Spring Statement 2026: Savings, ISA and Pension Changes Explained — What to Do Before and After April

The ISA annual allowance remains at £20,000 for 2025/26 and 2026/27 — a figure that has not changed since 2017/18. Within that £20,000, you can split your allowance across four types of ISA: Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, and Lifetime ISA (capped at £4,000 of the £20,000 total). You must be 18 or over to open most ISAs (16 for Cash ISAs from April 2024).

The Spring Statement made no mention of increasing the ISA allowance or introducing the rumoured 'British ISA' that had been discussed in 2024. This means the £20,000 ceiling remains — and with it, the opportunity cost of not using it. Every pound of unused ISA allowance on 5 April is gone forever; it cannot be carried forward.

With the Bank of England base rate at 3.75% and likely to fall further in 2026, cash ISA rates have been drifting downward. The best easy-access cash ISAs are currently offering around 4.0–4.5%, while fixed-rate ISAs for one year offer slightly more. For savers whose interest income exceeds the Personal Savings Allowance, a cash ISA remains valuable despite lower rates.

For most savers, the decision is not whether to use the ISA allowance but how to split it. If you have more than £20,000 to save and your interest income will exceed the PSA, prioritise the ISA. If you are saving for retirement, a pension may offer better tax relief — see the pension section below. For our full ISA breakdown, see the ISA hub.

The Personal Savings Allowance (PSA) lets you earn a set amount of savings interest tax-free each year:

• Basic rate taxpayers (20%): £1,000 tax-free interest
• Higher rate taxpayers (40%): £500 tax-free interest
• Additional rate taxpayers (45%): £0 — no PSA

The Spring Statement did not change these thresholds, and they have remained fixed since their introduction in April 2016. The PSA is not indexed to inflation or interest rates.

Here is why this matters more now than ever. When the base rate was 0.1% (March 2020 to December 2021), a basic rate taxpayer could hold over £1 million in savings before breaching the PSA. At today's 3.75% base rate, with easy-access savings accounts offering around 4%, the same taxpayer would breach the PSA with just £25,000 in savings.

The combination of frozen PSA thresholds and higher interest rates means many more savers now owe tax on their savings interest — often without realising it, since banks report interest to HMRC and tax is collected through a revised tax code. If your savings exceed roughly £25,000 (basic rate) or £12,500 (higher rate) in non-ISA accounts, you are likely paying tax on the interest.

This is the strongest argument for using your ISA allowance — ISA interest is completely outside the PSA calculation. Moving savings from a taxable account into a cash ISA eliminates the tax even if the ISA rate is slightly lower.

The pension annual allowance remains at £60,000 for 2025/26 and 2026/27. This is the maximum total contribution that can be made to your pension(s) in a tax year — including employer contributions — before a tax charge applies.

For most employees, the effective allowance is lower because it is capped at your total UK earnings. If you earn £40,000, your annual allowance is effectively £40,000, not £60,000.

Key pension rules confirmed by the Spring Statement:

• Annual allowance: £60,000 (unchanged from 2023/24)
• Money Purchase Annual Allowance (MPAA): £10,000 — applies if you have flexibly accessed a defined contribution pension
• Tapered annual allowance: For those with 'adjusted income' over £260,000, the allowance tapers down to a minimum of £10,000
• Carry forward: You can carry forward up to 3 years of unused annual allowance, potentially contributing up to £180,000+ in a single year
• Lifetime Allowance: Abolished from April 2024 — no cap on total pension savings (though a lump sum allowance of £268,275 tax-free applies)

Pension contributions attract tax relief at your marginal rate. For a higher rate taxpayer, a £10,000 gross pension contribution effectively costs just £6,000 after 40% relief. For earners in the 60% effective marginal rate band (£100,000–£125,140), pension contributions are exceptionally powerful — see our detailed analysis in our tax bill worked examples.

For our comprehensive pension planning guide, visit the pensions hub.

The Bank of England has cut the base rate four times since August 2024, from 5.25% to the current 3.75%. Markets expect further cuts in 2026, with the rate potentially reaching 3.25–3.50% by year end. Each cut tends to flow through to savings rates within weeks.

For cash savers, this creates a clear tension: rates are still historically attractive compared to the near-zero era of 2020–2022, but the direction is downward. Here is how different savings products are responding:

• Easy-access accounts: Best rates around 4.0–4.5%, likely to fall as base rate drops
• Fixed-rate bonds (1 year): Around 4.0–4.5% — locking in may preserve current rates
• Fixed-rate bonds (2 year): Around 4.0–4.3% — reflects expectation of further cuts
• Cash ISAs (easy-access): Around 4.0–4.5%, tax-free
• NS&I Premium Bonds: Prize fund rate currently at 4.00%, recently cut from 4.40%

The strategy implication is straightforward: if you believe rates will fall further (which is the market consensus), locking into a fixed-rate account or fixed-rate cash ISA now preserves today's higher rates. If you need flexibility, easy-access remains strong but expect gradual erosion.

For a full comparison of savings account types, see our savings hub. For NS&I products specifically, read our NS&I guide.

The tax year ends on 5 April 2026. These allowances and opportunities reset — use them or lose them:

1. ISA Allowance — £20,000 Contribute to a Cash ISA, Stocks & Shares ISA, or both. Even if you can only save a small amount, it shields future growth from tax. The Lifetime ISA (£4,000 maximum, 25% government bonus) is available if you are under 40 and saving for a first home or retirement.

2. Pension Contributions Maximise employer matching first — it is free money. Then consider additional voluntary contributions, especially if you earn between £50,270 and £125,140 (higher rate relief) or near £100,000 (preserving personal allowance). Remember, you may be able to carry forward unused allowance from the previous 3 years.

3. Capital Gains Tax Exemption — £3,000 If you hold investments with gains, consider selling enough to use your £3,000 annual exempt amount. You can immediately repurchase different assets (selling and rebuying the same asset within 30 days triggers the 'bed and breakfasting' rules).

4. Dividend Allowance — £500 If you receive dividends from investments, the first £500 is tax-free. This cannot be carried forward.

5. Marriage Allowance — up to £252 savings If one partner earns below £12,570 and the other is a basic rate taxpayer, transfer £1,260 of personal allowance. This can be backdated up to 4 years.

For our full pre-April checklist, see the tax hub.

The new tax year brings the same allowances but a fresh start. Here is how to position yourself:

Early ISA contributions: Contributing your ISA allowance early in the tax year maximises the time your money grows tax-free. Even if you are drip-feeding contributions monthly, starting in April rather than waiting until March gives you 11 extra months of compound growth.

Review your pension contributions: With the lifetime allowance abolished, there is no cap on total pension savings. If you are a higher earner, consider whether salary sacrifice (which also saves employer NI) could increase your effective pension contribution without changing your take-home pay.

Check your tax code: HMRC adjusts tax codes to collect tax on savings interest exceeding the PSA. If your savings balances have changed, your code may need updating. You can check and update it via your Personal Tax Account.

Consider a Stocks & Shares ISA: With cash rates expected to fall, the relative attractiveness of investing within an ISA increases. Over the long term (5+ years), equities have historically outperformed cash — though with greater short-term volatility. Our investing hub covers the basics.

Plan for known events: The BoE MPC meets on 19 March and 8 May 2026. Rate decisions affect mortgage and savings rates. If you are on a variable rate mortgage or have large cash savings, these dates matter for your planning.

This article is for informational purposes only and does not constitute regulated financial advice. Tax rules can change and individual circumstances vary. You should consult a qualified financial adviser before making decisions based on the information in this article.