A finance specialist advises UK residents to take a specific action before their January payday to potentially unlock savings of up to £1,164. Rajan Lakhani, Head of Money at the financial management app Plum, suggests setting up an “autosave” rule on banking apps. This rule automatically transfers funds into a savings account or investment pot at scheduled intervals, eliminating the need for manual transfers.
By utilizing auto-saving tools, the average worker saved £97 per month in 2025, as per analysis by Plum. Setting up an autosaver before January payday could lead to savings of £1,164 by the year’s end. If these funds are moved to a high-interest savings account with a rate exceeding 4%, the total savings could grow to approximately £1,210.
Digital banks like Monzo, Starling, Revolut, and Chase offer autosave features. Lakhani emphasizes that establishing a payday autosaver can facilitate stress-free monthly savings, fostering consistency in financial habits and aiding in achieving long-term financial objectives. This money can contribute to goals such as a house deposit or covering unexpected expenses.
Basic-rate taxpayers can earn up to £1,000 in savings interest annually before incurring tax, known as the personal savings allowance. Higher-rate taxpayers face a 40% tax on savings interest exceeding £500 a year, while additional rate taxpayers are subject to a 45% tax on all savings interest. Savings held in an ISA account are tax-free, with a current annual limit of £20,000 across various ISA accounts, though the cash ISA limit will reduce to £12,000 for under-65s starting April 2027.
The overall ISA limit remains at £20,000, allowing flexibility in cash and stocks and shares ISAs. The new cash ISA cap does not affect over-65s, who can continue to save up to £20,000 annually in a cash ISA.