A leading savings expert has issued urgent guidance for Britons concerned about protecting their hard-earned cash following Chancellor Rachel Reeves' announcement to slash the annual tax-free Cash ISA allowance.
Alex Sitaras, Head of Savings and Partnership Products at Skipton Building Society, warned that the reduction from £20,000 to £12,000 for those under 65 has created widespread anxiety among savers. The changes are scheduled to take effect in 2027, giving savers limited time to adapt their financial strategies.
Immediate Actions to Protect Your Savings
Sitaras emphasised that savers should act quickly to maximise their current £20,000 allowance before the new limits come into force. His first recommendation involves diversifying across different ISA types to maintain the overall £20,000 annual limit.
"Splitting savings between Cash ISAs and Stocks & Shares ISAs helps spread risk while keeping as much money protected from tax as possible," Sitaras explained. This approach allows savers to continue utilising the full annual ISA limit despite the specific Cash ISA reduction.
The savings specialist also highlighted the importance of not overlooking the Personal Savings Allowance, which remains unchanged. Basic-rate taxpayers can still earn up to £1,000 in interest tax-free each year, equivalent to £25,000 saved at a 4% interest rate before paying any tax.
Alternative Savings Vehicles to Consider
For those seeking additional tax-efficient options, Sitaras suggested exploring Premium Bonds, which allow individuals to hold up to £50,000 tax-free through monthly prize draws. However, he noted that returns depend on luck rather than guaranteed interest.
Families with children might consider Junior ISAs as part of their wealth transfer strategy. Parents can deposit £9,000 per child annually tax-free, though this money legally becomes the child's property and becomes accessible when they turn 18.
Sitaras cautioned against making hasty investment decisions purely for tax reasons. "People shouldn't feel pushed into investing simply because the Cash ISA cap is falling," he advised. "Stocks and Shares ISAs can be brilliant for growing wealth tax-efficiently, but only when they genuinely support someone's long-term goals."
Public Reaction and Financial Uncertainty
Research commissioned by Skipton Building Society reveals significant public concern about the changes. A snap poll of 563 Cash ISA holders found that 67% have reacted negatively to the Chancellor's announcement.
The survey conducted by OnePoll showed that three-quarters of respondents believe the government should encourage saving rather than limiting opportunities. Additionally, 73% felt the move reduces the benefit of having a Cash ISA altogether, while 53% considered it unfair to those who planned their finances around the existing £20,000 cap.
Nearly half (44%) expect to rethink their savings behaviour, with 26% anticipating they'll shift more money into investments. Another 20% are considering increasing workplace pension contributions as a more tax-efficient alternative.
Despite these concerns, 53% of surveyed savers expect to max out the new £12,000 allowance once introduced. However, 33% admitted uncertainty about the best course of action following the Budget announcement.
The research also indicated strong demand for professional financial advice, with 52% believing it will be important to navigate the changes successfully. Forty-one percent are likely to seek advice to maximise returns, while 30% want help understanding what the reduced allowance means for their long-term financial goals.
Sitaras concluded: "Today's announcement has understandably rattled a lot of Cash ISA savers. People who've worked hard to build a financial buffer are suddenly unsure what the changes mean for them. But there are still plenty of smart, tax-efficient options available – the key is understanding which ones genuinely fit your goals."
Skipton Building Society offers free financial advice through its My Money Reviews service, available to both members and non-members struggling to adapt to the forthcoming changes.
