Millions of people will be affected by a range of savings, investment and tax changes that take effect in just under a year's time. Chancellor Rachel Reeves' tax shake-up, coming into force in April 2027, will impact everyone from savers to landlords and sole traders. Experts are urging individuals to act now to prepare for these significant adjustments.
"April 2027 may feel some way off, but when it comes to financial planning, a year is not a long time," says Jason Hollands at the wealth management firm Evelyn Partners. "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 Changes
Currently, you can save up to £20,000 per year in an Isa, splitting the allowance across multiple Isas as desired. From 6 April 2027, for those under 65, the cash Isa component will be capped at £12,000, with any additional savings required to go into a stocks and shares Isa. Individuals aged 65 and over can still place the full £20,000 into a cash Isa.
"This is a bit of a 'use it or lose it' moment for cash Isas," says Clare Stinton at Hargreaves Lansdown. "The countdown is on." She recommends an audit of savings to maximize the 2026-27 Isa allowance, possibly moving funds from old non-Isa accounts into easy-access cash Isas, which now pay up to about 4.5%. Interest outside an Isa is taxable above personal savings allowances: £1,000 for basic-rate taxpayers, £500 for higher-rate, and up to £5,000 for those earning under £17,570 annually. Higher taxes on savings income are also incoming.
"Setting up a monthly direct debit into your Isa is a simple – and non-taxable – move that makes a big difference," Stinton adds. "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."
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. Basic-rate taxpayers will pay 22%, higher-rate taxpayers 42%, and additional rate taxpayers 47% on such income after allowances. This aims to "narrow the gap" between tax on work and asset income.
"In a higher-tax environment, how you structure your savings will become even more important than it is now," says Hollands. Steps like using both partners' Isa allowances and holding cash in the name of a lower-taxed spouse can make a difference. Premium bonds are also an option, with prizes tax-free; the annual prize fund rate is currently 3.3%, and you can invest up to £50,000.
For buy-to-let landlords, the higher tax rates on rental income add to recent challenges. "Many landlords are reassessing their position," Hollands notes. Options like transferring ownership between spouses or incorporating portfolios into company structures may help, but these are complex decisions. Some may choose to sell up.
Making Tax Digital Expansion
Making Tax Digital (MTD) is a major overhaul of self-assessment, requiring sole traders and landlords to report income and expenses to HMRC digitally. It kicked off this month with a £50,000 threshold. From 6 April 2027, the threshold drops to £30,000 for self-employment and property income from the 2025-26 tax year.
If you might be affected, HMRC offers videos and webinars on preparation and software selection. Experts recommend using a separate business bank account to simplify transaction categorization. Mettle, a NatWest digital brand, offers a free business account for sole traders and landlords. Guardian Money published a comprehensive report on MTD changes in February.
In summary, proactive planning now can help mitigate the impact of these tax changes. Review your Isa usage, savings structure, and property income strategies to optimize your financial position ahead of April 2027.
