The Chancellor, John Healey, has delivered the 2026 Autumn Budget. It included wide-ranging changes that will affect people of every age and from all walks of life.
Healey upheld many of Rachel Reeves’ commitments, including a pledge not to increase taxes on “working people” and a commitment to meeting the Labour Party’s self-imposed fiscal rules.
He also introduced a wide range of new measures, while rowing back on a key policy proposal tabled by the former Chancellor: a proposed reduction in the annual Cash ISA (Individual Savings Account) contribution limit from £20,000 to £12,000.
In this update, you’ll learn more about the key announcements that will affect both household and business finances.
Many of Reeves’ tax measures are being upheld
Healey said that Labour was keeping its promise not to increase taxes on working people.
In keeping with the Labour Party manifesto, Healey announced no further increases to the main rates of tax for individuals and businesses.
The taxes staying at their current rates for 2027/28 are:
- Dividend Tax
- Inheritance Tax (IHT)
- Capital Gains Tax (CGT)
- National Insurance
- The standard rate of VAT
- Corporation Tax (except for banks)
- Income Tax (with the exception of some savers and landlords)
In addition, existing “stealth taxes” – where thresholds are frozen instead of rising year-on-year – remain in place until 2031:
- The Personal Allowance of £12,570
- Income Tax thresholds
- The IHT nil-rate bands
There has been no reversal of the government’s decision to include pension funds within the estate for inheritance tax from April 2027. We are actively exploring solutions and alternatives.
New ISA announcements including a reversal of the Cash ISA limit reduction
A raft of changes and proposals were announced regarding ISAs:
- The decision to cut the amount under-65s could save into Cash ISAs from £20,000 to £12,000 has been reversed.
- A new First-Time Buyer ISA will replace the Lifetime ISA (LISA) from April 2029 for new savers and will allow contributions of up to £4,000 per year with a 25% Government bonus. The Budget document says: “The bonus will be paid on the value of the account balance when funds are withdrawn for a qualifying first home purchase, up to the value of £450,000, so avoiding the need for any withdrawal charge. The new product will have no upper age restriction.”
- Savers who already have a LISA will be able to continue contributing to it.
- Healey also pledged to deal with the so-called LISA penalty, reducing the withdrawal charge from 25% to 20% for first home purchases above £450,000 that meet the other qualifying rules. This removes the penalty on savers’ original contributions. Other unauthorised withdrawals will retain the 25% charge.
- The Government will investigate introducing a new ISA to reward first-time investors, labelled a Starter ISA.
Healey announced further Income Tax increases for landlords and savers
Income Tax will rise by a further two percentage points on taxable property income for landlords in England, Wales, and Northern Ireland.
The same increase will potentially apply to savings interest outside of an ISA that surpasses an individual’s Personal Savings Allowance (PSA), which stands at:
- Basic-rate taxpayers: £1,000
- Higher-rate taxpayers: £500
- Additional-rate taxpayers: £0
The Income Tax rate was already set to go up by two percentage points in April 2027 for those who meet the criteria, so this reform brings the total increase to four percentage points.
The ordinary rates for Income Tax in England, Wales, and Northern Ireland are:
- Basic rate: 20%
- Higher rate: 40%
- Additional rate: 45%
From 6 April 2027, for taxable property income and on qualifying savings interest, the rates will stand at:
- Basic rate: 24%
- Higher rate: 44%
- Additional rate: 49%
The Budget document states that 84% of Income Tax payers will be unaffected by the property and savings income changes in 2027/28.
Important changes for those starting, growing, and selling their businesses
The Chancellor placed a heavy focus on business owners in the Budget.
New business owners and newly self-employed people
- A new Young Entrepreneurs Allowance pilot in England will provide successful applicants with support towards their living costs during their first year in business.
- The existing Trading Allowance will increase from £1,000 to £3,000 from 6 April 2027, allowing individuals to receive up to £3,000 a year in qualifying trading and miscellaneous income, tax-free.
- The British Business Bank will double its investment commitments to women-led businesses and funds to £200 million.
Those growing their business
- From April 2029, Self Assessment taxpayers who make payments on account will make smaller, more regular payments towards their tax bill.
- Also from April 2029, eligible self-employed fathers and partners in Great Britain will receive two weeks’ parental pay, currently worth up to £194 a week.
