State spending on UK savings and investment tax incentives climbed by 2.5% to reach £45.5bn in the 2025/26 tax year, up from £44.4bn the previous year, according to research by Bowmore Financial Planning based on HMRC Revenue and Customs data.
The performance marks the slowest rate of expansion recorded in four years. It represents a sharp deceleration from the prior tax year, when aggregate relief surged by 17% from £37.9bn.
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
Individual Savings Accounts (ISAs) experienced the most notable slowdown. Government expenditure on ISA tax breaks contracted for the first time in four years, slipping from £9.8bn to £9.7bn.
The contraction followed an era of sustained momentum, during which annual growth averaged 24.2%.
The decline in ISA subsidies comes ahead of a projected increase in basic-rate tax on savings returns, which is scheduled to rise from 20% to 22% in April 2027.
Tax relief allocated to pension contributions also lost momentum. Support grew by 3.7% to £33.5bn, up from £32.3bn, falling short of its 6.6% four-year annual average.
Further restrictions across personal finance allowances are scheduled to take effect over the coming years.
In April 2027, the yearly Cash ISA subscription threshold will fall from £20,000 to £12,000, while income tax relief on Venture Capital Trust allocations will decline from 30% to 20%.
Pensions will also be integrated into the inheritance tax regime from April 2027, diminishing their efficiency as an estate-planning vehicle for passing on wealth.
Additional curbs on salary sacrifice pension arrangements will follow in April 2029.
Only the initial £2,000 of an employee’s annual contribution will remain free from National Insurance Contributions (NICs), with sums above that ceiling subject to both employee and employer liabilities.
Treasury disclosures released under Freedom of Information laws project that the salary sacrifice changes will cost individuals £807m annually.
Gill Millen, managing director at Bowmore Financial Planning, said: “It is vital that investors take advantage of all the tax reliefs and savings available to them. Previous Budgets have shown that the direction of travel is to reduce these tax breaks.”
“Maximising tax reliefs and tax savings can help investors shield their wealth from future tax rises. There has been a wave of tax increases in recent years, and this trend could continue.”
“Employees in defined contributions workplace pensions should try to top the pension contributions they make through salary and/or bonus sacrifice before the NIC savings they can receive is cut. There may be substantial tax savings taxpayers could make between now and 2029.”
