Individual Savings Accounts: Interest Rates
The question
To ask the Chancellor of the Exchequer, what assessment she has made of the impact of a 22% charge on ISA-held interest on household savings behaviour, particularly among low- and middle-income savers.
Answered by Rachel Blake
At Autumn Budget 2025, the Chancellor announced a reduction in the Cash Individual Savings Accounts (ISA) limit for those under 65, to encourage retail investment and drive better returns for savers.
Rules are needed to protect to integrity of the new Cash ISA limit. We have designed the rules to be as simple as possible for providers and consumers, and to retain maximum flexibility for consumers to build an investment portfolio that works for them.
Returns from investing remain tax free. Investors will still be able to hold cash in a non Cash ISA, but a flat rate charge will apply on any interest on cash held within a non Cash ISA to discourage long-term cash holdings.
A flat rate charge on interest on cash holdings in S&S ISAs was previously in operation prior to 1 July 2014.
The Government continues to support cash saving with a generous set of reliefs. Individuals under 65 will still be able to save up to £12,000 into a Cash ISA each year, and any savings income received in a Cash ISA will be tax free. Provisional figures for the average Cash ISA subscription in 2023/24 are £6993.
Outside of the ISA regime, there is a Personal Savings Allowance of up to £1,000 for basic rate taxpayers and £500 for higher rate taxpayers, and the Starting Rate for Savings, which allows for tax free savings income of up to £5,000 for those with earned income below £17,570. This means that in 2026-27 around 84 per cent of people with savings income will pay no tax on that income.
Verbatim has judged this answer against the question that was actually asked — answered, partly answered, or evaded. Sign in to see the verdict →