Autumn Budget 2026: “Use it when you need it, rebuild it when you can”

Overview 

Many commentators predicted that Chancellor John Healey’s first Budget would be an anodyne “keep the show on the road” affair, with few major tax or spending announcements, designed to demonstrate the fiscal responsibility and restraint recently praised by the IMF, and to placate rather than provoke the bond markets. On that measure, most will probably regard it as a job reasonably well done. The vibes, at least, were largely of talking up the UK economy where possible. 

There were, as ever, losers, including banks, which are being asked to contribute an additional 3% through an increased banking levy. Landlords and savers were also hit, with 2% added to their effective income tax rates from 2027, projected to raise £1 billion a year from a cohort already facing higher rates following last year’s Budget under former Chancellor Rachel Reeves. 

Albeit with no changes to headline rates, there was tinkering with capital gains tax too, including a welcome new founders’ relief (aimed at keeping entrepreneurs in the UK), but also a halving of the benefit of business asset disposal relief. 

Notwithstanding efforts to avoid the negativity for which Sir Keir Starmer and Rachel Reeves had been criticised, the Chancellor nevertheless demonstrated just how narrow a fiscal tightrope he is walking. He had to accept a reduction in fiscal headroom, at least for the time being, to fund the shortfall arising from his overall package of measures. His praise for the former Chancellor was perhaps partly because it is her headroom that he is now using, and it was abundantly clear that rebuilding it will have to wait. 

After two years of significant personal tax reforms, this Budget therefore offers clients some breathing space – but not a complete pause. Higher taxes on savings and property income, changes to reliefs for business owners and further developments affecting high-value homes mean there is still plenty for individuals and families to consider. 

We highlight the main features for private clients below. 

Savings and property: higher income tax from April 2027 

The higher tax burden on savings and property income is one of the Budget’s main practical consequences. From 6 April 2027, the rates applying to that income across England, Wales and Northern Ireland will rise to: 

• 24% at the basic rate
• 44% at the higher rate, and 
• 49% at the additional rate. 

This 4% increase will sting in particular given the manifesto commitments not to raise income tax rates. Meanwhile thresholds remain frozen until April 2031 with fiscal drag continuing to be a preferred means of raising the tax take by stealth.

ISAs: proposed changes reversed 

Against that backdrop, the reversal of the ISA changes announced at last year’s Budget offers some welcome continuity for savers. The cash ISA limit will remain at £20,000 from 6 April 2027. 

A new First Time Buyer ISA will replace the Lifetime ISA for new savers from April 2029. Savers can invest up to £4,000 a year with a 25% Government bonus, paid on withdrawal, towards the purchase of a first home worth up to £450,000, with the bonus capped at £20,000. 

Existing Lifetime ISA holders will be able to continue contributing to and using their accounts under the current rules. From 29 October 2026, the withdrawal charge for those using their savings to buy a first home above the £450,000 property price cap will fall from 25% to 20%. 

Alongside these changes, the Government will introduce “Your First Home”, a new equity loan scheme intended to support around 70,000 first-time buyers from April 2027, with net income from developer fees. 

High-value homes: further detail on the council tax surcharge 

The Budget also provides further detail on the High Value Council Tax Surcharge, first announced at Autumn Budget 2025, which will take effect in April 2028 in relation to homes worth over £2 million. The Government’s response to the consultation confirms plans for a deferral scheme; discounts and exemptions; and a 100% premium on properties left empty and unoccupied for 12 months or more. 

Business owners: new Founders’ Relief, but a lower disposal relief limit 

The capital gains tax changes mentioned above also present a mixed picture for business owners. A new founders’ relief will introduce a 10% capital gains tax rate on up to £10 million of lifetime gains for qualifying founders of innovative, high-growth companies from 6 April 2027. 

The detailed eligibility requirements will be important and appear narrow. A technical consultation on the design of the relief was launched alongside the Budget, with legislation to follow in the next Finance Bill. 

By contrast, the lifetime limit for business asset disposal relief will fall from £1 million to £500,000 from 6 April 2027. 

Separately, changes to Enterprise Management Incentives 2 from April 2027 will increase the individual option limit to £120,000, extend the exercise period to 15 years and remove the interaction with the EMI option limit. 

Family companies and changes to tax treatment of distributions  

The Budget papers include an update to HMRC's consultation on modernising the taxation of distributions and repayments of capital from companies. The broad policy direction is to narrow the circumstances in which value accumulated within a company can ultimately be extracted by an individual shareholder and taxed as capital rather than income, and to tackle avoidance. It is proposed that both UK resident and non-UK resident companies will be in scope and that their treatment should be aligned, which should be expected to materially alter the treatment of many family asset holding structures. 

Draft legislation is due for technical consultation in 2027, with the changes intended to take effect prospectively from April 2028. This is therefore an area for continued attention. 

US investments: double taxation relief delayed until 2028 

For UK investors in US limited liability companies and similar entities (including US S-Corps, Jersey LLCs, and French SCIs), the focus is instead on resolving an existing difficulty. The Budget brings the prospect of relief from double taxation, but not an immediate solution. 

Following its Summer consultation on this issue, the Government plans to introduce a credit based mechanism providing double taxation relief for income received from certain foreign entities where relief is currently unavailable. This would cover non-UK federal, state, and local-level taxes suffered by the investor. Its response sets out more detail on the mechanism, which will operate by election by an eligible taxpayer, and further consultation ahead of legislation in Finance Bill 2027–28. Claims for the new form of credit will be possible from early 2028, and consideration is being given to the position for prior years and existing disputes. 

The attention to this issue is welcome, but the timetable will disappoint affected (typically US-connected) clients given how often the current treatment causes very real difficulty. 

Pensions and charitable giving: a technical change with practical consequences 

The Budget also develops reforms already under way, including the extension of inheritance tax (IHT) to most unused pension funds and pension death benefits from 6 April 2027, as legislated for in Finance Act 2026. Further technical amendments are to be introduced in Finance Bill 2026–27, also taking effect from 6 April 2027. 

One potentially significant change concerns the calculation of the reduced 36% IHT rate where part of an estate is left to charity. The Government proposes to allow those administering an estate to decide whether notional pension property is included in the estate’s ‘general’ component or treated as a separate component for this purpose. 

This is an issue on which many clients have sought advice. The Government’s previous indication that pension property would form part of the general component has informed our advice and Will drafting. For some clients, that approach could have meant leaving considerably more to charity than originally intended to secure the reduced IHT rate from April 2027. 

The proposed flexibility is therefore welcome, but the detail will be important. We will look carefully at the implications, particularly for advice already given and Wills already prepared, to assess how the change affects clients’ intended charitable gifts and wider succession plans. 

A separate amendment will allow a prospective personal representative, where certain conditions are met, to direct pension scheme administrators to pay the IHT due to HMRC. 

Inheritance tax and deductions for trusts 

IHT rules are to be changed as part of Finance Bill 2026-27 to clarify when liabilities relating to trust property may reduce the value of assets for IHT purposes, and to strengthen anti-avoidance provisions, to take effect for deaths and other chargeable events occurring on or after 28 October 2026. We anticipate that this will be in response to particular avoidance strategies relating to the periodic (10-year anniversary) charging regime. 

The overall picture 

The significance of this Budget lies not only in its new announcements, but in how they interact with reforms already under way. We continue to help clients navigate changes to agricultural property relief, business property relief, the IHT treatment of pensions and the residence-based tax regime affecting internationally mobile clients. 

For many families, these developments will affect current structures, decisions about business succession, charitable giving and the passing of wealth between generations. These latest announcements reinforce the importance of reviewing existing advice and plans, including Wills.