The Chancellor of the Exchequer, Rachel Reeves, delivered her second Autumn Budget on 26th November. After months of speculation, the actual changes announced were more widespread than dramatic, but did include an extension of the freeze in income tax thresholds to April 2031.
Other changes included a reduction in the cash ISA allowance to £12,000 from April 2027, for those aged under 65.
The OBR (Office for Budget Responsibility) increased its estimate of growth for the UK economy this year to 1.5% (up from 1%) but downgraded future years to 1.4% in 2026 and 1.5% for the following 4 years. It also expects inflation to have peaked at 3.6% in October, and to now gradually fall towards the Bank of England’s 2% target.
Key figures for the new 2026/27 tax year are now as follows:
Pensions
• Standard annual allowance to remain at £60,000.
• MPAA (Money Purchase Annual Allowance, for individuals who have accessed flexible pension income) to remain at £10,000.
• No change to the maximum amounts for total tax-free lump sum (£268,275) and lump sum death benefits (£1,073,100).
• Flat rate state pension to increase by 4.8%, from £230.25 to £241.30 per week.
• New £2,000 cap on the amount that can be salary sacrificed into a pension without paying National Insurance Contributions, from April 2029.
Income Tax
• Personal allowance to remain at £12,570.
• Higher rate tax threshold to remain at £50,270.
• Additional rate tax threshold to remain at £125,140.
• Thresholds to remain frozen for a further 3 years, to April 2031.
• Rates of income tax unchanged (basic rate 20%, higher rate 40% and additional rate 45%).
• Note that an effective income tax rate of 60% applies between £100,000 and £125,140, due to the loss of £1 of personal allowance for every £2 of income.
Capital Gains Tax
• Capital gains tax remains at 18% (basic rate) and 24% (higher and additional rate).
• Capital gains tax allowance remains at £3,000.
Other Individual Tax
• Dividend allowance remains at £500.
• An additional 2% tax on dividends for basic and higher rate taxpayers from April 2026, taking the rates to 10.75% and 35.75% respectively. Additional rate remains at 39.35%.
• Personal savings allowance remains at £1,000 (basic rate taxpayers), £500 (higher rate taxpayers) or £0 (additional rate taxpayers).
• Tax payable on savings interest and property income to increase to 22% (basic rate taxpayers), 42% (higher rate taxpayers) and 47% (additional rate taxpayers) from April 2027.
• Income level at which child benefit starts to be reduced to remain at £60,000.
Corporation Tax
• Corporation Tax to remain at 25% for larger companies (profits above £250,000).
• Corporation Tax for smaller companies (profits below £50,000) to remain at 19%, with tapered rates for profits £50,000 – £250,000.
ISAs
• Overall ISA allowance remains at £20,000, but cash ISA allowance to be reduced to £12,000 from April 2027 for those under the age of 65.
• JISA (Junior ISA) allowance remains at £9,000.
• LISA (Lifetime ISA) allowance remains at £4,000.
• Consultation on a simpler replacement to the LISA to be published in early 2026.
Inheritance Tax
• Nil Rate Band (NRB) remains at £325,000 and Residential Nil Rate Band (RNRB) remains at £175,000.
• These thresholds frozen for a further year, to April 2031.
• Most unused pension funds will be included in an individual’s estate from April 2027.
Please note that different tax rates and allowances apply in Scotland.
This article is for information only and should not be construed as advice or a recommendation. You should always seek independent financial advice prior to taking any action.
We are always available to discuss any queries or concerns, so just call or drop us an e-mail.