Autumn Budget 2026

Summary

John Healey presented the Autumn Budget on 28 October 2026, calling it a Budget for the working people.  We’ve sifted through all the changes and picked out these key messages for your clients:

• Adjustment to the Triple Lock means revisiting State Pension planning assumptions  
• New Pension Tax Allowance offers some protection for low-income individuals
• Additional Income Tax charge prevented by removal of the pension death benefit two-year rule
• Further 2% tax increase on savings and property income from April 2027, in addition to the increase announced last year
• Cash ISA allowance to remain at £20,000 and first-time buyer changes create new planning opportunities
• Business Asset Disposal Relief reduced from £1 million to £500,000

Many of today's Budget announcements will be legislated for in the upcoming Finance Bill 2026-27, so are subject to change.
 

More detail on key changes

State pension

The full new State Pension will increase by 3.9% in April 2027 from £241.30 to around £250.70 a week. Those who reached State Pension age before 6 April 2016 will see an increase from £184.90 per week to £192.10.

Adjusted Triple Lock

The full Triple Lock will remain in place until April 2029. From April 2030, State Pension increases will be based on the higher of 2.5%, inflation, or the increase needed to maintain its value relative to earnings at April 2029.

For advisers, the adjusted Triple Lock should provide greater certainty when making long-term State Pension assumptions in retirement cashflow planning. However, future increases could be lower than under the current Triple Lock, making it important to review existing projections and the level of private retirement provision clients may need.

New Pension Tax Allowance (PTA)

From April 2027, the full new State Pension will exceed the £12,570 Personal Allowance. A new Pension Tax Allowance of £13,036 will help prevent people of State Pension age with income around this level from having to pay tax as a result of receiving it.

The PTA will apply automatically where income is no more than the full new State Pension, with the allowance gradually withdrawn for higher incomes, effectively reducing the PTA back to the £12,570 Personal Allowance.  In 2027/28 it will be worth up to around £94 in tax, with no allowance available once income exceeds £13,319. HMRC will apply it automatically, so clients won't need to claim.

Pensions 

As expected, the government is proceeding with plans to bring unused pension funds and death benefits within the scope of IHT through notional pension property from April 2027. With no change announced in the Budget, advisers should continue to plan on the basis that the new rules will take effect and consider the potential impact on clients’ estate and pension planning.

Pension death benefits two-year rule

For payments made from 28 October 2026, beneficiaries will no longer become taxable solely because certain tax-free pension death benefits are paid more than two years after the member's death. This removes a potentially significant tax consequence where death-benefit decisions or administration take longer, giving beneficiaries and schemes greater flexibility following a member's death.

Income Tax liability on lump sums exceeding the Lump Sum and Death Benefit Allowance (LSDBA)

The government is introducing a new process for taxing lump-sum death benefits that exceed the deceased member’s available LSDBA. Rather than treating the excess as pension income, each beneficiary will face a tax charge on their share of the excess based on their marginal Income Tax rate.

The changes apply retrospectively to relevant payments from 6 April 2024, with the revised IHT interaction applying to deaths from 6 April 2027. 

For advisers, the changes provide greater clarity over the tax treatment of death benefits and the interaction between IHT and Income Tax. Importantly, from April 2027, where IHT paid on a benefit is subsequently refunded, the repayment may then be brought into charge for Income Tax purposes, preventing the same amount from benefiting from both an IHT refund and Income Tax relief.

HMRC definition of terminal illness for pensions access 

The definition of terminal illness will be broadened, making it easier for clients with a life expectancy of less than 12 months to access uncrystallised pension savings as a serious ill-health lump sum, including after age 75. Overseas medical practitioners will also be able to provide evidence for clients living abroad. The effective date of this change will be announced when Royal Assent is granted to the Finance Bill 2026/27.

For advisers supporting clients with a terminal diagnosis, the changes should provide greater flexibility around accessing pension benefits, as well as reducing potential barriers where clients are receiving treatment overseas.

Personal taxation

There are no changes to the tax rates on employment or dividend income, while Income Tax and National Insurance thresholds will stay frozen until April 2031. The extended freeze means fiscal drag will remain an important consideration in longer-term financial planning as client incomes increase.

Higher tax on savings and property income

In the Autumn Statement 2025, it was announced that there would be an increase of 2% across all savings rate bands from April 2027.  Today the Chancellor confirmed that the increase will be 4% across all bands.

The basic rate will rise to 24%, the higher rate to 44% and the additional rate to 49% from April 2027.

The new separate rates for property income will now be 24% for basic rate, 44% for higher rate and 49% for additional rate from April 2027. This will only apply to income for residents in England, Northern Ireland and Wales.  For landlords, the higher rates may also warrant a wider review of the tax efficiency of property alongside other investments.

Capital Gains Tax - Business Asset Disposal Relief – from 6 April 2027, the lifetime limit for gains qualifying for Business Asset Disposal Relief (BADR) will reduce from £1 million to £500,000, with qualifying gains taxed at 18%. Advisers supporting business owners approaching an exit should consider the reduced limit when modelling the after-tax proceeds available for retirement, investment or estate planning.

Founders' Relief – a new Founders’ Relief will be introduced from 6 April 2027, providing qualifying founders with a 10% CGT rate on up to £10 million of lifetime gains. For eligible entrepreneurs, this could significantly change the tax outcome of a business sale and should be factored into exit, investment and wider wealth-planning strategies. 

Other measures

Carer’s Allowance – from 2030/31, Carer’s Allowance will no longer be lost in full as soon as earnings exceed the earnings limit. Instead, the benefit will be gradually reduced as earnings increase. This should reduce the current cliff edge and will be relevant when advising clients who combine caring responsibilities with employment or self-employment. 

Expanded paternity pay – self-employed partners who currently cannot qualify for Statutory Paternity Pay will become eligible for two weeks’ support worth up to £194 per week. While unlikely to drive financial planning on its own, it’s another consideration when modelling short-term income and cashflow for self-employed clients starting or growing their families.

ISAs

Cash ISAs – the planned reduction in the Cash ISA allowance from £20,000 to £12,000 for under-65s from April 2027 will no longer go ahead, meaning clients can continue to invest up to the full ISA allowance in cash.

New first-time buyer ISA – from 6 April 2029, a new first-time buyer ISA will replace the Lifetime ISA for new savers, retaining the £4,000 annual contribution and 25% government bonus, but with no upper age restriction. The bonus will be available on qualifying first-home purchases up to £450,000 without a withdrawal charge. 

Existing Lifetime ISAs (LISAs) – from 29 October 2026, the existing withdrawal charge will be reduced from 25% to 20% for relevant purchases that do not meet the qualifying rules, recognising that some Lifetime ISA holders may wish to purchase a property above the £450,000 property price cap.