The Chancellor John Healey has presented his Budget speech to parliament, the first under Andy Burnham, who this week marked his first 100 days in office.
With the slogan “Breathing space for today, fresh hope for the future,” Healey announced a number of measures which could have implications for your finances.
From changes to income tax on savings and property to a u-turn on Cash Isa changes, plus more help with energy bills and a surprise announcement on the trading allowance - here are the key changes you need to know.
Taxing times ahead
A u-turn on changes to the Cash Isa limit was widely welcomed. Last year, then Chancellor Rachel Reeves had vowed to reduce the allowance for Cash Isas from £20,000 to £12,000 a year in a bid to encourage people to invest more. The government has reversed this decision.
But it’s not all good news for savers, with a blow dealt to anyone with cash savings held outside an Isa. The income tax rate on savings was due to increase by 2 percentage points from April, but Healey has gone further and added another 2 percentage points to the increase.
From next year, basic rate taxpayers will pay 24 per cent tax on savings income beyond their annual allowance, higher rate payers 44 per cent, and additional rate payers 49 per cent.
In a further blow for second-home owners, the income tax applied to property income will also increase by the same amount.
Savings and ISA overhaul
More changes to Isas are on the way. A First Time Buyer ISA will be launched from April 2029, offering similar benefits to the current Lifetime ISA: savers can contribute £4,000 a year to the accounts and will receive a 25 per cent bonus from the government when the money is withdrawn to buy a first home.
The Lifetime ISA, meanwhile, will be mothballed. However the 25 per cent penalty will be removed for anyone withdrawing the money to buy a first home above the property limit of £450,000.
And a new ISA in the workings too. The Starter ISA will aim to incentivise those investing in a stocks and shares Isa for the first time. The government will develop plans for the new account with the industry.
And there’s more help on the way for aspiring homeowners. A new Your First Home equity-loan scheme will help 70,000 first-time buyer households on to the property ladder. The scheme will provide 20 per cent equity loans to buyers who would not be able to buy a home otherwise. For existing homeowners, there is more detail to come on the so-called Mansion tax.
Backing businesses and workers?
National Living Wage will rise by 3.9 per cent to £13.21 an hour, while the National Minimum Wage for those aged 18-20 will rise to £11.27.
Parental pay will be expanded to include self-employed fathers and partners for the first time, worth potentially up to £194 over two weeks.
A new Capital Gains Tax Founders’ Relief will be brought in, offering a reduced 10 per cent CGT rate on up to £10 million of lifetime gains.
Entrepreneurs will benefit from a higher Trading Allowance, with the tax-free allowance being tripled from £1,000 to £3,000 as of 6 April, 2027.
The lifetime limit for capital gains eligible for Business Asset Disposal Relief (BADR) will be halved from £1 million to £500,000.
Breathing space for households
The cost of living was at the forefront of the speech, with a number of small, targeted measures to help households.
The VAT cut to electricity is to be extended by three months until July 2027, a move expected to shave about £50 off of the average bill.
A new Household Energy Payment will help further, giving £100 to an estimated 20 million households in Council Tax bands A to D from January 2027 to help with bills. The money will be paid directly into bank accounts, and is expected to cost the government £2.6 billion.
The gas standing charge on energy bills - the daily amount you pay regardless of whether you use any - is to be scrapped by the end of next year. The government said it would look to see whether the same could be done for electricity.
And the 5p fuel duty cut, due to end this year, will be extended to July 2027.
If you have any questions or concerns about how the Budget 2026 could impact you, please speak to your adviser.
