The UK Autumn Budget was delivered on 28 October 2026 by Chancellor John Healey. I’ve updatred our report from the 2025 budget to show what has changed and what has stayed the same for Savings, Investments and Pensions.
The most significant development is that the proposed reduction in the Cash ISA allowance has been reversed. There are also further changes to savings taxation, Lifetime ISAs and pensioners’ tax liabilities.
UK Budget 2026 – What the Changes Mean for Your Savings, Investments and Pensions
Client Financial Update | November 2026
The Autumn Budget, delivered on 28 October 2026 by Chancellor John Healey, introduced a number of important changes affecting savers, investors, homeowners and pensioners.
Some measures announced in the 2025 Budget have been amended, while others have been confirmed or extended. In particular, the Government has reversed its proposed reduction in the Cash ISA allowance, but has announced further increases in tax on savings income.
The following summarises the main changes and explains what they could mean for your financial planning.
1. Individual Savings Accounts (ISAs)
What is staying the same?
The overall annual ISA allowance remains at £20,000 per tax year.
Other ISA allowances also remain unchanged:
- Junior ISA: £9,000 per year.
- Lifetime ISA: £4,000 per year.
- Overall adult ISA allowance: £20,000 per year.
What has changed following the 2026 Budget?
The 2025 Budget proposed reducing the maximum annual Cash ISA contribution for people under 65 from £20,000 to £12,000, with effect from 6 April 2027. This proposed reduction has now been scrapped.
Following the October 2026 Budget:
- All eligible adult savers will retain the ability to put up to £20,000 into a Cash ISA each tax year.
- There will be no separate £12,000 Cash ISA restriction for under 65s.
- The overall annual ISA allowance remains £20,000.
- Savers will retain the flexibility to choose between Cash ISAs and Stocks & Shares ISAs, subject to the normal ISA rules.
This is a welcome reversal for people who prefer the security and accessibility of cash savings rather than taking investment risk.
A new First-Time Buyer ISA
The Government has confirmed further details of a new First-Time Buyer ISA, expected to launch in April 2029.
The intention is for this new product eventually to replace the Lifetime ISA for first-time buyers.
The proposed arrangements include:
- A Government bonus of 25% on qualifying contributions, subject to a maximum contribution of £4,000 per year.
- A maximum qualifying property purchase price of £450,000.
- No upper age restriction for opening the new account.
- No withdrawal penalty when money is withdrawn for an eligible purpose.
The new arrangements are intended to make saving towards a first home simpler and more accessible.
Existing Lifetime ISA holders will be able to continue using their accounts under the existing rules.
Changes to the Lifetime ISA withdrawal penalty
The Government has also announced an immediate reduction in the Lifetime ISA withdrawal charge in certain circumstances.
From 29 October 2026, the charge will reduce from 25% to 20% where an eligible first-time buyer purchases a property above the existing £450,000 property price limit.
This is intended to prevent savers losing part of their original contributions because property prices have exceeded the qualifying limit.
What this means for savers
The reversal of the Cash ISA reduction means that people who rely on cash savings will retain their existing flexibility.
However, the increases in tax on savings interest from April 2027 make the tax-free benefits of ISAs particularly valuable.
It is worth reviewing how much of your savings are held within ISAs and whether you are making full use of your annual allowance.
2. Savings Income Tax – Interest on Cash Savings
Further increases announced in the 2026 Budget
The 2025 Budget announced that income tax rates on savings interest would increase by two percentage points from 6 April 2027.
The 2026 Budget has gone further, increasing the planned rise to four percentage points above the existing rates.
The revised rates from 6 April 2027 will be:
| Tax band | Current rate (2026/27) | New rate (2027/28) |
|---|---|---|
| Basic rate | 20% | 24% |
| Higher rate | 40% | 44% |
| Additional rate | 45% | 49% |
These rates apply to taxable savings interest, including interest received from bank accounts and building society accounts outside tax-free wrappers.
Personal Savings Allowance
The Personal Savings Allowance remains unchanged:
- Basic-rate taxpayers: £1,000 tax-free interest.
- Higher-rate taxpayers: £500 tax-free interest.
- Additional-rate taxpayers: No Personal Savings Allowance.
Interest above the relevant allowance will be taxed at the new rates.
