Simon’s 2026 Budget Special
UK Budget 2026: What does it mean for your finances?
The Chancellor has delivered the 2026 Autumn Budget, which, in my opinion, felt a little calmer than some of the Budgets we’ve seen in recent years. There was plenty of tinkering around the edges, but no major shocks.
As always, there was plenty of political commentary surrounding the announcements, but I’ve picked out the measures most likely to affect our clients, along with a few of the wider policies that caught my attention.
This isn’t an exhaustive list and, as is often the case, we may need to wait for further details on some of the announcements.
Savings, investments and ISAs
There was some welcome news for savers, with the Government confirming that the annual Cash ISA allowance will remain at £20,000. This represents a U-turn on earlier proposals to reduce the allowance to £12,000 for those under 65 (and makes Lisa’s recent blog outlining the planned change, redundant!)
However, savings held outside tax-efficient accounts will become more expensive from April 2027. A two percentage point increase in savings income tax had already been announced, but Wednesday’s Budget added a further two percentage points, taking the rates to:
- Basic rate: 20% to 24%
- Higher rate: 40% to 44%
- Additional rate: 45% to 49%
The Personal Savings Allowance remains unchanged, allowing basic rate taxpayers to receive up to £1,000 of savings interest tax-free and higher rate taxpayers up to £500. Additional rate taxpayers do not receive an allowance.
The Government has also announced plans to explore a new Starter ISA, aimed at encouraging more people to begin saving and investing, although we don’t have any further details at present.
Property and rental income
Landlords will also face higher taxes from April 2027, with the same additional two percentage point increase applying to rental income, on top of the previously announced rise:
- Basic rate: 20% to 24%
- Higher rate: 40% to 44%
- Additional rate: 45% to 49%
For clients with rental properties, particularly alongside other sources of income, this makes reviewing ownership arrangements and the longer-term benefits of retaining property investments increasingly important.
Pensions and inheritance tax
One of the more interesting announcements was the introduction of a new Pension Tax Allowance (PTA), designed to prevent individuals with modest incomes from paying small amounts of income tax simply because the State Pension has risen above the standard Personal Allowance.
The full new State Pension is expected to reach £13,036 from April 2027, above the current Personal Allowance of £12,570.
The PTA will provide relief equivalent to the basic rate of income tax on the difference between these two figures. Eligibility will depend on total income, regardless of where that income comes from, with the allowance gradually withdrawn for those earning slightly more than the full new State Pension. The system is due to be phased in from 2027, with the position beyond April 2030 set to be outlined in due course.
Aside from the previously announced plans to reform the State Pension Triple Lock, there wasn’t much on pensions during the Chancellor’s speech. There was also no sign of a U-turn on plans to bring unused pension funds and certain death benefits within the scope of Inheritance Tax from April 2027.
The Budget document published afterwards did include some technical changes, including improved access to pension savings for terminally ill individuals and the removal of the two-year reporting window for certain pension death benefits. This means beneficiaries will no longer face an income tax charge solely because qualifying benefits are paid more than two years after the member’s death.
There were also changes to inheritance tax rules affecting certain trust arrangements, aimed at preventing individuals from obtaining what the Government describes as “unintended tax advantages”. These are fairly technical changes, and we’ll be reviewing the detail to establish whether they affect any existing client arrangements.
Changes for first-time buyers
The Government has confirmed plans to replace the Lifetime ISA (LISA) for first-time buyers with a new First Time Buyer ISA from April 2029.
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The new account will offer a 25% government bonus towards the purchase of a first home, with the bonus paid on withdrawal rather than when contributions are made. The maximum property purchase price will be £450,000, with a maximum government bonus of £20,000.
Existing LISA holders will be able to continue using their accounts, and there was also some good news for those buying properties above the current LISA price cap.
At present, withdrawing money from a LISA for a property above the permitted price results in a 25% withdrawal charge, meaning savers lose their government bonus and some of their own contributions.
Under the proposed changes, this charge will reduce to 20%, effectively removing the government bonus without penalising savers further.
I think this is a sensible change, particularly given how much house prices have increased since the LISA was introduced, especially for those buying in more expensive areas.
Household bills and the cost of living
With energy prices remaining high following the conflict in the Middle East, the Government announced some additional support for households.
Properties in England between Council Tax bands A to D will receive a £100 rebate to help with energy costs over the winter.
There are also plans to abolish standing charges on household gas bills, although this is unlikely to happen until the end of 2027 at the earliest. Electricity standing charges are also being reviewed, with further details expected next year.
For motorists, the temporary 5p per litre reduction in Fuel Duty has been extended until July 2027.
Businesses and business owners
There were several announcements aimed at supporting smaller businesses, although rising employment costs will remain a challenge.
For business owners considering a future sale, the Government has announced a reduction in the Business Asset Disposal Relief (BADR) lifetime limit from £1 million to £500,000 from April 2027.
This could make a significant difference to the Capital Gains Tax payable when selling a qualifying business, particularly for those planning an exit over the next few years.
The rateable value threshold for Small Business Rates Relief will increase from £12,000 to £18,000 for retail, hospitality and leisure businesses, allowing more smaller premises to qualify for relief.
Pubs, social clubs and live music venues will also benefit from an additional 20% business rates relief, although larger venues will receive less generous support.
However, some of these savings may be offset by another increase in employment costs. From April 2027, the National Living Wage will rise by 3.9%. This will put further pressure on businesses already dealing with higher energy bills, National Insurance contributions and other operating costs.
Another change worth mentioning is the introduction of more frequent income tax payments for some Self Assessment taxpayers from April 2029. Rather than relying solely on the existing payment arrangements, affected taxpayers will be required to make regular payments towards their final tax bill throughout the year.
There were no further changes to the main personal income tax thresholds or dividend tax rates announced in the Budget.
Public spending and infrastructure
Away from personal taxation, the Government set out plans to make greater use of technology and artificial intelligence across the public sector, with the aim of improving productivity, reducing administrative costs and delivering better value for taxpayers.
Defence spending is also set to increase, alongside a commitment of an additional £10 billion of support for Ukraine.
There was also a further push towards giving local mayors greater powers and funding, allowing more decisions about investment and public spending to be made locally rather than in Westminster.
And finally, one announcement that may be particularly welcome for those of us who regularly travel to the Lake District.
The Government has set out plans for a 50-mile dual carriageway upgrade to the A66 between Scotch Corner and Penrith. Work is expected to begin in November, although with a nine-year delivery timetable, we may be waiting a while before enjoying the benefits!
Final thoughts
There is no need to rush into making changes based on the headlines alone. However, as part of our ongoing financial planning work, we’ll be considering how the announcements affect individual circumstances and whether any adjustments are appropriate.
As always, if you have any questions about how the Budget might affect your own finances, please don’t hesitate to get in touch.
Written by Director, Simon Warne
This article is based on our understanding of legislation and events at the time of publication. It is provided for general information only and should not be regarded as financial advice. We recommend seeking advice from a suitably qualified professional before making any investment decisions. The value of investments can fall as well as rise, and you may get back less than you invest.
