The Autumn Budget: More Tax, more complexity and what you can actually do about it

The Chancellor has delivered another Budget. There were a few welcome surprises, some less welcome tax increases and plenty of tinkering around the edges. Here is what matters for your finances.

Another Budget, another 98 measures on the Treasury scorecard, and another opportunity for the nation’s accountants and tax lawyers to celebrate.

To be fair to the Chancellor, the economic circumstances have been difficult. Higher energy prices following the conflict in the Middle East have put pressure on inflation, households and the public finances. Allowing deficit reduction to slip in response to what may prove to be temporary pressures was a sensible decision.

But once again, it feels as though we’re tinkering around the edges rather than tackling some of the bigger problems facing the UK economy.

Our tax system has become extraordinarily complicated. The tax burden has risen sharply since before Covid, yet we continue to add new taxes, exemptions, thresholds and special arrangements rather than seriously simplifying the system.

There is also a much bigger debate to be had about government spending, welfare reform and how we encourage investment and economic growth.

Unfortunately, those are rather more difficult problems to solve than finding another way to tax someone’s savings account.

Anyway, rant over. For now.

From a financial planning perspective, the Budget was relatively modest compared with some recent years. There were no further restrictions on pension tax-free cash, the main pension allowances survived, and the proposed reduction in cash ISA allowances was abandoned.

But there were some important changes, particularly for savers, landlords, business owners and families with substantial wealth.

Let’s look at what actually matters.

Sources: HM Treasury, Budget 2026 | HMRC, overview of tax legislation

1. The biggest change: Higher taxes on savings and rental income

The most significant announcement for many of our clients was another increase in the tax charged on savings interest and rental income.

From 6 April 2027, the rates will rise to:

Taxpayer	2026/27	From April 2027
Basic rate	20%	24%
Higher rate	40%	44%
Additional rate	45%	49%

For additional-rate taxpayers, almost half of the interest earned on savings, or the taxable profits from rental properties, will go to HMRC.

Consider someone with £500,000 in a savings account earning 4% interest.

That produces £20,000 a year in interest. Assuming all of it falls within the additional-rate band, the annual tax bill rises from £9,000 to £9,800.

That’s an additional £800 a year, without earning a penny more.

The same principle applies to taxable rental profits. A landlord with £30,000 of profits falling entirely within the additional-rate band would pay an extra £1,200 annually compared with today’s rates.

It is effectively another tax on accumulated wealth, although technically it is a tax on the income that wealth produces.

Investment bonds are affected too

An important detail that has received less attention is that the new savings income tax rates will also apply to chargeable-event gains on onshore and offshore investment bonds.

These gains are generally treated as savings income for tax purposes.

For onshore bonds, the notional basic-rate tax credit will also rise to 24%.

Investment bonds can still be useful in certain circumstances, particularly where controlling the timing of taxable gains is important. But they should not be viewed as a simple escape from the new savings tax rates.

As always, the details matter.

Sources: HMRC, savings and property income tax changes | HMRC, consequential changes to savings and property tax rules | 2027/28 rates and allowances

2. Be smarter with cash

This brings me to the first practical takeaway from the Budget.

Don’t hold more cash than you genuinely need.

Cash has an important role in a financial plan. You need sufficient reserves for emergencies, unexpected expenditure and money you expect to spend over the next few years.

For many clients, we generally think in terms of maintaining sufficient cash or low-risk assets to cover planned expenditure over approximately the next five years, depending on their circumstances.

But cash is not usually the best home for money intended to support your lifestyle in ten, fifteen or twenty years.

Even before tax, inflation gradually erodes its purchasing power. Add a 44% or 49% tax rate on the interest, and the attraction diminishes further.

Fortunately, there are alternatives worth considering.

Short-dated UK government bonds

One increasingly interesting option for higher-rate taxpayers is short-dated conventional UK government bonds, particularly those paying very low coupons.

Most conventional gilts are exempt from capital gains tax when held directly by individuals.

This means that if you buy a gilt below its redemption value and hold it to maturity, the capital gain can generally be realised free of CGT. The coupon payments, however, remain subject to income tax.

For someone facing a 49% tax rate on bank interest, this distinction can be valuable.

It doesn’t make gilts risk-free. Their market value can fluctuate before maturity, and their suitability depends on the purchase price, redemption date and your need for liquidity.

But they can be a useful tool for managing larger short-term cash holdings tax-efficiently.

Premium Bonds

Premium Bonds are another possibility.

Prizes are tax-free, and there is no risk of losing the nominal capital invested, although inflation can still erode its value.

