Budget 2026

What the announcements could mean for you and your business

The Chancellor’s Budget includes changes affecting savings, property income, business disposals, payroll, pensions and the way tax is reported and paid. Some measures are new, while others confirm plans announced previously. Many will not take effect immediately, giving taxpayers time to consider their options.

This update highlights developments likely to be of interest to individuals, landlords, employers and smaller businesses. Dates and details are based on the Government’s published Overview of Tax Legislation and Rates (OOTLAR). Proposed measures remain subject to legislation or, where stated, consultation.

Personal tax and household finances

Income Tax rates and allowances for 2027-28 The Budget makes no general change to the main Income Tax rates, thresholds or Personal Allowance for 2027-28. The standard Personal Allowance remains £12,570 and the higher-rate threshold remains £50,270. For England, Wales and Northern Ireland, the main rates on employment, pension and trading income remain 20%, 40% and 45%. Scotland sets its own rates and bands for non-savings, non-dividend income and Wales has devolved rate-setting powers. The changes to savings and property income described below are exceptions, and previously announced dividend tax changes also remain relevant. Freezing thresholds can mean that an increase in income leads to a higher tax bill, even when headline rates stay the same.

Savings interest will face higher tax rates From 6 April 2027, the rates applying to taxable savings income across the UK will be 24%, 44% and 49%. These rates add two percentage points to the 22%, 42% and 47% rates previously announced. The Personal Savings Allowance and tax-free ISA treatment remain relevant, so not all interest will necessarily be taxed. Savers with substantial balances outside ISAs may wish to review their expected liabilities.

Landlords will pay more tax on rental profits From 6 April 2027, the rates applying to taxable property income will rise to 24%, 44% and 49% in England, Wales and Northern Ireland. This follows the rates of 22%, 42% and 47% announced in the previous Budget, with a further two percentage points added in Budget 2026. Scotland and Wales have devolved powers to set property income rates, so future differences may arise. Landlords should revisit forecasts of their after-tax rental income.

Trading allowance increases to £3,000 From 6 April 2027, the trading allowance will increase from £1,000 to £3,000, and the Self-Assessment trading income reporting threshold will also rise. This may simplify matters for people with modest trading or miscellaneous income. The allowance is an alternative to deducting actual expenses, not an extra deduction on top of them. Other reasons for filing a tax return may still apply.

Help for pensioners with modest incomes A Pension Tax Allowance, previously announced in Budget 2025, will operate for three tax years from April 2027. It is designed to prevent certain pensioners whose total income does not exceed the full new State Pension from having to pay small Income Tax bills through Simple Assessment. The relief is gradually withdrawn as income increases.

A new ISA for first-time buyers From April 2029, a new First Time Buyer ISA is due to replace the Lifetime ISA for new savers. It will permit contributions of up to £4,000 a year and provide a Government bonus of 25% calculated on the final account balance, capped at £20,000. The bonus will be paid when funds are withdrawn towards a qualifying first home costing no more than £450,000. Existing Lifetime ISA holders can continue using their accounts under existing rules. The new ISA will have no upper age restriction.

Lifetime ISA withdrawal charge changes From 29 October 2026, the withdrawal charge for using a Lifetime ISA to purchase a property above the permitted price cap will fall from 25% to 20%. The 25% charge remains for other unauthorised withdrawals. The Government also intends to retain the £20,000 cash ISA limit for adults from April 2027, which had been expected to fall to £12,000.

Household energy bills and the cost of living

£100 Household Energy Payment From January 2027, a £100 Household Energy Payment will be delivered to qualifying households in Council Tax bands A to D in England. The Government expects the £2.6 billion scheme to reach up to twenty million households. Payments will be made directly to bank accounts through arrangements involving local authorities and the Council Tax system. Devolved governments will receive funding to determine comparable support in their nations.

Temporary reduction in electricity VAT extended The temporary zero rate of VAT on qualifying domestic electricity, introduced on 1 October 2026, has been extended until 30 June 2027. The Government estimates that the extension will reduce the annual Ofgem price cap equivalent by around £50 in April 2027. Actual savings will vary with usage and tariff. Separate funding is intended to provide comparable support in Northern Ireland.

Changes proposed for gas standing charges The Government has asked Ofgem to abolish domestic gas standing charges, aiming for implementation by the end of 2027 or as soon as possible afterwards. Suppliers would recover the relevant costs through gas unit rates instead. The change would not necessarily reduce total bills for every household, particularly those using more gas. Reform of electricity standing charges is also under consideration.

Help with home energy improvements The Government has launched a Warm Homes Loan Scheme to support household investment in heat pumps and other clean technologies. Details of eligibility, loan costs and individual savings should be checked before committing to work. The Budget also confirms continued funding for the Boiler Upgrade Scheme, although some capital grant funding within the wider Warm Homes Plan has been reprioritised.

Fuel Duty relief