The MoneySavingExpert.com founder used the latest episode of his ITV Martin Lewis Money Show Live programme to explain all the changes that are happening to your savings
Martin Lewis has cleared up some confusion about major changes to the cash ISA allowance, as previously announced in the Budget.
The MoneySavingExpert.com founder used the latest episode of his ITV Martin Lewis Money Show Live programme to explain all the changes that are happening to your savings.
As of April 2027, anyone under the age of 65 will no longer be able to save £20,000 every tax year into a cash ISA – this limit is being slashed to £12,000.
But the overall ISA limit will still remain at £20,000 – so Martin explained that this means you could save £12,000 into a cash ISA, and then have £8,000 leftover to save in another type of ISA.
He said: “The ISA limit is £20,000 and will remain at £20,000 even for under-65s after 2027, which means you can put £20,000 in a shares ISA, you could also choose to put some in cash.
“Let’s say you put £1,000 in cash, well that reduces the amount you can put in shares by £1,000, because it still has the total of £20,000.
“You can do that all the way up from 2027 to £12,000. So you could have £12,000 in cash, and £8,000 in shares. You don’t have to put the money in shares.
“You could just, from that point, have £12,000 in cash. The key to this rule is, it only impacts new money paid in.”
Martin then received a question from a viewer called Jane, who asked him about a potential way to get around the new cash ISA limit.
She asked: “Can you open a stocks and shares ISA using the full £8,000 and a cash ISA using the full £12,000, and then transfer your stocks and shares ISA to the cash ISA during the same tax year to get around the new cash ISA limit?”
Martin confirmed: “Isn’t that a clever workaround? Unfortunately, the Treasury is just as clever, because they have said – this is a consultation – that from 2027, you will not be allowed to do a transfer from a shares ISA to a cash ISA.”
Martin also explained how the rate of tax paid on savings interest in other accounts – so anything that is not an ISA – is rising from April 2027.
If you’re a basic-rate payer, you can earn £1,000 in savings interest every tax year before you start to pay tax – this is known as your personal savings allowance.
You would pay tax at a rate of 20% on savings interest above your allowance. This tax rate will rise to 22% from April 2027. The limit is lower for higher-rate taxpayers, who pay 40% tax when they earn more than £500 in savings interest a year.
This will go up to 42% from April 2027. Additional rate taxpayers have to pay 45% tax on all their savings interest. This will rise to 47%.
