Chancellor John Healey’s first Budget, delivered on 28 October 2026, left the rates of VAT, National Insurance and Income Tax on wages unchanged, but raised tax on savings and property income from April 2027. Billed as giving families and businesses “breathing space”, it still raises around £7 billion a year by 2031-32, mostly from savers, landlords and business owners.
This guide covers the main changes for individuals and what you can do before they take effect.
Budget 2026 at a glance
- Savings and property income: Income Tax rises to 24%, 44% and 49% from 6 April 2027.
- Trading Allowance: triples from £1,000 to £3,000 from 6 April 2027.
- Pension Tax Allowance: pensioners with income up to the full new State Pension won’t pay Income Tax from 2027-28.
- ISAs: the cash ISA limit stays at £20,000, and a First Time Buyer ISA launches in April 2029.
- Business Asset Disposal Relief: the lifetime limit halves from £1 million to £500,000 from 6 April 2027, alongside a new 10% Founders’ Relief.
- Capital allowances: the main first-year allowance rises from 40% to 50% from 1 January 2027, but the main writing down allowance falls from 14% to 12% from April 2027.
- Company distributions: their tax treatment will be reformed from April 2028.
- National Living Wage: up 3.9% to £13.21 an hour from 1 April 2027.
- Energy bills: a one-off £100 Household Energy Payment for Council Tax bands A to D in England from January 2027.
Income Tax on savings and property income rises to 24%
The biggest change for individuals is a four-point rise in tax on savings interest and rental profits from 6 April 2027. Two points were announced in Budget 2025 and this Budget added two more. Rates on wages, pensions, self-employed profits and dividends are unchanged.
| Band (after Personal Allowance) | Wages, pensions, trading | Savings income | Property income | Dividends |
| Basic rate: £1 to £37,700 | 20% | 24% | 24% | 10.75% |
| Higher rate: £37,701 to £125,140 | 40% | 44% | 44% | 35.75% |
| Additional rate: over £125,140 | 45% | 49% | 49% | 39.35% |
2027-28 rates. In 2026-27, savings and property income are taxed at 20%, 40% and 45%.
The savings rates apply across the UK. The property rates apply in England, Wales and Northern Ireland; Scottish rates are expected at the Scottish Budget on 3 December 2026.
The Personal Allowance stays frozen at £12,570. It is reduced once income passes £100,000 and lost entirely above £125,140.
Some savings income is still tax-free:
- Personal Savings Allowance: £1,000 for basic rate taxpayers, £500 for higher rate taxpayers, none for additional rate taxpayers.
- Starting rate for savings: if your other income is low, up to £5,000 of interest can be taxed at 0%. With savings rates rising, this band is worth more than before.
- ISAs: returns inside an ISA remain tax-free.
For landlords, the Property Allowance stays at £1,000.
Trading Allowance triples to £3,000
From 6 April 2027, you can earn up to £3,000 a year from small trading activities, such as selling crafts or occasional freelance work, without declaring it or paying tax. The Self Assessment reporting threshold for trading income also rises to £3,000.
If you earn more than £3,000, you can deduct the allowance instead of your actual expenses. For example, with £5,000 of income and £800 of costs, deducting the allowance leaves £2,000 taxable rather than £4,200. Until 6 April 2027, the £1,000 limit still applies.
New Pension Tax Allowance for pensioners
From 2027-28, pensioners whose total income is no more than the full new State Pension (£13,036.40 a year) will not pay Income Tax. The allowance runs for three tax years, to 2029-30.
It is needed because the full new State Pension will exceed the frozen £12,570 Personal Allowance for the first time. The allowance is worth 20% of that gap, up to £93.28 in 2027-28, and reduces your tax bill directly.
- HMRC applies it automatically to anyone over State Pension age, or reaching it during the tax year.
- It counts total income from all sources.
- It tapers by £1 for every £3 of income above £13,036.40, disappearing at about £13,316.
ISAs and the new First Time Buyer ISA
Plans to cut the cash ISA limit for under-65s have been scrapped, so everyone over 18 can still save up to £20,000 a year in cash ISAs.
From April 2029, a First Time Buyer ISA will replace the Lifetime ISA (LISA) for new savers:
| Feature | First Time Buyer ISA |
| Who can open one | UK residents aged 18 or over, no upper age limit |
| Contributions | Up to £4,000 a year, within your £20,000 ISA allowance |
| Government bonus | 25% of the final balance, up to £20,000, paid when you buy |
| Property price cap | £450,000, bought with a legal mortgage |
Existing LISA holders can keep their accounts. You can’t transfer a LISA into a First Time Buyer ISA, but you can hold both and use both for the same purchase. From 29 October 2026, the LISA withdrawal charge for buying a home above £450,000 fell from 25% to 20%; other unauthorised withdrawals still face 25%.
Marriage Allowance and Married Couple’s Allowance
These two allowances sound alike but work differently.
- Marriage Allowance stays at £1,260 for 2027-28. If one partner doesn’t use their full Personal Allowance, they can transfer £1,260 to a basic rate taxpaying spouse or civil partner, saving up to £252 a year. It is available at any age.
- Married Couple’s Allowance is only for couples where one partner was born before 6 April 1935. For 2027-28 the maximum rises to £12,110, the minimum to £4,690 and the income limit to £40,600. Relief is given at 10%, so it is worth up to £1,211 off your tax bill.
National Insurance for the self-employed and voluntary contributions
Class 4 NICs stay at 6% on profits between £12,570 and £50,270 and 2% above, with thresholds frozen until 2030-31.
If you have gaps in your National Insurance record, voluntary contributions can help you qualify for the full new State Pension. From 6 April 2027:
- Class 2 (self-employed with profits below the Small Profits Threshold, which rises to £7,355) rises from £3.65 to £3.80 a week, about £198 a year.
- Class 3 (everyone else, including employees and people who have been abroad or out of work) rises from £18.40 to £19.05 a week, about £991 a year.
Child Benefit and the High Income Child Benefit Charge
The High Income Child Benefit Charge is unchanged for 2027-28. It applies at 1% of Child Benefit for every £200 of income above £60,000, so all Child Benefit is clawed back once income reaches £80,000. Where a couple live together, only the higher earner pays.
New legislation will automatically offset Child Benefit overpayments against the charge paid on them, so families won’t need to claim a separate refund. This applies retrospectively to January 2013.
Tax on inherited pension lump sums
Where someone dies before 75, pension lump sums paid above their lump sum and death benefit allowance (normally £1,073,100) are taxed on the recipient at their marginal rate. Under the new rules, that excess will no longer count as the recipient’s income for any other purpose, so their allowances and benefits are unaffected. HMRC will still calculate the tax, and it doesn’t go on a tax return. The change applies retrospectively to payments from April 2023.
Plan before April 2027
Most of the changes that cost money start on 6 April 2027, so there is a window to act. Depending on your circumstances, that could mean using your ISA allowance, sharing savings between spouses, reviewing how rental property is owned, timing a business sale before the BADR limit halves, or reviewing how you take income from your company.
These measures are Budget announcements and most still need to pass through Finance Bill 2026-27, so details may change.
Want to know how Budget 2026 affects you? Contact A&C Chartered Accountants for a review before April 2027.
This article is a general summary for information only and is not advice. Please speak to A&C Chartered Accountants before acting on anything in it.