Financial planning tips to beat the Budget 2026

The theme of the day was “breathing space”, but not everyone will be feeling better off. For investors, families and business owners, the significance of this Budget lies in how several changes work together and the best next steps will depend on your individual circumstances.

Higher tax on savings and rental income could affect what you have available to spend or give away, while forthcoming pension inheritance tax rules remain an important consideration for family wealth.

Here are the key changes to take note of, what they could mean for you, and what you might want to consider for your own financial plans as a result:

Income tax

Once again, income tax has not been raised outright but the personal allowance (the amount you can earn each year before paying tax) and the thresholds for basic, higher and additional rate income tax remain frozen until 2030-31.

There was, however, an important change for pensioners. A new Pension Tax Allowance (PTA) will be introduced, meaning that from April, pensioners whose total income is up to the value of the full new State Pension will not pay income tax.

For those with incomes just about that amount, the allowance will be gradually withdrawn through a taper. We do not believe that this will have any benefit for the majority of atomos clients.

From 2030, the government plans to adjust the pension “triple lock”, which currently ensures that the state pension rises each year by the highest out of inflation, average wage growth or 2.5%. We await further information.

Savings and property income

A further increase to income made from savings interest and property will come into effect from April.

Currently, under the personal savings allowance, basic rate taxpayers can earn £1,000 a year from savings interest tax-free and will pay their usual rate of income tax on anything further. Higher rate payers get a £500 allowance and additional rate payers get no allowance.

Last year, then Chancellor Rachel Reeves announced a 2 percentage point increase to the tax. Healey has gone further and will add an additional 2 percentage points charge. The same amount will be charged on all property income.

This means from 6 April 2027, the rates will be:

24% for basic rate taxpayers

44% for higher rate taxpayers

49% for additional rate taxpayers

Scottish property income rates should be checked separately. There was no further increase to dividend tax rates in this Budget.

If you hold substantial cash outside ISAs, receive rental income or rely on investment income, your after-tax income could fall even if your gross receipts stay unchanged.

For landlords, it is particularly important to review whether a rental property still meets your needs. Look at how much income is left after tax, mortgage payments, maintenance and other costs, alongside potential growth and the demands of managing the property.

Selling is not automatically the right answer, but is worth consideration as part of your wider financial plan.

Your investment portfolio also deserves a review: how your cash and investments are held, whether you are making use of available ISA allowances, and how different sources of income and capital withdrawals support your spending. Retaining accessible cash is still important: a higher tax bill is not, by itself, a reason to take more investment risk.

Changes to Isas

In a move that was widely welcomed by savers, the government has reversed plans to change the Cash ISA allowance. In a government drive to encourage more people to invest, it had been set to reduce from £20,000 to £12,000 for those under age 65 from April. The plans have now been scrapped.

There are instead plans to create a new Starter ISA to incentivise people investing in a stocks and shares ISA for the first time. With no launch date or further details yet revealed.

With savings tax rising, the protection offered by ISAs becomes more valuable. For couples, two individual allowances can shelter up to £40,000 of new savings or investments each tax year.

Whether cash or investments are appropriate depends on when you need the money, your wider finances and your willingness and ability to accept losses. The starting point should remain your objectives, not simply the tax treatment.

First-time buyers

There is more help to come for first-time buyers too. The government is creating a Your First Home scheme to support aspiring buyers who cannot get help from the “bank of mum and dad”. The scheme will offer 20% equity loans to first-time buyers with a household income of up to £110,000, or £140,000 in London.

The scheme, which is expected to help around 70,000 households onto the property ladder, will open for pre-registration by the end of 2026, with full applications accepted from February 2027 and the first loans issued from April. This will only be made available for new build properties where the builder has signed up to the scheme, and there is a price cap on the property value.

Plans to scrap the Lifetime ISA will go ahead. From April 2029, it will be replaced with a First Time Buyer ISA. This will allow people to save up to £4,000 a year, with a 25% government bonus (capped at £20,000) paid when they withdraw the funds to buy a first home worth up to £450,000. Unlike a Lifetime ISA, there will be no upper age limit on who can open the account.

The £450,000 price limit on properties that can be bought through the Lifetime ISA has received some criticism. Savers who withdraw money from the account to buy a property above this threshold pay a 25% penalty, meaning they lose the government bonus as well as some of their own contribution. The government said it would address this by reducing the charge to 20% meaning that only the bonus is lost.

Small business and start-ups

A new Capital Gains Tax Founders’ Relief will be introduced, offering a reduced 10% CGT rate on up to £10 million of lifetime gains for qualifying companies. The relief is targeted at high-growth, innovative companies, with a consultation now open to finalise the exact eligibility criteria.

Meanwhile, the lifetime limit for capital gains under Business Asset Disposal Relief (BADR) will be halved to £500,000 from April. The qualifying tax rate remains 18%, and previous claims count towards the lifetime limit. The government said three-quarters of claimants would still receive relief on their entire gain after the change.

