We think the highlight of the Budget was what wasn’t in it.
As those who we have been speaking to recently will know, we were intending to make a series of videos explaining all the new rules. But having sat down to plan it yesterday, we agreed it wasn’t really necessary.
We had all been prepared for a ripping up of the rule book and being taxed or limited from every angle. But the big things which weren’t mentioned, which had been “leaked” in the press for the last few weeks and months, didn’t even get a mention.
Some of the things which didn’t change include:
- Further limits on the amount of Tax-Free Cash you could receive from your Pension
- Limits on the tax relief on pension contributions – it was widely publicised it could be a flat relief to stop higher and additional rate tax-payers receiving 40% or 45% relief on contributions
- Capital Gains Death Tax – currently, if you pass away, your capital gain “dies with you.” Reports were this was going to be scrapped in a form of Capital Gains on Death Wealth Tax
- There were in fact no changes to Capital Gains Tax at all
- Increased Gifting timeframes – there had been suggestions that the 7-year rule would become a 10-year rule before a gift falls out of your estate
In our view, this is all good news that none of this happened! The current Chancellor made changes to help the working man and woman. Look away now if you own a business or are a landlord.
So, what changed then?
Income Tax & Allowances:
- Dividend tax rises by 2% from April 2026. This will hit both business owners and investors if they hold investments in a General Investment Account
- Savings and property income tax will increase by 2% from April 2027. Again, savings tax will include income from a GIA, Onshore and Offshore bond, while property tax increase will hit anyone with a Buy to Let property / properties.
- Income tax bands, Student Loan Repayment thresholds and National Insurance Thresholds are frozen until April 2031 #stealthtax
- In pensions, if you or an employee avails of Salary Sacrifice, then there will be both Employer and Employee NICs due when this is in excess of £2,000 from April 2029.
- This shouldn’t have any impact on company owners and directors paying employer contributions into their pensions, but we shall see what this means for those companies who currently offer Salary Sacrifice arrangements, as the benefit to the company will be negligible. The thing here is that the devil is always in the detail.
Savings & Investments
- A return to separate Cash ISA and Stocks & Shares ISA Allowances. The full ISA allowance (the total amount you can contribute per tax year) remains at £20k per year, but only £12k can be into a Cash ISA, with the remaining £8k into a S&S ISA. In a potential age-discrimination act, those over 65 years old will still be able to contribute £20k into a Cash ISA.
- There is going to be a review into Lifetime ISAs in January. They will look at closing the account to new entrants in its current guise. They want it to return to a first-time home buyer only account, possibly remove early withdrawal penalties and will look to remove the price limits on first-time homes as the current £450k max price rules out a lot of London flats. Those with an account already open for retirement (age 60) should be unaffected
- VCT income tax relief reduced from 30% to 20% from April 2026. There are also changes to what can be held inside a VCT which should open this door to funding for bigger companies, but that’s more detail than most need now.
Inheritance Tax
Largely unchanged since last year, with the current £325k Nil Rate Bands now frozen until April 2031. They didn’t really clarify much for business owners and agricultural landowners/farmers, but at least the new £1m Business/Agricultural relief allowance will be transferrable between spouses from April 2026. That means if a husband died and left the farm / land / business to his spouse, then they would have both allowances (£2M) to utilise on their death.
Property Taxes – Mansion Tax
This won’t having an impact on NI homeowners as Stormont decides our rates but for those in England and Wales, a “Mansion Tax” will be added onto your council tax for homes worth over £2m
Business Owners
- Increases to National Living Wage and Minimum Wages, with the under 18s getting the biggest percentage increase of just over an 8% hourly wage increase. Yes, it might encourage under 18s to get a job, but it might discourage a potential employer from hiring someone under 18 who has no training and experience because the overall cost will be quite similar to hiring someone who might have the experience and training needed already.
- If you were thinking of selling to an Employee Ownership Trust (EOT) because of the 100% tax relief on the sale, this has now been reduced to a 50% tax relief.
Benefits
Scrapping the Two-Child Universal Credit and Tax Credit benefit cap.
Pensioners
Your State Pension rises by 4.8% from April 2026.
Electric Vehicle Users
A new Pay Per Mile tax is going to be introduced which they estimate will be worth about half of the fuel duty they would have received had you been buying petrol or diesel.
We assume they will do this through annual MOTs and mileage reports for older cars, but no idea how they will do it for the newer cars? Possibly build in a field when you are taxing your car to put in the current mileage ant then impose a retrospective charge? Again, further clarification is needed here.
If you stand back and look at it, there shouldn’t be anything here which will severely alters our financial plans. Little bits of detail on income tax and NIC, but nothing fundamentally changes.
So, all we need to do now, is figure out exactly how the changes to last year’s Budget with IHT on Business Property, Agricultural Property and Unused Pensions is going to work in practice, because it’s just around the corner now.
As ever, if there’s anything specific you want to ask about or talk to us about, give either myself or John a shout to talk it through.