At the recent reading of the 2025 Budget, Chancellor Rachel Reeves announced several changes for savers and investors. Here are three key points that may impact your investment strategy going forward.

ISA Allowance: Starting in April 2027, the cash ISA allowance for individuals under 65 will reduce from £20,000 to £12,000. However, the overall ISA limit remains firmly set at £20,000 until April 2031. Importantly, this adjustment does not apply to those aged 65 and over. To clarify, this means that while you can still contribute a total of £20,000 to your ISA, those under 65 will only be allowed to allocate £12,000 to a cash ISA.

Tax on Income: Be prepared for an increase in tax rates on property, savings, and dividend income for both basic and higher-rate taxpayers. Starting April 2026, taxes will rise by 2%. Basic-rate taxpayers will pay 10.75% on their dividends, while higher-rate taxpayers will pay 35.75%. This change signifies a higher tax responsibility on any income generated from these sources

Stamp Duty Reserve Tax (SDRT): The chancellor also announced the introduction of a temporary SDRT tax holiday for investors purchasing shares in newly listed UK companies. The Government will still charge the SDRT flat rate of 0.5% on transactions in existing UK shares.

Here are five actions you can take in response to these budget changes:

Review your finances:  Carry out a thorough review of all your savings and investments. Know exactly how much you have across different accounts, what interest rates you’re receiving, and the tax implications involved.

Maximise your ISA: Make sure you have fully utilised your £20,000 cash ISA limit for this year. If you have not, consider transferring any savings earning low interest into an easy-access cash ISA that offers better rates. This should allow you to keep your funds readily available while benefiting from tax-free interest.

Plan for April 2027: As we approach April 2027, be aware that your overall tax-free allowance will remain at £20,000.  You could consider investing £12,000 in a Cash ISA and using the remaining £8,000 in money market funds, which offer returns and risk profiles similar to those of Cash ISAs. For those looking to take on more risk, now may be a good time to explore investing through a stocks and shares ISA. Our guides on stocks and shares ISAs will be a good starting point.

Consider a stocks and shares ISA: If you plan to invest up to £20,000 in stocks and shares each year, doing so through a stocks and shares ISA is wise, as any dividend income will not be subject to tax

Evaluate your cash: The Government’s intention behind reducing the cash ISA limit for those under 65 is to encourage investment in stocks and shares, benefitting the economy overall. Assess how much cash you truly need for emergencies or other expenses. This evaluation will help you decide whether to diversify your portfolio into a stocks and shares ISA.

Long-term trends show that investing in the stock market often yields better returns. However, conduct thorough research before investing in stocks and shares, as past performance does not guarantee future results. Keep in mind that returns from stock market investments can go down as well as up, and that cash returns may be affected by inflation over time.

If you are unsure how these changes will affect you, seek advice from a registered independent financial advisor who can help you navigate these changes effectively.

This article is not financial or personal advice. We are not financial advisers. The information contained in this article is designed for educational and informational purposes only.  It is provided solely to enable you to make your own choices. Always remember that if you choose to invest, the value of your investments can fall or rise, so you could get back less than you invested. So, it is essential to seek advice from a qualified, authorised and registered professional. Note also that past performance is not a reliable indicator of the future performance of any investment.

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