Cash Isa reforms spark debate over whether savers can still build an investing culture

Chancellor John Healey's October 28 Budget raised savings interest tax by four percentage points — double the two-point rise originally planned — hitting basic-rate taxpayers at 24 per cent, higher-rate at 44 per cent, and additional-rate at a punishing 49 per cent from April 2027. The change makes ISAs far more valuable as a tax shield, particularly for anyone with meaningful savings earning above 5 per cent on fixed-rate bonds.

The personal savings allowance stays at just £1,000 for basic-rate taxpayers and £500 for higher-rate — easily breached at current top rates above 5 per cent.

Healey also U-turned on slashing the annual cash ISA limit from £20,000 to £12,000, keeping it unchanged — a concession to Britain's estimated 7 million adults holding over £10,000 in cash savings.