The starting rate for savings also remains unchanged, including the £5,000 starting-rate limit, subject to the normal eligibility rules.
What about ISA savings?
Interest earned within a qualifying ISA remains free from income tax.
The combination of higher savings tax rates and the retention of the £20,000 Cash ISA allowance makes ISAs an important consideration for people holding substantial cash savings.
For those with significant savings outside ISAs, it may be appropriate to review the use of available allowances and tax-efficient savings arrangements.
3. Dividend Tax
The dividend tax increases announced in the 2025 Budget took effect from 6 April 2026.
The 2026 Budget did not announce a further increase in these rates.
The current dividend tax rates are:
| Tax band | Previous rate | Current rate from April 2026 |
|---|---|---|
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% |
The Dividend Allowance remains at £500 per tax year.
Dividends received from investments held within a Stocks & Shares ISA remain tax-free.
What this means for investors
Investors receiving dividends from shares held outside ISAs may face higher tax bills than in previous years.
It is therefore worth reviewing investment portfolios to establish whether available ISA allowances are being used effectively.
The treatment of dividends within ISAs remains unchanged.
4. Pensions – Changes and Important Developments
The 2026 Budget introduced an important new tax allowance for pensioners and confirmed the next State Pension increase.
It is also important to understand the pension changes previously announced in the 2025 Budget, particularly those affecting salary sacrifice arrangements.
A. State Pension increases
The State Pension increased by 4.8% from April 2026 under the Triple Lock.
For the full New State Pension, this took the weekly amount from approximately £230.25 to £241.30.
The Government has subsequently confirmed a further increase of 3.9% from April 2027, reflecting earnings growth under the Triple Lock.
The full New State Pension will therefore rise to approximately £251 per week, equivalent to an annual amount of £13,036.40.
The basic State Pension will also increase.
Please note that the figures quoted relate to the full New State Pension. Individuals receiving the old basic State Pension, Additional State Pension, SERPS or Graduated Retirement Benefit will receive different amounts depending on their individual National Insurance and pension records.
B. New Pension Tax Allowance from April 2027
One of the important announcements in the 2026 Budget is the introduction of a new Pension Tax Allowance.
The Personal Allowance remains frozen at £12,570.
As the full New State Pension increases above this amount, some pensioners could otherwise find themselves liable for income tax simply because of State Pension increases.
The new Pension Tax Allowance is designed to protect pensioners on relatively low incomes from this situation.
From 6 April 2027:
- Individuals above State Pension age, or reaching State Pension age during the tax year, will qualify.
- Those with total annual income up to the full New State Pension (£13,036.40 in 2027/28) will receive the full allowance.
- The maximum tax reduction will be approximately £94 in 2027/28.
- The allowance will gradually reduce for those with income above £13,036.40.
- It will be fully withdrawn once total income reaches £13,319.
Importantly, eligibility is based on total income, not just State Pension income. This means private pensions, employment income, savings interest, dividends and property income are also taken into account.
HMRC will apply the allowance automatically, so eligible individuals will not need to make a separate claim.
The measure is currently intended to apply for the 2027/28, 2028/29 and 2029/30 tax years.
C. Pension Salary Sacrifice – National Insurance Changes
The 2025 Budget announced a restriction on the National Insurance benefits available through pension salary sacrifice arrangements.
This measure remains scheduled to take effect from 6 April 2029.
Salary sacrifice works by an employee agreeing to give up part of their gross salary in exchange for an equivalent pension contribution from their employer.
This arrangement can provide National Insurance savings for both the employer and employee.
Under the new rules:
- Only the first £2,000 of employee pension contributions made through salary sacrifice each year will remain exempt from National Insurance.
- Contributions above £2,000 will be subject to employee and employer National Insurance contributions.
- Income Tax relief on pension contributions will remain available, subject to the usual pension tax rules.
- Ordinary employer pension contributions will continue to be exempt from National Insurance.
This does not prevent employees from making larger pension contributions. It simply reduces the National Insurance advantage of making contributions through salary sacrifice.
Employees and employers using these arrangements should review their pension contribution structures ahead of April 2029.
D. Personal Tax Allowance and Fiscal Drag
The Personal Allowance remains frozen at £12,570.
