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Chancellor John Healey’s much awaited first Autumn Budget did much as expected – which was to announce a series of small fixes aimed at offsetting rising living costs. In the chancellor’s words, to offer millions some ‘breathing space’. There were also measures to support smaller businesses, and entrepreneurs, as well as small tax increases on savings and property income.
However, against a backdrop of rising inflation, high government debt and geopolitical tensions, there was little room for major giveaways. And little appetite for controversial tax rises that could be seen as going against the Labour government’s 2024 manifesto.
Ahead of the Budget, the Office for Budget Responsibility (OBR) announced an uptick in its prediction for UK growth in 2026, from 1.1% to 1.2%. This was referenced by Healey during his speech as evidence of the UK’s improving economic situation. However, the OBR also downgraded expected growth for 2027 from 1.6% to 1%.
Healey said the government continues to meet the fiscal rules with a buffer of £15 billion in 2029-30, before rising to £22 billion in 2030-31.
Overall, the Budget was largely welcomed as relatively uneventful with no big fiscal shocks.
Hetal Mehta, SJP’s Chief Economist, says: “Overall, I’d say there were no big surprises – no showstoppers, and little in terms of major macro announcements. The package of announcements was broadly neutral as had been increasingly expected.
“When it comes to fiscal headroom, there is no precise figure that is ‘right’ for markets. The £15 billion figure announced today seems to have been broadly in line with expectations given the gilt market barely reacted. Yet as the OBR states, the margins of error remain small given uncertainty and geopolitical
risks remain elevated.
“There are few immediate implications for the Bank of England. High inflation and some near-term fiscal support are likely to smooth the path to higher rates in the coming months despite the downgrade to 2027 growth.”
At a glance
- Support for households struggling with rising living costs, with measures to help with fuel and energy costs.
- Thousands of smaller businesses to be taken out of paying business rates.
- Cash ISA limit to remain at £20,000 in a reversal of previous plans.
- From April 2027, tax rates on savings and property income will rise by a further two percentage points across all bands.
- UK economic growth predicted to be higher than expected in 2026 but fall sharply in 2027.
Key announcements
Investments
Cash ISAs
In a surprise move, Healey has reversed plans to cut the annual allowance for cash ISAs from £20,000 to £12,000 in April of next year. This had been announced by his predecessor Rachel Reeves in the 2025 Autumn Budget, for those under the age of 65.
The decision means all savers can continue to put up to £20,000 in cash ISAs each tax year, free of tax. This removes potential complexity around the treatment of cash held inside stocks and shares and investment ISAs. However, it does little to encourage greater investment in the UK through equity ISAs.
There are also plans help incentivise first time investors into stocks and shares ISAs through a ‘Starter ISA’. The financial services industry is set to be consulted on this but no timeframe was given for launch.
Tax
Property and savings tax increases
In her 2025 Autumn Budget, Healey’s predecessor Rachel Reeves announced an increase to the basic and higher rate of tax on property and savings income from April 2027. This would have seen the basic rate on property rise to 22%, the higher rate on property reach 42% and an additional rate on property of 47%.
Healey announced he would increase this by a further two percentage points from April of next year. This means from 2027 to 2028, the basic rate will be 24%, the higher rate will be 44%, and the additional rate will be 49%.
Claire Trott, SJP’s Head of Advice, says: “These may be small changes but they can become cumulative if all your eggs are in one basket. The changes do reiterate the need for ongoing financial advice to ensure people’s long-term plans are not derailed.”
First time buyers
My First Home Scheme
The chancellor reiterated the government’s plans for a new scheme to help first-time buyers get a first foothold on the property ladder. The Your First Home scheme, announced last month, will offer government-backed loans of 20% of a property’s value to first-time buyers purchasing new build homes in England. Buyers will need to have at least a 2.5% cash deposit to put towards their purchase.
Healey said the scheme would be available from the spring next year.
Healey also confirmed the government's plans for a new first time buyer ISA, to be launched in April 2029. It will replace the lifetime ISA, which can be used by first-time buyers to save towards their first home.
