London, 28 October 2026: Chancellor John Healey has delivered his first Autumn Budget against a challenging backdrop of rising living costs, stubborn inflation and pressure on the public finances.
While the decision to abandon the planned Cash ISA allowance cut will be welcomed by savers, it masks a less welcome announcement: a further increase in the tax on savings interest, taking the top rate to 49% from April 2027.
From changes to savings and retirement income to measures aimed at easing the squeeze on household finances, the Budget contains significant announcements for savers, investors, pensioners and families.
Maike Currie, VP Personal Finance, PensionBee, highlights five of the most significant announcements for personal finances in Budget 2026.
1. Cash ISA reprieve masks a savings tax hike to 49%
“The Chancellor has given savers a reprieve with one hand and taken more with the other. Reversing the planned Cash ISA allowance cut is welcome news, but behind the headline-grabbing U-turn lurks a significant tax rise on savings interest outside an ISA.
“Last year’s Budget had already announced a two-percentage-point increase in savings income tax. Healey’s Budget adds another two percentage points, taking the total increase to four percentage points from April 2027. That means basic-rate taxpayers will pay 24% on taxable savings interest, higher-rate taxpayers 44% and additional-rate taxpayers a whopping 49%.
“With the Personal Savings Allowance unchanged, savers earning interest above their tax-free limits will now hand over more of it to the taxman. The Cash ISA reprieve is therefore masking a much bigger tax grab on savings held outside the ISA shelter.
“The rise could be particularly unwelcome for retirees holding larger cash balances. People drawing an income from invested pensions are often encouraged to keep a cash buffer, potentially covering a year’s worth of living expenses, so they can avoid selling investments during a market downturn. For those holding this money outside an ISA, the higher tax rates could take a bigger bite out of the interest they earn once their tax-free allowances have been exhausted.”
2. ISA alphabet soup and LISA reforms
“We already have Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, Junior ISAs and Lifetime ISAs (LISAs). Now there's a proposed incentive for first-time investors, alongside a new First Time Buyer ISA to replace the LISA.
“At this rate, savers and investors will need a glossary just to work out where to put their money.
“The welcome news is that the Chancellor has finally addressed one of the LISA’s most glaring flaws: the punitive withdrawal penalty for first-time buyers purchasing above the £450,000 property ceiling. Reducing the charge from 25% to 20% means these savers should no longer lose a slice of their own contributions simply because house prices have moved beyond an outdated threshold.
“Unfortunately, the 25% withdrawal penalty remains for people who need to access their LISA savings before 60 for reasons other than a qualifying first-home purchase, unless an exemption applies. Someone who saves £4,000 and receives a £1,000 government bonus would still get back just £3,750 if they withdrew early – £250 less than they put in.
“The LISA was designed to encourage two important financial goals: getting on the housing ladder and saving for retirement. Fixing one flaw while leaving the other untouched is a missed opportunity. Rather than continually inventing new ISAs, perhaps we should focus on making the ones we already have simpler, fairer and fit for purpose.”
3. State Pension tax trap: A new allowance offers relief, but only until 2030
“The Chancellor has finally addressed the looming State Pension tax trap. With the full new State Pension set to reach £13,036.40 from April 2027, exceeding the frozen £12,570 Personal Allowance, pensioners faced the prospect of paying income tax simply for receiving their full State Pension.
“The new Pension Tax Allowance offers welcome relief. From April 2027, pensioners whose total income does not exceed the full new State Pension will receive an automatic tax reduction, with support gradually withdrawn for those earning slightly more. Importantly, this applies to eligible pensioners regardless of whether their income comes from the State Pension or other sources.
“The measure is only confirmed until April 2030, and it doesn’t address the wider problem of frozen income tax thresholds dragging more people into the tax net.
“The State Pension is the bedrock of retirement income for millions. Protecting it from the taxman is important, but pensioners also need certainty about what happens beyond 2030. Retirement planning requires decades of foresight, not another temporary fix.”
4. £100 energy payment: Welcome breaking space or a drop in the ocean?
“A £100 payment for households in Council Tax bands A to D in England will provide welcome breathing space for those struggling with rising energy costs. But spread across a year, that's just £8.33 a month.
“The Chancellor is taking a leaf out of Australia’s playbook. In 2024, Australian households received A$300 in electricity rebates, with further support in 2025. The rebates provided immediate relief and were estimated to reduce headline inflation by around half a percentage point. But they didn’t tackle the underlying cost of energy.
“The Budget also extends the temporary VAT cut on electricity and sets out plans to reform standing charges. These are steps towards addressing costs, but the real test is whether households see lasting reductions in their bills rather than another temporary reprieve. Subsidising energy bills isn't the same as making energy cheaper.”
5. Capital Gains Tax: Investors spared a rate rise
“Investors can breathe a sigh of relief that the Chancellor has left the main Capital Gains Tax rates unchanged. At a time when Britain desperately needs more investment, enterprise and wealth creation, raising the tax on investment gains would have sent a conflicting message.
“But there are changes beneath the surface. A new Founders’ Relief will offer qualifying entrepreneurs a 10% CGT rate on up to £10 million of lifetime gains, while the lifetime limit for Business Asset Disposal Relief is being halved to £500,000.
“For ordinary investors, the annual CGT exemption remains just £3,000, meaning relatively modest gains outside tax-efficient wrappers can trigger a tax liability.
“If the Government genuinely wants to build a nation of investors, it needs to give people the confidence and incentives to invest for the long term, rather than continually moving the goalposts.”
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