The downside is that prizes are uncertain. The advertised prize fund rate is not the return you are guaranteed to receive.

For some clients, particularly those who have already used their ISA allowances, they can nevertheless form part of a sensible cash strategy.

Cash ISAs

Cash ISAs remain useful too, particularly for shorter-term savings.

However, where someone has substantial long-term investments and limited ISA capacity, I would generally favour using the tax shelter for assets with greater long-term growth potential.

There is no universal rule here. The correct approach depends on your circumstances, objectives and time horizon.

The important point is that the tax treatment of where you hold your money matters increasingly, but it should never override the underlying investment decision.

Further reading: HMRC, Capital Gains Tax manual | UK Debt Management Office | NS&I Premium Bonds | HMRC, Individual Savings Accounts

3. ISAs: A welcome U-turn

One of the more sensible decisions was the abandonment of the proposed reduction in the cash ISA allowance.

The Government had previously proposed limiting cash ISA subscriptions to £12,000 for savers under 65.

That proposal has now been dropped.

The overall annual ISA allowance remains £20,000, and individuals can continue to allocate the full amount to cash if they wish.

Personally, I never saw much merit in the proposed restriction. It seemed likely to create more administrative complexity without necessarily persuading people to become better long-term investors.

ISAs remain one of the simplest and most valuable tax shelters available.

Interest, dividends and capital gains generated within an ISA are free from UK income tax and capital gains tax. Withdrawals are also generally tax-free.

For couples, that means potentially sheltering £40,000 of additional savings or investments every tax year.

Over a long period, the benefits can be substantial.

Changes for first-time buyers

There was also some welcome news for younger savers.

From 29 October 2026, first-time buyers using Lifetime ISA savings towards a property costing more than the existing £450,000 limit face a reduced withdrawal charge of 20%, rather than 25%.

The normal 25% charge continues to apply to other unauthorised withdrawals.

The Government also plans to introduce a new First Time Buyer ISA from April 2029, replacing Lifetime ISAs for new savers.

The proposed account will provide a 25% government bonus towards a qualifying first-home purchase, with a maximum bonus of £20,000.

Existing Lifetime ISA holders will be able to continue contributing under the current arrangements.

For parents helping children onto the property ladder, these developments are worth keeping in mind.

Sources: HMRC, ISA guidance | HMRC, Lifetime ISAs | Budget 2026, tax measures

4. Pensions: The feared tax raid didn’t materialise

Every Budget seems to arrive with speculation about the Government restricting pension tax relief or reducing the amount of tax-free cash available at retirement.

This year was no exception.

Fortunately, there were no further restrictions on either.

The standard pension annual allowance remains £60,000, although it can be reduced for very high earners and people who have already flexibly accessed their pensions.

The standard lump sum allowance remains £268,275.

For senior executives and professionals paying higher or additional-rate income tax, pensions therefore remain a highly attractive way of saving for retirement.

However, there are several other developments worth understanding.

Inheritance tax on pensions is still coming

The biggest change affecting pensions wasn’t actually announced in this Budget.

From April 2027, most unused pension funds and relevant pension death benefits will become part of a person’s estate for inheritance tax purposes.

This fundamentally changes an important aspect of retirement and estate planning.

Historically, it often made sense to preserve pension assets for beneficiaries and spend other savings and investments first.

For some families, that may no longer be the most efficient approach.

But that doesn’t mean everyone should immediately start drawing down their pension.

The right strategy depends on how much income you need, the income tax payable on withdrawals, your other investments, your beneficiaries and your wider estate.

For clients with substantial pension assets, this is something we are incorporating into retirement and inheritance tax planning.

A welcome change to pension death benefits

There was some good news.

The Government is removing the rule under which certain pension death benefits could become taxable simply because they were paid more than two years after the pension scheme became aware of the member’s death.

For eligible payments made from 28 October 2026, that delay will no longer, by itself, cause the benefit to become taxable.

There are also technical changes to how certain lump sum death benefits exceeding the lump sum and death benefit allowance are taxed.

These won’t affect most people directly, but they should make the administration and taxation of some pension death benefits fairer and more consistent.

Salary sacrifice changes are still approaching

Another previously announced change takes effect from April 2029.

Pension contributions made through salary sacrifice above £2,000 annually will become subject to employee and employer National Insurance.

For highly paid executives making substantial contributions through salary sacrifice, this could reduce the attractiveness of those arrangements.

Importantly, this does not mean that pension contributions above £2,000 lose income tax relief.

It is the National Insurance advantage that is being restricted.