The Government has maintained the existing income tax thresholds, meaning that increases in earnings, pensions and investment income can result in more people becoming liable for income tax or moving into higher tax bands.
This is often referred to as fiscal drag.
Although the new Pension Tax Allowance provides some protection for lower-income pensioners, those with additional private pension or investment income may still face increasing tax liabilities.
E. Older Protected Pensions – Pre-1997 Benefits
Previously announced changes affecting certain older pension arrangements also remain relevant.
For eligible pensions managed by the Pension Protection Fund (PPF) or under the Financial Assistance Scheme (FAS), certain pre-April 1997 pension benefits may receive inflation increases where the original scheme rules permitted them.
The increases are linked to CPI inflation, subject to a maximum of 2.5% a year, from January 2027.
Eligibility depends on the original scheme provisions and the relevant protection arrangements.
5. What Should Savers, Investors and Pensioners Consider?
The 2026 Budget reinforces the importance of reviewing personal financial arrangements, particularly where savings interest, dividends and pension income form a significant part of household income.
Some areas worth considering include:
Cash savings
- Review the amount of cash held outside tax-efficient accounts.
- Make use of the full £20,000 annual ISA allowance where appropriate.
- Consider the effect of the higher savings income tax rates from April 2027.
Investments
- Review whether investment portfolios are held in the most appropriate tax-efficient structures.
- Consider making use of Stocks & Shares ISA allowances where investment risk is appropriate.
- Review dividend income and the impact of the higher dividend tax rates introduced in April 2026.
Pensions
- Review existing pension arrangements and contribution levels.
- Consider the effect of the £2,000 salary sacrifice National Insurance cap from April 2029.
- Check how the State Pension and other retirement income could affect future tax liabilities.
- Consider the new Pension Tax Allowance if approaching or already above State Pension age.
First-time buyers
- Keep the proposed First-Time Buyer ISA in mind if saving towards a property purchase.
- Existing Lifetime ISA holders should understand the changes to withdrawal charges and the proposed transition to the new product.
Conclusion
The 2026 Budget has brought some welcome news for cash savers, particularly with the reversal of the proposed Cash ISA allowance reduction.
However, the further increase in savings income tax rates from April 2027 means that people holding substantial cash savings outside ISAs could face higher tax bills.
Dividend tax rates have already increased from April 2026, while pensioners will benefit from the introduction of the new Pension Tax Allowance from April 2027.
The changes to salary sacrifice arrangements from April 2029 also mean that employees and employers should consider how their pension contributions are structured.
Overall, the message is clear: tax-efficient financial planning is becoming increasingly important.
A review of your savings, investments and pension arrangements may help ensure that you are making the best use of the available allowances and reliefs.
If you would like to review your financial arrangements in light of these changes, please contact:
Ken McNeil
McNeil Stevens Financial Services
Telephone: 07590 828227
Email: ken@mcneilstevens.com
This article is intended for general information and educational purposes. It does not constitute personal financial or tax advice. The information is based on Budget announcements and published guidance available as at 5 November 2026. Some measures remain subject to the passage of legislation and further HMRC guidance. Individual circumstances will differ, and professional advice should be sought before making financial decisions.
Important points verified against the 2026 Budget
The key changes incorporated above are:
- Cash ISAs: The proposed £12,000 restriction for under-65s has been cancelled. The £20,000 allowance remains available.
- Savings tax: The planned 2 percentage point increase has been increased to 4 percentage points, taking the rates to 24%, 44% and 49% from April 2027. Saffery+1
- Dividend tax: The increases introduced in April 2026 remain in place, with no further increase announced in the 2026 Budget. GOV.UK+1
- First-Time Buyer ISA: Now expected in April 2029, with further details confirmed. Moneyfactscompare+1
- Lifetime ISA: The withdrawal charge has been reduced to 20% in the specified circumstances. Moneyfactscompare+1
- State Pension: The next increase, from April 2027, is 3.9%, rather than 4.8%. UK Parliament
- Pension Tax Allowance: A new allowance is being introduced from April 2027 to protect eligible lower-income pensioners. GOV.UK+1
- Salary sacrifice: The £2,000 National Insurance exemption limit remains scheduled for April 2029. GOV.UK
The official Budget documents are available here: HM Treasury – Budget 2026 .
