NatWest has begun proactively messaging its customers, instructing them to log into their online accounts and review their financial plans. This urgent communication comes as a direct response to significant changes to ISA rules announced in the Labour Party's recent Autumn Budget.
What are the new ISA rules?
In an email to customers, the high street bank clarified the upcoming adjustments. While the total annual ISA allowance remains at £20,000, the way savers can allocate this money is set to change for individuals under the age of 65.
From 6 April 2027, the new rules will stipulate that you can only put a maximum of £12,000 per tax year into a cash ISA. The remaining portion of your allowance, up to £8,000, can be placed into a stocks and shares ISA. Alternatively, customers can choose any combination that suits them, provided they do not exceed the £12,000 cap for their cash ISA and their total contributions across all ISAs stay within the £20,000 overall limit.
Who is affected by these changes?
It is crucial to note that these new restrictions only apply to individuals under the age of 65. For those aged 65 or over, the full £20,000 annual ISA allowance remains intact and can be used across cash or stocks and shares ISAs without the new £12,000 cash limit.
NatWest was quick to reassure customers that the changes are not imminent. Savers still have the current tax year and the next one to save up to the full £20,000 in a cash ISA tax-free, if that aligns with their strategy. Furthermore, any money already saved in a cash ISA from this year or previous years will remain protected and continue to earn tax-free interest.
The bank also confirmed that no changes have been made to Junior ISAs, with the allowance staying at £9,000 per tax year for each child.
Additional tax changes on the horizon
Separate from the ISA adjustments, the Autumn Budget also outlined increases to the income tax paid on savings interest received outside of an ISA. Effective from April 2027, this tax will rise to 22% for basic-rate taxpayers, 42% for higher-rate taxpayers, and 47% for additional-rate taxpayers. This change applies to interest that exceeds an individual's personal savings allowance.
In its guidance, NatWest emphasised that while investing carries risk and isn't right for everyone, it has the potential to grow your money over the long term, typically five years or more. The bank's message concludes by urging customers to explore all their options to find a financial plan that works for their specific circumstances and risk appetite.
