The Treasury has issued a fresh update on Individual Savings Accounts (ISAs) after being asked whether a new charity-focused version of the product could be introduced. The response comes as changes to ISA rules and the taxation of savings are due to take effect in the coming years.
The discussion was prompted by a parliamentary question from Liberal Democrat MP Sarah Dyke, who asked Chancellor Rachel Reeves whether she had considered creating “charity ISAs” to provide long-term funding for the charity sector. In response, Treasury minister Rachel Blake outlined the Government’s current position and highlighted existing tax reliefs available to charities and donors.
According to the Treasury minister, the Government believes existing ISA products already provide opportunities for individuals to support charitable causes while benefiting from established tax advantages.
Government Points to Existing Tax-Advantaged Savings Options
ISAs currently available to UK savers include cash ISAs, stocks and shares ISAs, innovative finance ISAs and Lifetime ISAs. Junior ISAs are also available for children under the age of 18, with annual deposits capped at £9,000.
Responding to the parliamentary question, Rachel Blake said that the Government already offers “a range of tax advantaged savings accounts (ISAs) that are well placed to support individuals to donate the capital and/or the growth to a charity of their choice”.
She also highlighted the role of Gift Aid in supporting charitable donations. According to Blake, “Gift Aid enables charities to claim a basic rate top-up on eligible donations and incentivises taxpayers to donate more to charity”. The minister added that Gift Aid and higher-rate relief on Gift Aided donations provide more than £2.5 billion in tax relief.
ISAs remain one of the main tax-efficient savings vehicles available in the UK. Interest earned within a cash ISA and investment growth generated within other ISA products are exempt from tax. By contrast, savings held outside an ISA may be subject to tax once annual allowances have been exceeded.
Under the current rules, basic-rate taxpayers can earn up to £1,000 in savings interest each financial year before paying tax. The allowance falls to £500 for higher-rate taxpayers, while additional-rate taxpayers receive no personal savings allowance.
Addressing the possibility of future reforms, Blake stated that the Government “keeps all taxes and reliefs under review” and remains committed to ensuring charities benefit from the existing system while improving it where possible.
ISA Allowance and Savings Tax Changes Scheduled From 2027
Alongside the discussion around charity ISAs, the Government’s update comes at a time when wider changes to savings rules are approaching.
According to the reports, the annual ISA allowance will change from April 2027. The current £20,000 allowance will be divided so that savers can allocate up to £12,000 freely across ISA products, while the remaining £8,000 will be reserved exclusively for stocks and shares ISA contributions.
Changes to the taxation of savings interest are also scheduled. The tax rate applied to interest earnings will increase by two percentage points across all income tax bands.
For basic-rate taxpayers, the rate will rise from 20 per cent to 22 per cent. Higher-rate taxpayers will see the rate increase from 40 per cent to 42 per cent, while additional-rate taxpayers will face a rise from 45 per cent to 47 per cent.
The Treasury’s latest comments did not announce any new charity ISA product. Instead, the Government reiterated its support for the existing ISA framework and the current range of tax reliefs available to encourage charitable giving.
