Shield savings by using your allowances

The big headline was yet another squeeze on incomes, as Chancellor Rachel Reeves extended the freeze on income tax thresholds for another three years to 2030-31. But savers, investors and buy-to-let landlords took a hit too.

- By HARVEY JONES

AST Wednesday's Budget inflicted a world of pain on pensioners, workers and anyone simply trying to do the right thing with their money.

With so many tax hikes, it's hard to follow them all. Yet these changes will reshape how millions save, invest and plan for the future.

So what does it all mean for your savings and investments?

SAVED

Pensioners got one reprieve. Reeves was widely rumoured to be slashing the £20,000 Cash ISA allowance, a move that would have hit older savers especially hard. Many don't want to take on stock market risk in later life and rely on getting the full allowance to protect their nest egg from tax.

The Chancellor did cut the Cash ISA to £12,000 from April 2027, but that only applies to under-65s. Older savers keep the full limit.

Jason Hollands, managing director of Bestinvest, said younger savers should use their full Cash ISA allowance while they can. “They can still plough up to £20,000 into Cash ISAs in both the current and next tax year, sheltering a potential £40,000 of savings before the cut.”

Pensioners should celebrate by making their Cash ISAs work as hard as possible, by shifting over money held in standard deposit accounts and shopping around for top rates.

Interest earned in a standard deposit account is only tax-free up to the personal savings allowance (PSA). That stands at £1,000 for basic-rate taxpayers and £500 for higher-rate.