Households
Energy costs
In today’s Budget, Healey announced plans to remove the daily standing charge from gas bills. This is currently £108 a year and is paid by everyone, even when no gas is used. The move is expected to lead to higher unit costs for gas. Estimates suggest three in five households will pay less as a result, on average £45 a year, with those using more gas facing higher costs.
There will also be a £100 energy payment for households in the A-D council tax brackets. This is expected to benefit some 20 million households. It will cost an estimated £2.6 billion.
Yet predictions from leading energy companies including British Gas, EDF and E.ON suggest the UK energy price gap could rise by up to 25% in January. This is due to high wholesale gas prices fuelled by the US Iran conflict. The energy regulator Ofgem will make an official announcement on this in November.
The chancellor also said the government would suspend tariffs on fertiliser and heating oil temporarily. The move should lower costs for the agricultural sector in terms of production and help those who use heating oil to warm their homes.
Small businesses
Small businesses rate relief
The threshold at which smaller businesses pay business rates will rise from £12,000 to £18,000 from April. Healey said that “70,000 smaller businesses would pay no business rates at all as a result.” Pubs, village halls and shops will among this contingent. This will be paid for by raising taxes on gambling and carving out an exemption for gambling and vape shops from rate relief changes.
There will also be a crackdown on online marketplaces by making them responsible for collecting VAT at source from retailers on their platforms who have a turnover of £90k or more, wherever they are based.
Entrepreneurs and business owners
Lower CGT rate for qualifying company founders
From April 2027, qualifying founders of high-growth, innovative companies will pay a reduced 10% capital gains tax rate (CGT) on up to £10 million of gains over their lifetime. The detailed rules will be confirmed following consultation.
Business owners reduction in CGT relief
From 6 April 2027, the lifetime limit for Business Asset Disposal Relief (BADR) will fall from £1 million to £500,000. BADR allows qualifying business owners to pay a reduced CGT rate of 18% when selling or disposing of their business.
Banking
Bank levy
A new surcharge on banks’ profits was widely expected as the government looked to raise funding to make budget concessions in other areas.
However, ahead of the Budget, bank shares rose, after reports leaked that the increase would be less than feared. From January 2027 banks will face a 3% bank surcharge, rather than the 8% expected. It will also be time limited and end 15 months later.
Pensions
Triple lock to end
Healey confirmed the triple lock would end from 2030, to be replaced by the so-called double lock, saving an estimated £50 billion by 2050.
From April 2027, a new pension tax allowance will help prevent people on modest pension incomes from having to pay small amounts of tax. It will also ensure that those relying on the full new state pension do not start paying tax simply because the state pension increases.
A small but welcome nugget in the Budget red book also removes the two-year rule on pensions death benefits. Claire says: “On payments made from Budget Day 2026 income tax won’t be applied just because they are made more than two years since the death of the member. This was previously in place to ensure that benefits were either subject to a lifetime allowance test or income tax, if the death occurred before the age of 75.”
Mark FitzPatrick is Chief Executive of St. James’s Place. He says: “Today’s Budget will inevitably prompt people to take stock of what it means for their finances.
“Of course, knowing what has changed is one thing. Knowing what it means for you is another. People’s circumstances, goals and plans are different, and this is where financial advice can make a real difference, helping people understand the implications, avoid knee-jerk decisions and stay focused on their long-term goals.”
Other
- AI - The government will provide £500 million for AI security, alongside a new data centre covenant.
- Import tariffs will be removed on more than 100 food products. It is estimated this could save an average £21 a year per household.
- National living wage: The hourly rate for workers aged 21+ will rise by around 3.9% from April 2027 from £12.71 to £13.21, with the rate for 18 to 20-year-olds increasing from £10.85 to £11.27.
- Paternity pay: Self-employed fathers will be eligible for paternity pay for the first time, receiving up to £194 a week for two weeks following the birth or adoption of a child.
- Carer’s Allowance: The current earnings ‘cliff edge’ will be replaced with a gradual taper from 2030, so carers will no longer lose their entire allowance simply by exceeding the earnings limit.
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