28 October 2026
If you are covering the news that savings interest will rise by a further 2%, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
“Three forces are now colliding for savers, which is relatively high interest rates, higher rates of tax on savings and a Personal Savings Allowance that remains stuck in time. Together, they create significant fiscal drag that will pull more people into paying tax on their savings, while increasing the bill for those already caught.
Retaining the existing Cash ISA allowance offers some protection for savers, but the higher tax rate on savings income from April 2027 will make holding cash outside an ISA more costly. This will be particularly relevant for those who already make full use of their ISA allowances and Personal Savings Allowance. Take £8,000 earning 5% outside an ISA and it would generate £400 of interest a year. For someone who has already exhausted their Personal Savings Allowance, from April 2027 that would mean a tax bill of £96 for a basic-rate taxpayer, £176 for a higher-rate taxpayer and £196 for an additional-rate taxpayer, as savings income tax rates rise to 24%, 44% and 49%.
“For those fortunate enough to have already maximised their ISA allowance, there are other options worth considering. Onshore investment bonds, for example, can have a role in longer-term tax planning because they allow tax to be deferred and potentially managed around when withdrawals are taken. They are more complex than ISAs and will not suit everyone, so this is an area where financial advice can be particularly valuable.
“The broader message from these changes is that where you hold your savings is becoming almost as important as the rate you earn on them. With frozen allowances and higher tax rates increasingly eating into returns, savers need to make sure they are using the tax-efficient options available to them.”
