Alex Sitaras, head of savings and partnership products at Skipton Building Society, shared his top tips for savers scrambling to make sense of Rachel Reeves’ plan to slash the annual tax-free Cash ISA allowance from £20,000 to £12,000 for those under 65.
His first piece of advice is for savers to consider diversifying across ISA types as they can still maximise the overall annual ISA limit, which remains unchanged at £20,000, by splitting it across both Cash ISAs and Stocks & Shares ISAs.
The expert added this helps spread risk while keeping as much money protected from tax as possible.
He went on to encourage savers to act fast and make full use of this year’s £20,000 allowance before any changes come into force.
Alex advised savers not to overlook the Personal Savings Allowance. Here, basic-rate taxpayers can earn up to £1,000 in interest tax-free each year.
Based on an interest rate of four per cent, a basic-rate taxpayer can save £25,000 before paying a penny in tax, although this allowance reduces for higher-rate taxpayers.
He added some savers may want to look at Premium Bonds too, which let you hold up to £50,000 tax-free through monthly prize draws – though they work differently to traditional interest-earning accounts as returns are based on luck rather than guaranteed interest.
While for those with children, exploring intergenerational wealth transfer with Junior ISAs is also an option.
Savers can deposit an additional £9,000 per child each year tax-free, although this money legally becomes the child’s and can be accessed at 18.
The expert from Skipton Building Society, which provides free money advice through its My Money Reviews service, said: “Slashing the cap so sharply means many more people under 65 will end up paying tax on savings that were previously protected, so making the right moves now is vital.
“But it’s important not to let the tax tail wag the investment dog. People shouldn’t feel pushed into investing simply because the Cash ISA cap is falling.
“Stocks and Shares ISAs can be a brilliant way to grow wealth tax-efficiently, but only when they genuinely support someone’s long-term goals.
“These changes are a useful nudge for savers to start thinking about investing, yet they won’t – and shouldn’t – drive decisions on their own.
“What matters most is choosing the right approach for your circumstances, whether that’s cash, investments, or a blend of both.
“We see this as a chance to talk openly with customers about risk, reward, and how to build a plan that works for them.”
A snap poll of 563 Cash ISA holders commissioned by the building society revealed 67 per cent have reacted negatively to the Chancellor’s announcement.
Three-quarters believe the Government should be encouraging people to save, not limiting them.
While 73 per cent said the move reduces the benefit of having a Cash ISA altogether, and 53 per cent feel it is unfair on those who have planned their finances around the existing £20,000 cap.
Almost half (44 per cent) expect they will have to rethink their savings behaviour as a result, with 26 per cent anticipating they’ll shift more money into investments instead.
And 20 per cent think they’ll put more into workplace pensions which could be a more tax-efficient option.
Just over half (53 per cent) of those surveyed by OnePoll expect they will max out the new £12,000 allowance once introduced in 2027.
A further 23 per cent already regularly max out the £20,000 cap, while another 27 per cent said they’ve managed it once or twice.
But 33 per cent admitted they are unsure what the best course of action is for their savings following the Budget.
Over half (52 per cent) believe it will be important to get financial advice to help them navigate the changes, with 41 per cent likely to seek advice to find the best way to maximise returns.
Four in 10 would do so to prevent errors that could eat into their savings, and 30 per cent want help understanding what the reduced allowance means for their long-term goals.
Alex Sitaras, from Skipton Building Society, which also offers financial advice and free pension health checks to its members, added: “Today’s announcement has understandably rattled a lot of Cash ISA savers, particularly those under 65.
“People who’ve worked hard to build a financial buffer are suddenly unsure what the changes mean for them, and whether they need to rethink their entire savings strategy.
“What we’re hearing already is a mix of frustration, confusion and, for some, real concern about making the wrong move.
“But there are still plenty of smart, tax-efficient options available – the key is understanding which ones genuinely fit your goals.
“Whenever allowances change, it can feel like the rules of the game have shifted overnight.
“That’s why taking a moment to step back, reassess, and get clear on the basics can make a huge difference.
“The good news is no one has to figure this out alone – we offer expert, regulated financial advice tailored to people’s needs – and it’s available to everyone, not just our members.”
