A financial expert advises individuals in the UK to take a specific action before their January payday to potentially unlock savings of up to £1,164. Rajan Lakhani, the Head of Money at the financial management app Plum, recommends setting up an “autosave” rule on a banking app. This feature automatically transfers funds into a savings account or investment portfolio at scheduled intervals, eliminating the need for manual transfers.
Plum’s analysis reveals that on average, individuals used auto-saving tools to save £97 per month in 2025. By initiating this action at the beginning of January, one could accumulate £1,164 by the year’s end. If these funds were moved to a high-interest savings account with a rate exceeding 4%, the savings could grow to around £1,210.
Popular digital banks like Monzo, Starling, Revolut, and Chase offer “autosave” functionalities. Lakhani emphasizes the significance of setting up a payday autosaver as a stress-free method to save consistently and achieve long-term financial objectives. By establishing this practice, individuals can develop good financial habits and create a safety net for savings, contributing to peace of mind and financial security.
Basic-rate taxpayers can earn up to £1,000 in savings interest annually before incurring taxes, known as the personal savings allowance. Higher-rate taxpayers face a 40% tax on savings interest exceeding £500 per year, while additional rate taxpayers are subject to a 45% tax on all savings interest. Notably, savings in an ISA account are tax-free, with an annual limit of £20,000 across various ISA accounts.
From April 2027, the cash ISA limit for those under 65 will decrease to £12,000, while the overall ISA limit remains at £20,000. Over-65s are unaffected by this change and can continue to save up to £20,000 per tax year in a cash ISA. This adjustment aims to streamline ISA savings and investment opportunities for different age groups.
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