The new Chancellor of the Exchequer, John Healey, delivered the first Autumn Budget under Prime Minister Andy Burnham on 28th October. As expected, the Budget focused on small measures to ease the cost of living, rather than big shifts in spending or taxation.
One change announced was that the planned reduction to the cash ISA allowance to £12,000 from April 2027, for those aged under 65, has been scrapped.
The OBR (Office for Budget Responsibility) highlighted the economic effects of the continued conflict in the Middle East, lowering its estimate for growth in the UK economy next year to 1.0% (from 1.6% in March 2026). The OBR also now expects UK inflation to average 3.4% in 2027 (up from 2.0% in March 2026).
Key figures for the new 2027/28 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 3.9%, from £241.30 to £250.70 per week.
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.
• These tax thresholds to remain frozen until April 2031.
• A new “Pension Tax Allowance” for pensioners with income up to £13,037, tapered up to income of £13,319.
• 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.
• Tax on dividends to remain at 10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.
• 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 24% (basic rate taxpayers), 44% (higher rate taxpayers) and 49% (additional rate taxpayers) from April 2027. This is a further increase of 2% on the 2% already announced in the Autumn Budget 2025.
• Income level at which child benefit starts to be reduced to remain at £60,000.
ISAs
• ISA allowance remains at £20,000.
• JISA (Junior ISA) allowance remains at £9,000.
• LISA (Lifetime ISA) allowance remains at £4,000.
• A new First Time Buyer ISA will be introduced from April 2029, to replace the LISA for new savers.
Inheritance Tax
• Nil Rate Band (NRB) remains at £325,000 and Residential Nil Rate Band (RNRB) remains at £175,000.
• These thresholds remain frozen until 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.
Tax treatment depends on individual circumstances and may change in future. This article is for information purposes only and does not constitute personal financial advice or a recommendation. You should always seek independent financial advice prior to taking any action.
If you do have any queries or concerns, please call or drop me an e-mail.