UK Budget 2026: what does it mean for your tax and financial planning?

UK Chancellor John Healey presented this Autumn Budget to Parliament on 28 October. Headline income tax and capital gains tax rates remain unchanged, while the £20,000 cash ISA allowance has been retained. However, taxes on savings income and landlords are set to rise further.

John Healey’s first Budget was perhaps as notable for what did not change as for what did. After the sweeping, and often painful, tax reforms announced in recent Budgets, this one may seem relatively tame. But while many taxpayers can breathe a sigh of relief that there were fewer surprises this time, the wider tax landscape remains challenging.

Existing reforms remain on course, including the important extension of UK inheritance tax to unused pension funds from April 2027. Taken together with higher taxation of savings and rental income, there is good reason to review how your wealth is structured and whether you are taking advantage of available tax-efficient arrangements.

This doesn’t only apply to UK residents. Many British expatriates retain UK tax exposure through pensions, property and other assets, making this an equally important time to review the UK elements of your financial planning. If you still own UK property, the further increase in rental income taxation makes that review particularly timely.

What has changed?

One of the Budget’s key announcements for investors and landlords concerns savings and rental income.

Income tax rates for savings and investment income were already scheduled to rise by 2% following previous reforms. The Chancellor has now added a further 2%, so that rates from 6 April 2027 are 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers.

For people holding substantial savings or receiving rental income the cumulative effect could be significant.

And for landlords, this latest measure is another addition to a succession of tax and regulatory changes affecting residential property. It reinforces the value of periodically stepping back and asking whether property continues to deliver the appropriate return for the tax, costs, administration and investment risk involved.

There is some positive news for low-income pensioners. Since the state pension will exceed the frozen personal allowance from April, a new Pension Tax Allowance will protect those who earn up to its value (£13,036 in 26/27) from paying income tax. For those with incomes just above this, the allowance will be gradually withdrawn through a taper. The allowance will operate from 6 April 2027 to 5 April 2030.

The two-year rule on pension lump sum death benefits has been removed for payments made on or after 28 October 2026. Beneficiaries will no longer be taxable solely because lump sums are paid two years after the member’s death. The rules for collecting tax on excess lump-sum death benefits will also change.

For business owners, the lifetime limit on capital gains qualifying for Business Asset Disposal Relief will fall from £1 million to £500,000 for disposals from 6 April 2027. A new Founders’ Relief is also planned for qualifying high-growth innovative companies.

What has not changed?

After considerable speculation in the run-up to the Budget, several important areas have been left untouched.

Headline income tax rates applying to employment and self-employment income remain unchanged, as do dividend income tax rates.

Notably, the standard personal allowance and income tax thresholds remain frozen until 2031. While tax rates have not increased, wage growth and inflation mean that taxpayers still face higher tax bills.

There is also no change to the headline rates of capital gains tax or the annual exemption.

Likewise, the £20,000 cash ISA allowance has been maintained.

These may be welcome outcomes for investors, particularly given the speculation before the Budget. But they should not distract from the wider trend. Tax allowances and the way different forms of income and assets are taxed continue to evolve, so the structure of your investments can matter increasingly to the return you ultimately retain.

Remember: a major pension and inheritance tax change is still coming

Perhaps the most important message for families did not originate in this Budget at all.

From 6 April 2027, most unused pension funds and pension death benefits become part of an individual’s estate for UK inheritance tax purposes. This removes an inheritance-planning advantage long used by many families.

The new Chancellor has not reversed this reform. Indeed, this Budget includes administrative provisions preparing for its introduction, including allowing personal representatives to direct pension scheme administrators to pay inheritance tax directly to HM Revenue & Customs.

Expatriates are also impacted, since UK-based assets always remain subject to UK inheritance tax, regardless of how long you have lived abroad.

For families with larger pension funds, this can change the balance between pensions, investments and other assets when planning how to fund retirement and pass wealth to the next generation. The key is not to look at pensions or inheritance tax in isolation. Estate planning should be coordinated with your retirement income requirements, investment strategy and family objectives.

Own UK property?

UK rental property also deserves particular attention, with rising income tax rates potentially proving the final nail in the coffin for some landlords.

It may be time to ask: does owning UK property still make financial sense for you?

The answer will depend on your circumstances, objectives and other investments. Property can form one part of a well-diversified portfolio, but the decision should take account of taxation, net rental yield, running and compliance costs, capital growth prospects and your estate planning.

This question is equally relevant if you live overseas, since UK rental income remains subject to UK tax.

For British expatriates, the Budget provides another reason to reconsider the role UK assets play in your overall wealth. If you retained a UK property when you moved abroad, perhaps for rental income, as a future fallback or simply because you had no reason to sell at the time, now is a good time to review your position.

There is also the inheritance tax angle. If your UK property did not previously have much impact on your liability, the inclusion of unused pension funds in estates next year could change the picture. Together, your property and pension could leave your heirs with much greater UK inheritance tax exposure.

Your UK property should therefore not be considered in isolation. Pensions, investments, savings and property need to be assessed alongside the tax and succession rules of both the UK and your country of residence, and the available planning opportunities. With cross-border planning, the right answer differ significantly from looking at either country alone.

Make the Budget a prompt to review your planning

Budgets naturally focus attention on individual tax announcements. For families building, enjoying or passing on wealth, however, the bigger question is how all the rules work together.

Effective tax planning is not about reacting to every Budget measure. It’s about structuring your investments, pensions and estate around your circumstances and objectives, while legitimately taking advantage of available allowances and tax-efficient arrangements.

With higher taxes on savings and rental income on the way, and the significant inheritance tax treatment of pensions changing from April 2027, now is a sensible time to review whether your arrangements remain suitable.

To understand how these changes could affect you and ensure your financial planning remains as tax-efficient as possible, contact Blevins Franks for personalised advice.