- The Government will reform how payments from companies to individual shareholders are taxed, reducing opportunities to extract profits at more favourable tax rates.
- From April 2027, qualifying retail, hospitality, and leisure properties in England with a rateable value of up to £18,000 will qualify for full Small Business Rates Relief, up from £12,000. Tapered relief will extend to £21,000, up from £15,000.
For those disposing of business assets, the Budget presented a mixed bag
The Chancellor announced a new Founders’ Relief, offering a 10% CGT rate on qualifying share disposals from 6 April 2027, subject to a £10 million lifetime limit.
The relief will target founders and significant early investors in high-growth, innovative U.K. companies. Detailed eligibility rules are being consulted on, including conditions relating to employees, turnover, growth, and research and development.
Healey also announced that the lifetime limit on gains qualifying for Business Asset Disposal Relief (BADR) will fall from £1 million to £500,000 from 6 April 2027. The Budget document says three in four BADR claimants will still receive relief on their entire gain.
Separately, the Government plans to reform non-compete clauses to make it easier for businesses to recruit and for employees to move jobs.
The Chancellor reaffirmed previously announced State Pension changes
The triple lock will be reformed from 2030
Honouring a manifesto promise, the Chancellor confirmed that the triple lock will remain for the duration of this parliament.
As previously announced at the Labour Party Conference, it will, however, be adjusted from April 2030, when the State Pension will rise by the highest of inflation (as measured by the Consumer Prices Index), 2.5%, or the amount needed to maintain its value relative to earnings. This means it will track earnings growth over time.
The changes are projected to save £15 billion a year by the end of the 2030s, and £50 billion a year by 2050 with the savings used to fund the National Care Service in England, announced by the prime minister in September.
A new Pension Tax Allowance will protect pensioners as the full State Pension rises above £13,000
The full new State Pension will rise by 3.9% in April, bringing full payments above the Personal Allowance. This will bring payments for those eligible for the full amount to approximately £250.70 a week, up from £241.30 in 2026/27.
The increase will see the full new State Pension rise above the Income Tax Personal Allowance of £12,570 a year for the first time. Previously, the Government said that pensioners whose total income is no higher than the full new State Pension would not pay Income Tax, and this promise was upheld by the Chancellor.
The Government will, therefore, introduce the Pension Tax Allowance (PTA), ensuring that pensioners whose total income is up to the value of the full new State Pension will not pay Income Tax. The allowance will apply from 6 April 2027 until April 2030, at which point further arrangements will be considered.
More help for first-time buyers
With many aspiring homeowners struggling to get on the property ladder, Healey announced the ‘Your First Home’ scheme for eligible first-time buyers purchasing qualifying new-build homes in England.
The scheme will offer a Government equity loan worth 20% of the purchase price, with buyers needing a deposit of at least 2.5%. The loan will be interest-free for five years. Household income limits and local property price caps will apply.
Applications are expected to open in February 2027, with the first purchases taking place from April 2027.
Healey announced further support with household energy bills
Continuing his focus on giving families “breathing room”, the Chancellor announced several measures to help households with their energy costs.
VAT reduction on energy costs
The temporary reduction in VAT on domestic electricity from 5% to 0% will be extended for three months, until 1 July 2027. The Government expects this extension to take around £50 off the annual Ofgem price cap from April 2027.
Household Energy Payments
Households in council tax bands A to D in England will also receive a £100 Household Energy Payment from January 2027. Delivered through local authorities, the payment is expected to support up to 20 million households.
The devolved Governments will receive funding to enable them to provide similar support.
Removing the standing charges on gas bills
Healey also announced plans to remove gas standing charges from domestic bills in Great Britain, aiming for delivery by the end of 2027 or as soon as possible afterwards.
Gas standing charges currently average £108 a year. However, these costs will move into gas unit rates, so removing the standing charge will not mean every household saves £108. The impact will depend on gas consumption, with targeted support planned for households adversely affected.
An extension to the fuel duty cut
The 5p cut and freeze on fuel duty will be extended until 1 July 2027.
The Government also committed to:
- Reforming electricity standing charges, with details due in 2027
- Scrapping the planned Gas Shipper Obligation, which would have added costs to gas bills to fund hydrogen projects. These projects will instead receive Government funding.