Further pension reforms

The Government is also progressing legislation intended to make pension consolidation easier, including reducing the risk of losing certain valuable protections when transferring between schemes.

A new Guided Retirement Framework and retirement-only collective defined contribution arrangements are also being developed.

These are longer-term changes, with more detail expected in subsequent legislation.

For now, they are interesting developments rather than reasons for clients to change existing pension arrangements.

Sources: HMRC, Pension Schemes Newsletter 186 | Royal London, Autumn Budget 2026 technical analysis | HMRC, pension annual allowance | HMRC, inheritance tax on pensions

5. Buy-to-let: Another nail in the coffin?

I have never been particularly enthusiastic about buy-to-let property.

In fact, I wrote an article called 10 Reasons Not to Invest in Property almost four years ago, and I haven’t found many reasons to change my mind.

The latest increase in rental income tax makes the economics even less attractive, particularly for higher and additional-rate taxpayers.

Consider the realities of owning an investment property.

You have tenants, maintenance, insurance, potential void periods, regulatory obligations and potentially substantial transaction costs.

You also have a large amount of capital tied up in one property, often in one geographical area.

And unlike a diversified investment portfolio, you cannot sell 5% of your property when you need some extra cash.

Of course, property can be a successful investment. Professional landlords who understand the business, manage costs carefully and operate at scale can do very well.

But that is the point.

Being a landlord is running a business, not owning a passive investment.

For someone who has accumulated one or two buy-to-let properties over the years, it is worth asking whether the after-tax returns still justify the effort, risks and lack of diversification.

A globally diversified portfolio of equities and high-quality bonds may offer a simpler alternative.

That doesn’t mean everyone should sell tomorrow. Selling property can crystallise capital gains tax, and the economics need to be assessed properly.

But holding on simply because property has always been regarded as a safe investment is not a particularly convincing strategy.

Further reading: HMRC, renting out a property | HMRC, tax when selling property | HMRC, savings and property income tax changes

6. Business owners: A mixed bag

For entrepreneurs and business owners, there were two important announcements.

Business Asset Disposal Relief becomes less generous

From April 2027, the lifetime limit of qualifying gains eligible for Business Asset Disposal Relief will fall from £1 million to £500,000.

This relief allows qualifying business owners to pay a reduced capital gains tax rate when disposing of their businesses.

At the current 18% relief rate, compared with the standard 24% higher CGT rate, reducing the qualifying limit by £500,000 could mean up to £30,000 of additional tax for someone with sufficient qualifying gains.

For business owners considering a sale, the timing and structure of the transaction could therefore become important.

New Founders’ Relief

The more interesting announcement was the proposed introduction of a new Founders’ Relief.

This would offer a 10% capital gains tax rate on up to £10 million of qualifying lifetime gains.

That could be enormously valuable for founders of successful businesses.

However, there are significant proposed eligibility conditions, including requirements relating to founding ownership, holding periods and the nature and growth of the business.

The final details are subject to consultation.

So while this is potentially very welcome news for entrepreneurs, I would reserve judgement until the legislation is clearer.

It is also worth emphasising that this is not a general capital gains tax reduction for employees holding shares or RSUs in large listed companies.

For executives receiving RSUs, the existing employment income tax treatment on vesting remains relevant, alongside capital gains tax on subsequent share-price movements.

There were also changes to employee share option arrangements, including an increase in the individual Company Share Option Plan limit to £120,000 from April 2027.

These may be helpful for employees of smaller and growing businesses, although they will be less relevant to most executives working for large listed companies.

Sources: HMRC, Business Asset Disposal Relief | HMRC, Budget 2026 tax measures and Founders’ Relief consultation | HM Treasury, measures for business owners | HMRC, employee share schemes

7. Inheritance tax: The slow squeeze continues

There were no further increases to the headline inheritance tax rate.

The standard rate remains 40%, while the nil-rate band remains £325,000.

The residence nil-rate band can provide a further £175,000 where the relevant conditions are met, although it is tapered for larger estates.

The real problem is that these allowances have been frozen for years.

As property values, pensions and investments grow, more families find themselves exposed to inheritance tax.

For wealthier households, the forthcoming inclusion of unused pensions within estates makes the position potentially more challenging.

There were also technical changes affecting trusts, including the treatment of certain liabilities and the taxation of savings and property income.

From April 2027, the new 49% rates will also apply to relevant savings and property income within discretionary trusts.

For families with substantial assets held in trust, that is worth reviewing with their advisers.

Planning should come before tax

Inheritance tax planning is important, but I always think the starting point should be a different question.

