Chancellor Rachel Reeves has unveiled a sweeping tax shake-up that will affect millions of UK taxpayers. The changes, announced in the latest budget, include modifications to Individual Savings Accounts (ISAs) and the self-assessment system, prompting experts to advise early planning.
ISA Changes The annual ISA allowance will be reduced from £20,000 to £15,000 starting next tax year. Savers who have already maximized their allowance will need to adjust their strategies. Additionally, the government is introducing a new "UK-focused" ISA with a separate £5,000 allowance, aimed at boosting domestic investment.
Self-Assessment Overhaul The self-assessment tax return process is being digitized further. From 2027, all taxpayers will be required to file digitally, with HMRC rolling out a new online platform. Late-filing penalties will increase, with a flat £100 fine for missing the deadline, followed by daily penalties of £10 for up to 90 days.
Other Key Measures
- Capital gains tax rates for higher-rate taxpayers will rise from 20% to 24%.
- Inheritance tax thresholds will be frozen until 2030.
- The energy profits levy will be extended by one year.
Financial advisers recommend reviewing your portfolio now to mitigate the impact. For ISA holders, consider using this year's allowance before the cut takes effect. For self-assessment filers, start gathering documents early to avoid penalties.