Paragon Bank research shows millions of savers could face higher tax bills as speculation mounts over potential ISA limit cuts from £20,000 to £10,000
Christian Abbott Audience Writer
10:46, 25 Nov 2025
Rachel Reeves will announce her Budget on Wednesday(Image: PA)
Millions of UK households could find their savings in the crosshairs of HM Revenue and Customs (HMRC) ahead of the Autumn Budget.
Chancellor Rachel Reeves is set to unveil her Autumn Budget on Wednesday, November 26, with Cash ISAs potentially facing changes on the day.
Research from Paragon Bank has shown that £516 billion held across 5.2 million non-ISA accounts generates annual interest exceeding the £1,000 threshold for basic-rate taxpayers.
At present, individuals can save £20,000 each year without facing tax on their savings, but this could be slashed to as little as £10,000.
Some 58 per cent of ISA savers are unwilling to transfer funds to stocks and shares alternatives if limits were reduced, rising to 74 per cent amongst older generations, reports Birmingham Live.
Andrew Wright, Paragon Bank’s head of Savings, cautioned: “With interest rates having recovered from historic lows and the Autumn Budget just around the corner, millions of savers are leaving themselves exposed to unnecessary tax bills.Time is running out, and with speculation that ISA thresholds could be cut and the Budget just days away, the window to shield your savings from tax could soon narrow.”
Chris Irwin, Yorkshire Building Society’s director, added: “People are looking for stability and reassurance, and the continued uncertainty around ISAs isn’t helping. At Yorkshire Building Society, we’re standing up for our savers and campaigning to protect savings allowances.
“We’re committed to helping people continue to build financial security and navigate life’s challenges.”
For first-time buyers and those saving for their pension, there is the Lifetime ISA, or LISA, available. This permits savers to set aside £4,000 each year, with the Government providing a 25 per cent bonus – amounting to £1,000 annually if you maximise your LISA contributions.
The drawback is that Britons face a 25 per cent withdrawal penalty which not only eliminates the bonus, but also eats into part of your initial savings.
Martin Lewis has been urging Labour to implement reforms to the Lifetime ISA, including increasing the property threshold and amending the penalty so that nobody forfeits part of their original contributions.
In a post shared on X last week, he said: “I think we may finally see some changes to the Lifetime ISA in [this week’s] Budget. Currently, if you try and use your savings to buy a property over £450,000, never mind you don’t get the 25% bonus, you have to pay an effective fine of 6.25% of your money to the state.
“I think one of two things will happen (I’ve been pushing for them): They get rid of the fine if you’re buying a bigger property (so you don’t get the bonus, but do get all your money back).
“They increase the threshold to somewhere in the £500,000s (which is where it would be with inflation if it’d increased since 2017 when it was launched). Or maybe both – nah actually – unlikely, only one!”.