An increase to the National Minimum Wage and National Living Wage
As with the State Pension, the National Minimum Wage and National Living Wage will rise by 3.9% next April.
HMRC will receive “new powers” to claim tax from those who do not pay
The Chancellor announced measures to close tax loopholes and recover unpaid tax.
These include reforms to how company payments to individual shareholders are taxed, reducing opportunities to extract profits at more favourable tax rates. From April 2029, Self Assessment taxpayers who make payments on account will also make smaller, more regular payments towards their tax bill.
From July 2029, HMRC will gain powers to recover lower-value tax debts through regular instalments directly from the bank accounts of individuals and companies who can afford to pay but repeatedly fail to do so. Safeguards will be developed before the powers are introduced.
Additional Budget measures that could affect you, your family, and your business
- An end to the Carer’s Allowance “cliff edge”. From 2030/31, the Government plans to introduce a taper in England and Wales, so unpaid carers will no longer lose their entire Carer’s Allowance simply for earning as little as a penny over the Weekly Earnings Limit.
- The removal of import tariffs on household staples and farming goods. “Family favourites” including baked beans, chocolate, and gherkins will see import tariffs removed. This will extend to some fertiliser and kerosene heating oil, helping households and farmers facing high bills.
- Investment of up to £5 million a year (for three years from 2027/28) in children’s organisations, such as Dolly Parton’s Imagination Library, which gives books to children.
- The introduction of a Misogyny Prevention Fund to support the Government’s ambition to halve violence against women and girls.
- Welfare reforms. These will include a huge number of changes, to be set out in a white paper in 2027.
- Helping drivers with tax-free mileage rates. The rate for the first 10,000 qualifying business miles in an employee’s or self-employed person’s own car or van will remain at 55p a mile, following the temporary increase in May. For business mileage above 10,000 miles, the rate will rise from 25p to 35p a mile.
A temporary increase to the tax surcharge on banks
Healey announced a temporary increase to the existing Bank Corporation Tax Surcharge, pushing it up from 3% to 6% for 15 months from 1 January 2027 to 31 March 2028.
This increase was lower than some in the banking sector had expected, with reports suggesting a return to 8%.
The Government is investing in AI and has increased the defence budget
The Chancellor is extending an additional £10 billion of aid to Ukraine and expects to spend 3.5% of GDP on defence by 2035.
As part of its push for national security, the Government will also increase its investment in AI.
Commenting that “we are already world leaders in AI safety and security”, Healey announced around £500 million to strengthen AI security and resilience, alongside an additional £140 million for the Sovereign AI Unit.
In practice, the Chancellor said this investment will include:
- New data centres, to keep data on British soil, including for the NHS and armed forces
- A Data Centre Covenant to create local jobs and protect the U.K.’s water supplies.
GDP, national debt, and inflation
As always, the Chancellor announced the latest figures from the Office for Budget Responsibility (OBR).
Rising costs, along with the associated higher interest rates, have affected families and businesses, as well as the Government.
OBR figures show the U.K. Government will spend an average of £14 billion more a year on debt interest, compared to its March 2026 forecast. Healey explained that he aims to reduce Government borrowing in order to cut interest payments.
In the forecast, public sector net financial liabilities compared to GDP is predicted to be:
- 83.2% in 2026/27
- 83.8% in 2027/28 and 2028/29
- 83.1% in 2029/30
- 82.3% in 2030/31
- 81.7% in 2031/32
Moving on to the performance of the economy, in the first half of 2026, the U.K. was the joint fastest-growing in the G7, along with the US.
Looking ahead, the OBR expects GDP to increase but at a much slower pace than previous forecasts:
- 1.2% in 2026
- 1% in 2027
- 1.6% in 2028
- 1.8% in 2029
- 1.7% in 2030
- 1.6% in 2031
While the OBR data indicates there is pressure on the Government’s budget, Healey said the headroom established last year to absorb the impact of the Iran war means that taxes will not increase for working people.
Devolution will be a priority for this Government
Healey stated that local leaders should not have to come “cap in hand” to Westminster to fund infrastructure projects in their region. With this in mind, the Budget set out a roadmap to fiscal devolution.
The Government will introduce a Good Growth Fund, providing £285 million in transitional seed funding to local leaders for 2027/28.
