22 January 2026
If you are covering the latest tax relief statistics from HMRC, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
“These figures help to explain why changes to pension tax relief are always so heavily rumoured in the run-up to a budget, with policy kite-flying used to test the public appetite for reform. When the cost of a single relief is now over £32 billion a year for income tax alone, and more than £55 billion once National Insurance relief is included, it inevitably becomes one of the first places Chancellors look when searching for savings or extra headroom.
"The reality is that pension tax relief has become more valuable, and more expensive, with every year of frozen thresholds. Fiscal drag has pushed millions of workers into higher tax bands and into sharp tax traps such as the £100,000 personal allowance taper, automatically increasing the rate of relief applied to their contributions and also incentivising people to do so to reduce their net adjusted income so they can still access certain childcare benefits.
"ISAs show the same dynamic. The annual cost of ISA tax relief has more than doubled in just a few years, climbing from £4.1 billion in 2020–21 to £9.75 billion in 2024–25, with HMRC estimating that the total market value of adult ISAs is now around £872 billion. Higher interest rates have played a role, but policy has too. Deep cuts to the dividend allowance and the capital gains tax exemption have funnelled more savers into the ISA wrapper, turning it into the default shelter for anyone with even modest investment income.
"That shift helps to explain the government’s more interventionist stance towards ISAs. The decision to cap cash ISA holdings at £12,000 for under-65s from 2027 is a clear signal that ministers are no longer comfortable with ISAs operating primarily as long-term cash warehouses. There is a desire to push more savings into investment so that at the very least the capital is deployed into the markets even if the government still has to stomach the tax relief on gains.
"The wider risk is that this becomes a recurring theme. As reliefs grow larger and more concentrated among older and higher-income households, they attract more political attention and fiscal pressure. What began as incentives to encourage sensible long-term saving are increasingly being viewed through the lens of affordability. This then forces ever more changes to the tax landscape making it harder to plan for. However, as ever investors and savers must maximise the rules as they are today, especially given tax year end is only a few months away."