If you are considering a business sale, retirement or succession, the timing and structure could materially affect your eventual proceeds. Do not assume that Founders’ Relief will replace the relief you lose: it is aimed at a narrower group. Equally, a tax deadline should not dictate a commercially unsuitable sale. Early coordination between your financial adviser, accountant and solicitor is important, particularly as anti-forestalling rules may affect transactions spanning April 2027.

The Small Business Rate Relief threshold will be raised from £12,000 to £18,000, exempting an extra 70,000 businesses from paying rates. Pubs, music venues and social clubs will see a 20% reduction in their rates, and for all other retail, hospitality and leisure properties, rates will be frozen for two years.

For entrepreneurs, the Trading Allowance will be tripled from £1,000 to £3,000. This is the amount you can earn away from your main source of income each year before needing to declare it to HMRC or pay tax. The allowance was introduced in 2017 and has not been raised since.

Self-employed workers will see changes to the Payments on Accounts system. The government said it wants workers to make smaller, more regular contributions to their tax bill throughout the year from April 2029. It said this should reduce the risk of large, unexpected tax bills and help people to budget for their tax obligations.

Breathing space

A raft of smaller measures aimed to tackle the cost of living were announced in the Budget. The biggest of these will be a one-off £100 payment to help with rising energy bills. The payment will be made directly into the bank accounts of those in council tax bands A to D, and is expected to reach 20 million households.

Meanwhile, the VAT cut on electricity will be extended for a further three months, which should save £50 off the average bill, and the gas standing charge (the daily charge you pay regardless of the amount of energy used) will be removed by the end of 2027.

Elsewhere, Healey confirmed the 5p cut on fuel duty, which had been due to end this year, will be extended. The mileage rate for employees using their own car for working will also be increased from 45p to 55p for the first 10,000 miles for cars and vans, and from 25p to 35p for additional miles.

Self-employed fathers and partners will become eligible for paid parental leave for the first time, a move that could be worth up to £194 a week for two weeks and is expected to benefit more than 150,000 parents a year.

The cliff edge on Carer’s Allowance, whereby an individual loses their entire allowance if they earn a penny over the £204 weekly earnings allowance, will be removed. A new taper will be implemented, but not until 2030-31. It is expected to benefit about 48,000 carers in England and Wales.

More detail on what we already knew…

Pensions and inheritance tax

Several changes announced in the 2025 Budget will also come into effect from next year, so now is the time to start preparing for them.

From April, unused pension funds will be brought into the scope of inheritance tax for the first time. This will mostly affect those with unused defined contribution pensions and money in drawdown funds, as well as some pension death benefits.

The new rules are expected to bring an extra 10,500 into the scope of IHT in the first year as well as increase existing bills. Those who had planned to spend other assets first and preserve their pension wealth to pass on may need to take another look at that approach.

Individuals can pass on up to £325,000 of assets at death tax-free, and an extra £175,000 when leaving a main residence to a direct descendent, know as the residence nil-rate band. This latter allowance reduces by £1 for every £2 that your estate exceeds £2 million, meaning the pension changes could reduce or remove this allowance for some families.

Advance planning for how to pass on wealth to loved ones in the most tax efficient way will become increasingly important. Families should discuss how to make use of allowances such as the annual gifting allowance, gifts from surplus income, and seven year exemption where appropriate.

Be sure to review your pension beneficiary nominations and your Will. Consider whether charitable giving could help mitigate a future IHT bill; leaving at least 10% of your estate to charity can reduce the tax on the rest of the estate to 36%.

The government has removed the two-year rule for relevant pension death benefit payments made from 28 October 2026. This should mean otherwise tax-free benefits do not become taxable solely because of administrative delays.

Mansion tax

More details were provided about the forthcoming “Mansion Tax”, which will affect owners of homes worth £2 million or more from April 2028 in England.

The government said the charge would be made based on 2026 market values, assessed by the Valuation Office, with revaluations set to take place every five years (the next will be in 2033). Fewer than 1% of properties in England will be affected. The OBR expects 165,000 households to pay the levy in 2028/29, falling to 156,000 thereafter.

The charge is in addition to the usual council tax, and is expected to raise £430 million a year. The first bills will be due in March 2028, with payment in 12 or 10 monthly instalments.

There will be deferral options for those who can’t pay, which the government has defined as those with annual household income of £35,000 or less, or with savings of £16,000 or less, or households where a member meets disability criteria.

National Minimum Wage and National Living Wage will be increased by 3.9%, as we had expected. Living wage will rise to £13.21 an hour from April, equivalent to about £27,450 a year and, notably, about half the wage of a higher rate tax payer. Minimum wage for those aged 18 to 20 will rise to £11.27 an hour.

Next steps

Any time of change is a great opportunity to take stock and review your finances, from making sure you are taking advantage of tax-free allowances to assessing whether the assets you hold are still working for you and your family. Now is the time to speak to your financial adviser, who can help ensure you have the best plan in place to navigate whatever comes next.