Separately, from April 2028, a £1.5 billion borrowing facility will be available to Mayoral Strategic Authorities in England to support local growth projects. Devolved Governments will receive additional funding through the Barnett formula.
Together, it is hoped these measures will promote growth.
Our view on the Budget and how it might affect you
Our Chief Investment Officer, Rory Smith, had the following to say in relation to the impact on financial markets:
“Today’s Budget was broadly as we expected: measured, targeted, focused on stability, and small in size. There were no rises in the main rates of income tax, National Insurance or VAT. This is consistent with the election manifesto.
There were also no big new spending plans. Instead, the Chancellor raised revenue from specific areas to fund short-term support for households and businesses facing higher energy costs.
The bigger decisions on defence and departmental spending have been left for next year’s Spending Review, as expected.
Fiscal headroom
The Government’s buffer against its main borrowing rule now stands at £15 billion, down from £23.6 billion in March and in line with expectations.
Part of the fall reflects using headroom to absorb the latest energy price shock. The buffer isn’t large, but the Government has reaffirmed its commitment to the fiscal rules, which is important for market credibility.
This fiscal headroom is larger than it was under Jeremy Hunt and Rachel Reeves’s first 18 months.
Growth and inflation
The U.K. economy has been more resilient than expected this year, growing (joint) fastest of any other G7 economy in the first half.
The Office for Budget Responsibility (OBR) has nonetheless cut its growth forecast for next year from 1.6% to 1.0%, though it expects growth to recover to 1.6% in 2028.
More notably, it has sharply raised its inflation forecasts. It now expects inflation to average 3.1% this year and 3.4% in 2027, up from 2.3% and 2.0% in March. Higher gas and oil prices linked to the conflict in the Middle East are the main driver.
These are meaningful changes and put the Bank of England in a difficult position.
Inflation is too high for comfort, but growth is slowing. Raising rates risks deepening a slowdown, while holding back risks inflation becoming entrenched. We think the central bank will move cautiously, but this tension will be a key theme for U.K. markets in the months ahead.
Attention is now on the Bank of England’s meeting next Thursday, when they are expected to raise interest rates by 25 basis points, it would be first hike in over three years.
Gilt issuance
The Government now plans to sell £250.6 billion of gilts this year, slightly more than expected. More importantly, sales of long-dated gilts have fallen by £6.9 billion, which should ease pressure on long-term borrowing costs, which have risen most this year.
Vitally, gilt supply has not increased significantly, and recent auctions have been well covered, signalling strong demand for new issuance and easing concerns about fiscal stress.
Market reaction
It’s worth remembering that the rise in gilt yields ahead of the Budget was largely global, not a U.K.-specific vote of no confidence.
Borrowing costs have risen across major markets as the conflict in the Middle East has pushed up energy prices and inflation expectations, with U.S. Treasury yields climbing from 4.5% in early July to a peak of 5.3% earlier this month.
The immediate reaction to the Budget itself has been calm.
Ten-year gilt yields eased from a morning high of 5.37% to around 5.32% after the announcements. Sterling dipped briefly to $1.327 but recovered to trade flat at $1.33 on the day.
U.K. equities also steadied. The FTSE 100 recovered 40 points to stand flat on the day, while the more domestically focused FTSE 250 rallied 150 points from its low to trade 85 points higher. All are early signs that markets see the Budget as credible. All data is as of 13:45, 28/10/2026.
For U.K. banks, the outcome was better than feared. The extra tax on bank profits will rise from 3% to 6%, but only for 15 months, rather than returning to the 8% the industry warned about. Bank shares rose as the details emerged. This looks like a manageable cost.
Our initial impression is that this Budget does what it needed to do in the short term. It steadies the ship and keeps the bond market on side.
The harder choices are still to come, and the Bank of England’s next steps now matter more for markets and will be a key focal point for us next week, particularly regarding the outlook for rates going into 2027.
Our portfolios remain diversified globally and built for the long term. Nothing announced today changes our approach or warrants any immediate changes to portfolio composition, but we will continue to assess its implications for the U.K. economy in the coming days.”
Please note
All information is from the Budget documents on this page.
The content of this Autumn Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
While we believe this interpretation to be correct, it cannot be guaranteed, and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.
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