Chapters Financial News

The Chancellor, John Healey MP, has delivered his first Budget, set against some uncertainty with regard to future UK growth forecasts, and the future estimates provided by the Office for Budget Responsibility not being strong (between 1-2% pa). Billed (by him) as a Budget of fiscal discipline, and as the third Budget of this Labour administration, he hopes that the announcements made will provide some breathing space for households and businesses alike. 

The question must be, why? And this alone is leading to further speculation as to the short-term plans of the government. 

It should be noted that his current headroom of £15bn (2029-2030) is limited due to higher borrowing costs, so it was interesting to see what changes were announced from Westminster. 

As is always the case post the announcements, the ‘devil’ may well be in the detail. We have captured below some of the headlines, noting that the pledge not to increase the ‘big three’ revenue raisers of income tax, National Insurance or VAT was honoured.

Headlines

Personal / Household changes 

• Increase in tax rates on property income and savings income by a further 2% at the basic, higher and additional rates from April 2027. This means that income tax on property and savings income will rise to 24% for basic rate taxpayers, 44% for higher rate taxpayers and 49% for additional rate taxpayers 
• Minimum wage set to increase by 3.9% from £12.71 per hour to £13.20 per hour (18–20-year-olds from £10.85 per hour to £11.27 per hour)
• The £20,000 cash ISA allowance will be retained for adults of all ages – the planned capping of the maximum cash ISA investment for the under 65s to £12,000 has been scrapped
• The First Time Buyer ISA will replace the Lifetime ISA (LISA), and LISA penalties will be reformed, to ensure that if a first home costs more than the limit, the individual will get back at least what they put in
• Your First Home scheme: a scheme aimed at helping first-time buyers in England to purchase a property. The scheme will allow people to buy a new-build home with a deposit of 2.5%. It would provide them with a loan worth 20% of their property's value to help pay for the purchase. The threshold for eligibility for first-time buyers will be set at £110,000 for a combined income outside London, and £140,000 in London
• Standing charges on household gas bills to be scrapped (estimated to save 60% of households around £45 per year). The charge will essentially be moved into the unit cost of gas, so the less you use, the less you will pay
• Help with energy bills for 20M households in council tax bands A to D in England: a one-off £100 Household Energy Payment from January
• Fuel duty discount of 5p per litre has been extended until at least July 2027
• Low-income pensioners to be shielded from income tax through the Pension Tax Allowance from April 2027 to the end of the tax year 2029/2030: 
  • The full, flat-rate State Pension is expected to increase by 3.9% to £13,036.40 a year from April 2027 (paid gross but taxable). This would take the payment above the £12,570 personal tax allowance 
  • The government had already committed to not taxing people who only get an income from the State Pension. The Pension Tax Allowance will ensure that pensioners with income up to the value of the full new State Pension will not pay income tax
  • The aim is to avoid an administrative burden for a small amount of tax, which might cost more to collect than to gain 
• Removal of the two-year rule for taxation of pension and lump sum death benefits from 28 October 2026

Business changes 

• Reduction of Business Asset Disposal Relief (BADR) lifetime limit from £1M to £500,000 from 06 April 2027. Formerly Entrepreneurs’ Relief, BADR reduces the capital gains tax (CGT) rate on qualifying business sales or disposals. The tax rate is currently 18% (which is a reduction for higher / additional rate taxpayers), up from 14% between April 2025 and April 2026, and 10% prior to April 2025
• Introduction of Founders’ Relief from 06 April 2027, providing a 10% capital gains tax (CGT) rate on up to £10M of lifetime gains for qualifying founders of high growth, innovative companies. A technical consultation has been launched, and strict qualifying conditions will apply 
• The threshold for small business rate relief for retail, hospitality and leisure businesses (excluding adult gaming centres and vape shops) will be raised from £12,000 to £18,000. In addition, all business rates will be retained locally by the end of the decade

Extra taxes 

• Mansion tax: the High Value Council Tax Surcharge (dubbed the mansion tax) was announced in last year’s Budget. It will apply to properties in England valued above £2M from April 2028. There had been speculation that the government was considering extending it to properties worth more than £1.5M, but the £2M level was retained
• The Banking Surcharge rate has been temporarily increased by a further 3%, taking it to 6%, for 15 months from 01 January 2027
• Tax on higher stakes gaming machines will increase from 20% to 25% from 01 April 2027
• Online retail giants are to be made responsible for collecting tax owed by traders using their platforms

Defence 

• The Chancellor deferred until the spending review next year the details of how the UK will meet its commitment to NATO of spending 3.5% of GDP on defence by 2035 (target of 3% by 2030) 

Summary 

This is not an exhaustive list, and it is important that you take your own individual advice regarding your own arrangements as we move towards the end of this current tax year and the start of the 2027/2028 tax year, from 06 April 2027. As suggested at the start of this blog, there may be some additional devil in the detail! 

The team at Chapters Financial can help you with your pension, investment and financial planning and we look forward to helping you into the future. 

No individual advice is provided during the course of this blog.

Keith Churchouse FPFS 
Director 
CFP Chartered FCSI
Chartered Financial Planner  

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