Budget 2026: PwC comments on personal tax changes - ISAs, income tax and savings

Tom Evennett, tax partner at PwC, comments on the personal tax measures announced at the Budget:

ISA allowance changes

"The decision to retain the £20,000 Cash ISA allowance marks a clear change of direction. Savers may be particularly grateful that the proposed £12,000 limit has been dropped given the confirmed 2 percentage point increase in tax on savings income from April 2027, making the tax-free shelter provided by ISAs even more valuable. 

"The wider ISA changes also show a different approach to encouraging people to save and invest. Alongside plans for a new 'Starter ISA' to encourage first-time investors, the Government is moving towards a new First Time Buyer ISA to replace the Lifetime ISA. Importantly, the new product is designed without the LISA’s 25% withdrawal penalty; the Government bonus would instead be provided when the money is used to buy a first home, giving savers greater flexibility if their circumstances change." 

Income tax acceleration

"From April 2029, there will be a significant change in how many self-employed people, partners, landlords and other Self Assessment taxpayers pay their income tax. Those already within the Payments on Account regime - broadly, where the forecast liability exceeds £1,000 and less than 80% of tax is collected at source - will move away from two large instalments each year towards smaller, more regular automated payments, bringing payment much closer to when the income is actually earned. 

"The overall amount of tax should not change, but the timing of payments will. For some taxpayers this may make budgeting easier, but it also means losing the cash-flow benefit of holding on to tax for longer before it falls due. The transition will therefore need to be carefully managed, particularly for business owners and the self-employed who may have fluctuating income or irregular cash receipts." 

Savings and property income 

"Landlords and savers face a much steeper tax increase from April 2027 than they had previously expected. Last year’s Budget had already announced a 2 percentage point increase in the rates applying to savings and property income, but today’s further increase effectively doubles that rise to 4 percentage points compared with current rates, taking the basic, higher and additional rates to 24%, 44% and 49%. 

"For landlords, that represents a material further squeeze on the post-tax return from holding property personally. Savers will also feel the impact where interest falls outside the Personal Savings Allowance or ISA wrapper, making the decision to retain the full £20,000 Cash ISA allowance particularly valuable for those with larger cash savings." 

Our full budget reaction