Starter ISA welcome but 4.5% savings rate worth just 2.61% from April 2027

28 October 2026

Alex Beavis, Interim Director of Banking at LHV Bank responds to savings policy announced in the Budget:

“A welcome dose of common sense. Cash ISAs give people a straightforward, tax efficient way to save for a house deposit, build a buffer, or plan ahead with confidence. Encouraging more people to invest is a sensible ambition, but saving and investing aren’t interchangeable: cash is the safety net for life’s unexpected bills, while investments build wealth over the longer term. The new Starter ISA looks like a promising step for new investors, and we look forward to seeing the detail. Penalising people for wanting to save was always the wrong way to go about it.

That said, it isn’t all good news for savers. The two percentage point rise in tax on savings held outside an ISA is going ahead, taking rates to 22%, 42% and 47%, and the Personal Savings Allowance hasn’t moved since 2016. A higher-rate taxpayer earning 4% only needs £12,500 in the bank before their interest becomes taxable, and from April a 4.5% rate will be worth just 2.61% to them on interest above their allowance. That makes the ISA shelter more valuable than ever, so anyone with money sitting in a standard savings account should make sure they’re using their allowance. We’d still urge the Chancellor to raise the Personal Savings Allowance so that saving isn’t penalised.”

Alex Beavis speaks about 'How much is enough to feel safe? in the Money Chill Out Podcast if you'd like to hear more on his thoughts regarding saving, investing and money anxiety.

https://open.spotify.com/episode/0T1p0IxaTYqEVtPH4Xqa4X?si=f8494aad2ed74dfe