How much money do you actually need?

Once we understand what someone needs to fund their lifestyle, retirement, potential care costs and other objectives, we can begin to assess how much they might comfortably give away.

There is little point saving inheritance tax by giving away money you subsequently discover you need.

Equally, there may be little point accumulating more wealth than you could ever reasonably spend while your children struggle with mortgages, school fees or other financial pressures.

Good estate planning is about striking the right balance.

Sources: HMRC, inheritance tax | HMRC, passing on your home | HMRC, trusts and taxes | HMRC, Budget 2026 rates and allowances

8. The State Pension: More valuable than you might think

The full new State Pension is expected to increase to approximately £13,036 a year from April 2027.

That may not sound particularly exciting alongside the value of a substantial private pension.

But an income of more than £13,000 a year, payable for life and increasing over time, is a valuable financial asset.

Replacing that income privately with an inflation-linked annuity could require a surprisingly large amount of capital..

The Government is also changing the future operation of the State Pension triple lock from April 2030.

Until April 2029, the State Pension will continue increasing by the highest of earnings growth, inflation or 2.5%.

From April 2030, the revised formula will provide the highest of inflation, 2.5%, or the increase needed to maintain the State Pension’s value relative to average earnings at its April 2029 level.

In effect, the Government intends to preserve the pension’s relative value without allowing the existing triple-lock ratchet to continue indefinitely.

There is also a temporary Pension Tax Allowance from April 2027, designed to prevent people whose only income is the full new State Pension from paying small amounts of income tax.

For most of our clients, that particular measure won’t make much difference. But it illustrates the strange position we have reached when the Government needs to invent another tax allowance because the State Pension has overtaken the frozen personal allowance.

Perhaps simplifying the system might have been easier.

Sources: HM Treasury, State Pension and triple-lock reform | HMRC, Pension Tax Allowance | Check your State Pension forecast | The new State Pension

9. Expensive homes: Another tax on the horizon

The High Value Council Tax Surcharge, previously announced and due to begin in England from April 2028, will apply to residential properties valued at £2 million or more.

The additional annual charges are:

Property value	Annual surcharge
£2m to £2.5m	£2,500
£2.5m to £3.5m	£3,500
£3.5m to £5m	£5,000
£5m and above	£7,500

This will be payable in addition to existing Council Tax.

The Government has also confirmed plans for a deferral scheme, discounts and exemptions, including arrangements intended to help owners who may struggle to meet the charge.

For London homeowners, particularly those who bought their properties many years ago, this could become an unwelcome additional expense.

A valuable home does not necessarily mean its owners have substantial disposable income.

Nevertheless, for households with expensive properties, it is another cost to incorporate into long-term financial planning.

Sources: HM Treasury, High Value Council Tax Surcharge | HMRC, surcharge legislation and charges

What should you actually do?

Despite the lengthy list of announcements, I don’t think this Budget requires most people to make dramatic changes.

But it reinforces several things we have been saying for years.

Be smarter with cash. Keep sufficient reserves for emergencies and planned expenditure, but don’t leave unnecessarily large amounts exposed to inflation and increasingly high taxes on interest. Consider whether short-dated gilts, Premium Bonds or other appropriate arrangements could improve the position.

Invest for the long term. Make full use of pensions and ISAs where appropriate. For money that you won’t need for many years, a globally diversified, low-cost investment portfolio remains a sensible starting point. Tax efficiency matters, but so do risk, diversification and time horizon.

Think carefully about investment property. If you own buy-to-let properties, review the after-tax returns, ongoing costs, concentration risk and administrative burden. Ask whether the investment still makes sense compared with the alternatives.

And for those with substantial pension assets, complex estates or businesses they may eventually sell, make sure the financial plan reflects the changes already announced and those approaching.

The wider point is that governments will continue changing tax rules. There will be another Budget, another round of speculation and probably another collection of obscure new measures.

Trying to predict every change is a fool’s game.

A sensible financial plan should be robust enough to cope with changing tax rules, different market conditions and the occasional bright idea from Westminster.

After all, the purpose of financial planning isn’t to pay the least possible tax.

It’s to make the most of your money, and more importantly, your life.

 

Investment risk: The value of investments and any income from them can fall as well as rise. You may get back less than you invest.

Past performance: Past performance is not a reliable indicator of future performance.

Pensions: Pension benefits and tax relief depend on individual circumstances. Pension rules and tax treatment may change.

Taxation: Tax treatment depends on individual circumstances and may change in the future.

General information: This article is for information purposes only and does not constitute personal financial advice.