After the Budget: Why Advisers should talk about “after-tax outcomes”, not just headline rates.

A practical adviser guide to structured products.

The Autumn Budget has put savings tax back at the centre of the client conversation.  From 6^th April 2027, tax on savings income will rise by two percentage points, taking the basic rate to 24%, the higher rate to 44% and the additional rate to 49%.  The annual Cash ISA Allowance will remain at £20,000, after earlier plans to reduce it to £12,000 were scrapped.

For advisers, this creates a timely opportunity to move beyond headline interest rates.  The key question is, what will the client retain after tax, and does the solution match their needs for access, certainty, growth or income?

The Client Problem – Tax Drag on Cash

Cash remains essential for emergency funds, short -term spending needs and clients who value certainty.   But for clients holding significant cash outside an ISA, the Budget increases the risk of tax drag.

Most UK taxpayers have a personal savings allowance – £1,000 of tax-free savings income for basic-rate taxpayers and £500 for higher-rate taxpayers.  Additional-rate taxpayers receive no additional allowance.  Interest above these limits is taxed as savings income at the individual’s applicable rate.

From April 2027, that cost will rise.  A client with a large cash balance outside an ISA may find that a competitive gross rate produces a materially lower after-tax return, particularly where they have little or no remaining allowance.

A Timely Question – How Is the Return Taxed?

The Budget also makes it more important to explain how different savings and investment solutions are taxed.  This is an area where Structured Deposits and Structured Products are often misunderstood.

Structured Deposits

Structured Deposits are generally treated more like traditional deposits for tax purposes.  Outside an ISA or other wrapper, returns are typically treated as interest income and within the savings income rules, potentially covered by the personal savings allowance depending on the client’s other income and marginal tax rate.

Within an ISA, returns on eligible Structured Deposits are tax-free.  IDAD notes can be tax-efficient when held within wrappers such as ISA’s or SIPPs, whilst returns held outside of these wrappers are typically treated as interest income.

A Structured Deposit may offer capital protection at maturity and a defined potential return, but its after-tax attractiveness will depend on whether it is held in a wrapper and on the client’s wider tax position.

Structured Products

Capital-at-risk Structured Products are different.  Their tax treatment depends on the plan structure and the form in which the return is paid.

Some plans pay a return treated as savings income, similar to interest.  Others are designed so that growth is treated as a capital gain, potentially falling within the client’s annual exempt amount for Capital Gains Tax.  The correct treatment depends on the products terms, so advisers should review the plan documentation and seek appropriate tax or technical support where necessary.

Two products with similar headline returns can have very different after-tax outcomes depending on whether the return is taxed as income or capital, and whether it is held inside an ISA or pension wrapper.

Why the Cash ISA Allowance Matters

Retaining the £20,000 Cash ISA allowance preserves a substantial annual opportunity to hold cash-like savings without paying tax on interest. However, the key point is not simply that clients can save £20,000 in cash each year, it’s whether that is the most appropriate use of the allowance for their objectives.

For a client needing certainty, short term access or a known maturity date, cash or a Structured Deposit held within an ISA may be appropriate.  For a client with a longer time horizon, greater capacity for risk, or a need for long-term growth, using some or all of the allowance for investments may be more suitable.

A Structured Deposit can provide a middle ground, offering capital protection at maturity and a defined potential return while remaining capable of being held within an eligible ISA.  However, it is not a substitute for cash where immediate access is needed, and it should not be presented as risk-free simply because it may protect capital at maturity.

The Adviser Conversation

The budget gives advisers a clear framework for a more useful conversation:

• What is the money for, and when might it be needed?
• How much certainty does the client need?
• What is the client’s marginal tax rate, and how much of their personal savings allowance remains?
• Is the money held in a tax-efficient wrapper?
• What after-tax outcome is the client seeking?
• Does a Structured Solution offer a feature cash or a traditional investment does not?

These questions shift the discussion from product selection to planning, and show that the best solution is not always the one with the highest headline rate.

Where Structured Solutions fit In

Structured Deposits may suit clients seeking capital protection at maturity, a defined potential return and a known maturity date, particularly when held within an eligible ISA.  Their treatment as savings income outside a wrapper means the clients allowance and marginal rate should be considered.

Capital-at-risk Structured Products may suit clients comfortable accepting some downside risk for a more defined returned profile.  Their tax treatment can differ depending on the structure, so product-specific advice and documentation are essential.

Neither solution is automatically right for every client.  Liquidity needs, capacity for loss, time horizon, tax position and the wider financial plan should always come first.

As savings income tax rises from April 2027, advisers can help clients look beyond gross rates and focus on after-tax outcomes – whether through better use of ISA allowances or by considering whether a Structured Deposit or Structured Product offers a more appropriate balance of certainty, return potential and tax efficiency.

The value of advice lies in helping clients understand those trade-offs before they commit.

Important Information

Tax treatment depends on individual circumstances and may change.

Structured Deposits are not the same as conventional savings accounts, and capital protection, where offered, normally applies only at maturity.  Early access may be restricted or subject to a cost.

Capital-at-risk Structured Products can return less than the amount invested.  FSCS protection is subject to eligibility and applicable limits.

This article is for professional advisers and does not constitute tax, legal or financial advice.