ISA shake-up to put millions at risk of tax raid as savers urged to 'think more carefully'

Thank you for subscribing!

From April 2027, the tax-free allowance attached to cash ISAs will be reduced from £20,000 to £12,000, among other changes

An upcoming ISA shake-up could see millions of savers hit with a tax raid next year, with Britons being urged "think more carefully" about their money.

A stark divide in financial confidence exists between Britain's lowest and highest earners, according to new research published by Raisin UK.

The savings platform's Closing the Confidence Savings Gap study, based on a survey of 2,000 UK adults, uncovered a 37-percentage-point gulf between income groups.

Just 49 per cent of individuals earning £15,000 or less reported feeling confident in their understanding of financial products like savings accounts, investments and loans.

That figure jumped to 86 per cent among those on salaries above £55,000, and climbed further to 94 per cent for earners above £100,000.

Among working respondents who disclosed their earnings, 88 per cent earn £55,000 or below and nearly two in five within that cohort lack confidence navigating financial products.

These findings take on added significance given the sweeping ISA reforms set to take effect on April 6, 2027.

Additional changes will alter the way cash can be held inside non-Cash ISAs and reshape the rules governing transfers between different ISA types.

Raisin UK has cautioned that the reforms risk creating a two-tier system of understanding. Those with greater financial confidence are better positioned to grasp the new rules, weigh up their options and adjust their savings strategy accordingly.

Meanwhile, individuals who already feel uncertain about financial products face yet another obstacle.

Although investments can potentially deliver stronger returns, they carry different risks, making accessible, clear information all the more vital for people who do not already feel equipped to assess such products.

Robyn Demming, UK B2C Lead and Country Head at Raisin UK, said: "The amount someone can put aside will naturally be influenced by their income, but our research shows there is another divide too: how confident people feel navigating the financial system in the first place."

She added: "More choice can be positive, but only when people feel confident enough to navigate it. People should not need a high income to feel equipped to make decisions about their own money."

Ms Demming argued that the financial services sector bears a duty to simplify its products, rates and regulations, making them easier to compare.

"The financial industry has a responsibility to make products, rates, and rules easier to understand and compare, so these changes don't create another barrier for those who already feel less confident navigating their savings," she said.