Labor set to hit UK households with ‘triple blow’ austerity

UK families face a “double whammy” for the Labor government’s rescuers.

Labor is set to hit UK households with a “triple punch” as they clamp down on savings. UK families face “t“riple blow” for the saviors of the Labor Party government.

In a warning before the new tax year, AJ Bell’s director of personal finance, Laura Suter, said: “The decision to cut Cash ISAs for under-65s will lead to bigger tax bills for the public.

“While the government hopes this move will encourage more people to take their first investment steps, in reality many people will leave their money in non-ISA accounts and therefore pay tax on their savings gains.

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“The Budget also saw personal savings suspended for another year and tax rates on savings interest increased – creating a triple whammy for savers.

He added: “Savers who are looking down the tax barrel for their savings can look at other options to make a return on their money before the April 2027 deadline.

“While it may seem like a non-ISA savings account, there are other options you can consider that could pay off in the long run.

“In our survey, a quarter of people said that if the Cash ISA was cut they would buy Premium Bonds or another NS&I product.

“The appeal of Premium Bonds has just increased for some people, as any winnings are tax free. Although there is obviously a chance you won’t win anything, as there is no traditional interest paid on the accounts, you can win a prize and those winnings will be tax free.”

Ms Suter added: “While the ISA allowance will be reduced for cash, it will remain the full £20,000 for investments.

“We know we are a money-loving society, and many people have more money than they need. FCA data shows that from 2021 the number of people holding more than £10,000 in financial assets wholly or mainly in cash has risen from 8.4 million to 11.8 million.

“But those who save at least should think about investing, to see if it’s right for them.” Recent research from AJ Bell has found that investing £1,000 every year since 1999 in a standard IA Global unit can now be worth £92,349 versus just £36,290 in a Cash ISA – a difference of £56,059 over the long term.

He said: “Fixed rate savings accounts can earn you high returns, you just have to be willing to lock in your money for a long time. You can choose the length according to your needs, from one year to five years or more.

“But it’s a great way to lock in more money than is readily available. The money will still be taxed if it’s not through an ISA, but you can be more flexible with the accounts you choose.

“You only pay tax on the interest on most fixed rate accounts at the end of the term, which means you can reduce the tax payable in another tax year. For example, if you were to withdraw a one-year fixed rate account now, which paid interest as you grew, that would contribute to your 2026/27 tax year.

“It’s a smart move if you know you’ll be moving into a lower tax bracket next year, which means you’ll have more personal savings and pay a lower rate of tax on your savings.

“In the same way it can be a good step if you have a lot of tax savings this year, and so you have reached your tax limit, but it may be lower next year. It is a good idea to follow the savings reports in a spreadsheet, so that you do not lose track of when they grow, or use a savings account, so they are all in one place.”