail investing like you have in the US”. The move to restrict the amount most people can put into cash Isas forms part of that.