Tax on savings interest rises again from April 2027

What this costs one saver

AJ Bell modelled the effect of the rate rise on a single, illustrative client: a higher-rate taxpayer holding £50,000 in savings, comparing the tax on the interest at the current 42% rate with tax at the new 44% rate (Professional Adviser, 29 October 2026).

AJ Bell's calculation

Higher-rate taxpayer, savings held outside an ISA

Savings balance used in the calculation£50,000

Rate rise applied to the interest on it42% → 44%

Extra tax over ten years£603

A savings statement being reviewed alongside a chart

AJ Bell's figure holds the balance and the interest rate fixed for ten years, two things that will move in reality. It compares today's rules with the new rate for one illustrative client. A balance sitting on deposit outside an ISA or a pension carries a running cost every year it stays there, and that cost just got a little higher.

What else moved in the same Budget

Who the rise reaches

Healey's figure of 88% of savers unaffected describes households whose savings interest already sits inside existing allowances or an ISA (Professional Adviser, 29 October 2026). The remaining group, mainly higher and additional rate taxpayers with meaningful cash held outside an ISA, pays more from April 2027 than before the change.

More room in a Cash ISA

The same Budget reversed a plan to cut the Cash ISA annual allowance from £20,000 to £12,000, keeping it at £20,000 for all ages, and announced a new Starter ISA intended to make investing more accessible for first-time investors (Professional Adviser, 28 October 2026).

What is not yet settled

The Budget set the new rates and the April 2027 start date. The Finance Bill 2026-27 carries the technical detail, including whether the tax-free allowances for savings interest move alongside the rate rise. Professional Adviser's 29 October 2026 report did not cover that point.

Where this shows up in the file

An accountant already sees a client's savings interest: in the UK interest figure on their tax return, or on a Simple Assessment letter from HM Revenue & Customs for a client with no return requirement, built from interest totals banks already report (gov.uk, HMRC urges customers not to ignore Simple Assessment letters). Interest that has appeared outside an ISA or a pension for several years running, taxed at a further two points from April 2027, is on the file already, not something that needs finding.

44%

new higher-rate tax on savings interest from April 2027, up from 42%

£603

extra tax over ten years for a higher-rate taxpayer with £50,000 in savings, AJ Bell calculation

£20,000

Cash ISA allowance kept for all ages in the same Budget, instead of the planned cut to £12,000

Professional Adviser, 28 and 29 October 2026.

What is accountancy work and what is advice

Accountancy work

Reading the interest figure off the return or the Simple Assessment letter, and showing a client what the same balance costs in tax now against what it costs from April 2027.

Regulated advice

Deciding whether to move the balance into an ISA, a pension or elsewhere, and how much of the £20,000 Cash ISA allowance to use before the rate rise takes effect. That is for the financial adviser.

An accountancy practice without FCA permissions cannot give that advice. The accountant's part stops at showing the client what the file already contains and asking whether they would like a conversation about it.

The FCA's Financial Lives 2024 survey found that 8.6% of UK adults had taken regulated financial advice in the previous twelve months, and 13% of the self-employed. A client whose savings interest has appeared on their return every year for a decade is seen by their accountant long before any adviser.

Two things to do this week

Pull the savings interest clients. Sort clients with untaxed UK interest reported on their 2025/26 return, or a Simple Assessment letter, where the amount is more than a token sum, and note which are higher or additional rate.
Show the before and after. At the next meeting, set out what the same balance costs in tax now against what it costs from April 2027, and ask whether the client would like a conversation about the cash before the change takes effect.

Common questions

What exactly is changing in the tax on savings interest?

Savings income is already taxed two percentage points above the main income tax bands on earnings: 22% for basic rate taxpayers, 42% for higher rate, and 47% for additional rate. In the Budget on 28 October 2026, Chancellor John Healey announced a further two-point rise on each of those rates, taking them to 24%, 44% and 49% from April 2027 (Professional Adviser, 29 October 2026). The increase applies to interest on savings held outside an ISA or a pension, above whatever amount of interest a taxpayer's allowances already cover. The Budget document did not set out whether those allowances change alongside the rate rise.

Why did the Chancellor say 88% of savers are unaffected?

Healey told Parliament the change leaves 88% of savers paying no more tax (Professional Adviser, 29 October 2026). That describes how much household savings interest already sits inside existing tax-free allowances or ISAs, where the rate rise has no effect. It says nothing about the remaining group: anyone with savings interest above those allowances, mainly higher and additional rate taxpayers holding meaningful cash outside an ISA, pays more from April 2027 than they did before the change. The figure describes the population of savers as a whole. It gives no basis for assuming any one client sits in the unaffected majority.

How much extra tax are we talking about?

AJ Bell calculated that a higher-rate taxpayer with £50,000 in savings could face an extra £603 in tax over ten years as a result of the two-point rise (Professional Adviser, 29 October 2026). The calculation holds the balance and the interest rate fixed for ten years, two things that will move in reality for any actual client. It is a comparison between today's rules and the new rate, applied to one illustrative balance, and it does not predict any individual client's tax bill. A larger balance, or one earning more interest, produces a larger figure.

Does this change what counts as regulated advice?

No. Reading a client's interest income off their tax return or a Simple Assessment letter, and showing them what the same balance costs in tax before and after April 2027, is accountancy work. Deciding what to do about it, whether that is moving the balance into an ISA, a pension or somewhere else, is a recommendation about a specific financial product and is regulated advice. An accountancy practice without FCA permissions cannot give it. A financial adviser can, once the client has agreed to the conversation, and the firm continues to see the introduction through from the first call to the advice being implemented.

What is still unresolved about this change?

The Budget announcement set the new rates and the April 2027 start date, but the Finance Bill 2026-27 will carry the technical detail, including whether the tax-free allowances for savings interest move alongside the rate rise. Professional Adviser's 29 October 2026 report did not cover that point, and HM Revenue & Customs had not published further guidance on it by 30 October 2026. A firm with clients affected should expect more detail before April 2027, and should not assume the current allowances stay fixed.