Several tax rates are increasing next year (Image: Getty)
Savers have been urged to plan ahead as some key tax changes come in next year. Experts warn the complexities around savings “even harder to understand”.
Veronika Lovett, CEO of Kroo Bank, urged account holders to check over their savings and make sure they have their house in order ahead of the changes. She said: “Having a clear understanding of what each account is for can make a huge difference.
Many people end up with multiple accounts opened over many years, each with different rates, terms and tax rates.
“Taking time to review what you have, consolidate where appropriate, and ensure each account has a clear purpose can make managing your money much less overwhelming.” Several key changes are coming in from April 2027.
Tax increases for savers
This includes the tax rate you pay on your taxable interest earnings increasing by two percentage points, across each of the three income tax brackets. This will life the rate for basic rate taxpayers from the current 20 per cent to 22 per cent.
Those on the higher rate will pay 42 per cent rather than the current 40 per cent, while those on the additional rate will see their rate lifted from 45 per cent to 47 per cent. The ISA rules are also becoming more complex.
Current you can deposit up to £20,000 into ISAs, divided as you choose between cash accounts and stocks and shares ISAs. But from April 2027, people aged 65 will only be able to put away up to £12,000 as they choose, while the remaining £8,000 will only be available for stocks and shares deposits.
‘People want confidence’
Ms Lovett warned the system is hard enough already for people to understand. She said: “Many people already find savings and investment products difficult to navigate. Introducing different tax rates across different types of accounts risks making an already complicated landscape even harder to understand.
“People want confidence that their money is working in their favour. The more complex the rules become, the harder it can be for consumers to know whether they’re making the right choices for their circumstances.”
The Government also announced recently that cash deposits held in a stocks and shares ISA will be subject to a 22 per cent cash. Ministers have yet to confirm the full details about how this will work.
Is now the time to move into investing?
The bank boss shared some tips for if you are looking to diversify from cash savings and get into investing more. She said: “It’s really important not to feel pressured into making complex decisions straight away.
“Start by understanding your short and longer-term goals. Are you saving for a holiday, a house deposit, retirement, or simply trying to grow your money over the long term?”
She also pointed out some key differences between cash savings and investments. The expert said: “For many, a good first step is learning the difference between cash savings and investing.
“Cash savings offer certainty, while investing can offer higher long-term returns but comes with risk and fluctuations in value. It’s worth taking the time to understand the fees, risks and flexibility of different products before making a decision.
“Most importantly, choose an approach that you understand and feel comfortable with, rather than chasing the highest headline return.”