Millions of people are facing sweeping changes to their savings, investments, and taxes from April 2027, with experts warning that a year is “not a long time” to rethink financial strategies that may have been in place for years.
“April 2027 may feel some way off, but when it comes to financial planning, a year is not a long time,” said Jason Hollands of Evelyn Partners, a wealth management firm. “The changes on the horizon are significant and, for many people, will require a rethink of strategies that may have been in place for many years. The key message is not to wait. The sooner people start reviewing their plans, the more options they are likely to have.”
Cash Isa allowance slashed for under-65s
From 6 April 2027, the rules on how much can be parked in a cash Isa will change dramatically for anyone aged under 65. Currently, savers can put the full £20,000 annual Isa allowance into cash if they wish, or split it between cash and stocks and shares. Under the new rules, the cash element will be capped at £12,000. The remaining £8,000 of the annual allowance must be directed into investment-type Isas – either a stocks and shares Isa or an innovative finance Isa.
Savers aged 65 or over will see no change and can still place the entire £20,000 into a cash Isa. For everyone else, the current tax year (2026-27) is the final opportunity to use the full allowance for cash alone. “This is a bit of a ‘use it or lose it’ moment for cash Isas,” said Clare Stinton of Hargreaves Lansdown. “The countdown is on.”
Money already held in a cash Isa from previous years is unaffected by the cap – it remains protected and tax-free. However, from April 2027, under-65s may be prevented from transferring funds from a stocks and shares Isa back into a cash Isa, a measure designed to stop people sidestepping the new limits. At the same time, the government is introducing restrictions on the types of funds that can be held in stocks and shares Isas by under-65s, specifically excluding “cash-like” funds such as money market funds. Any interest earned on cash held in a stocks and shares Isa by under-65s will also become subject to an unspecified charge from that date.
The government’s stated aim is to encourage more retail investment in the UK economy. For savers, the message from advisers is clear: act now. Stinton recommends setting up a monthly direct debit into an Isa. “Whether you’re aiming to max out your £20,000 allowance or just save what you can, paying in regularly spreads the cost and smooths your cashflow,” she said.
Easy-access cash Isas currently pay up to about 4.5%, but interest earned outside an Isa wrapper is already taxable once it exceeds the personal savings allowance – £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers (rising to £5,000 for those earning less than £17,570 a year). With higher tax rates on savings income also on the way (see below), sheltering savings inside an Isa is becoming more valuable than ever. Hollands suggests doing an audit of existing savings, including old non-Isa accounts, and moving money into an Isa while the full cash allowance remains available. “Setting up a monthly direct debit into your Isa is a simple – and non-taxable – move that makes a big difference,” Stinton added.
Higher taxes on savings and property income
From 6 April 2027, income tax rates on savings and rental income will increase by 2 percentage points. The government says the move is intended “to narrow the gap” between tax paid on work and tax paid on income from assets, which does not incur National Insurance contributions. Treasury estimates suggest the change will raise £2.1 billion in revenue.
After the rise, basic-rate taxpayers will pay 22% on interest and property income (up from 20%), higher-rate taxpayers will pay 42% (up from 40%), and additional-rate taxpayers will pay 47% (up from 45%), once any applicable allowances have been used. The personal savings allowance remains unchanged at £1,000 for basic-rate and £500 for higher-rate taxpayers. From April 2027, general reliefs and allowances (such as the personal allowance) will be applied to employment, trading, or pension income before they are set against property, savings, or dividend income. However, specific allowances for those income types – such as the personal savings allowance and the property allowance – will still be applied first to their own category.
For savers, the higher rates make it more vital than ever to use Isa shelters where possible. “In a higher-tax environment, how you structure your savings will become even more important than it is now,” said Hollands. He recommends couples ensure both partners’ Isa allowances are fully used, and that family cash savings are held in the name of the lower-taxed spouse whenever possible. Premium bonds are also flagged as a tax-efficient alternative: prizes are free from income tax and capital gains tax, and up to £50,000 can be invested; the annual prize fund rate currently stands at 3.3%.
For buy-to-let landlords, the 2 percentage point rise in income tax on rental income is the latest blow in a series of government changes. “Many landlords are reassessing their position,” said Hollands. “While options such as transferring ownership between spouses or incorporating portfolios into company structures may help in some cases, these decisions are complex and need careful consideration … Some property investors may simply decide to sell up.” Industry stakeholders argue that much of the increased tax burden on landlords will ultimately be passed on to tenants through higher rents.
Separately, dividend income tax rates already increased by 2 percentage points from April 2026, with the ordinary rate rising from 8.75% to 10.75% and the upper rate from 33.75% to 35.75%.
Making Tax Digital expands to more self-employed and landlords
Making Tax Digital (MTD) for income tax is a major overhaul of the self-assessment system that requires sole traders and landlords to keep digital records and send quarterly updates to HM Revenue and Customs using compatible software. The scheme began in April 2026 for those with qualifying income over £50,000 (based on the 2024-25 tax return). From 6 April 2027, the threshold will fall to £30,000, based on income from self-employment and property earned in the 2025-26 tax year. A further reduction to £20,000 is planned from April 2028.
Qualifying income means gross turnover from self-employment and/or property – it does not include PAYE employment income, dividends, or pensions. If someone is both a sole trader and a landlord, their combined income from all such sources is counted. The quarterly updates are not full tax returns but “check-ins” that send summary totals to HMRC, with a separate update needed for each trade or property business. An end-of-year submission is still required.
HMRC does not provide its own software for MTD for income tax; users must buy compatible software or use bridging software if they prefer spreadsheets. The first £1,000 of property income (the property allowance) may be tax-free, but digital records are still needed. Individuals can also sign up voluntarily before they are mandated.
Clare Stinton of Hargreaves Lansdown advised anyone who thinks they might be affected by the £30,000 threshold to start preparing now. HMRC offers free videos and webinars on getting ready and choosing the right software. Many experts recommend opening a separate bank account for business income and spending to reduce the number of transactions that need categorising. Mettle, a digital banking brand owned by NatWest, offers a free business account for sole traders and landlords that is highly rated.
