2026 Budget Briefing

This afternoon John Healey presented his first budget to parliament, underpinned by his comments over the last few weeks regarding what he was, or more pertinently, was not going to do.

In the main the chancellor stuck to his previously made promises, in particular forgoing any rise to Capital Gains Tax. To quote directly from the policy documentation “this budget rejects broad-based tax rises”. The result is a rather underwhelming budget with minimal tax consequences beyond the introduction of a couple of new reliefs, and some small rate changes.

The widely debated freeze on the personal allowance at £12,570 has continued and not been removed, as had been suggested as a possible move.  A freeze which has now stretched to six years with a further four planned.

Particularly relevant points to note for individuals are as follows:

Income Tax

• Introducing a new “Pension Tax Allowance” to ensure that low income pensioners are not brought into paying tax as a result of state pension increases
• An increase to the tax rate by 2% (in addition to the 2% increase previously announced) on property income for basic, higher and additional taxpayers in England, Wales and Northern Ireland from 6 April 2027
• An increase to tax rates applied to interest income by 2% (again in addition to the 2% increase previously announced) for basic, higher and additional taxpayers from 6 April 2027. These rates will apply throughout the UK.
• An increase in the self-employed income tax trading allowance from £1,000 to £3,000 from 6 April 2027

Capital Gains Tax

• The introduction of a new “Founders CGT Relief” for individuals investing in a high risk, innovative business
• A reduction in the lifetime limit for Business Asset Disposal Relief (BADR) from £1million to £500,000 to be applied from 6 April 2027

Administration/Other

• From April 2029, taxpayers who make payments on account (currently in January and July) will be required to make more regular, smaller payments
• Household energy payment of £100 council tax rebate for band A-D from January 2027

As ever, much of the detail of the new policies will follow in subsequent technical documentation.  We also await the Scottish Budget on 3 December 2026, in particular, to see if the Scottish Government will adopt the introduction of higher tax rates for property income.

Looking further ahead, it is increasingly clear that 6 April 2027 will be the effective date for many tax changes, not least the inclusion of most pension death benefits within the inheritance tax regime.  With that looming deadline, it is vital to seek appropriate advice to ensure your tax affairs continue to operate in the most efficient way.