The 2026 Budget and you: three things to consider

The 2026 Budget: three things to consider for your financial future

The 2026 Budget included several changes that could affect your retirement income, savings and plans for passing on your wealth. While there are no sweeping changes to the main rates of Income Tax, Capital Gains Tax or Inheritance Tax, some announcements are worth understanding as part of your wider financial plans.

Here are three areas to consider and what they could mean for you.

1. Planning for retirement

The full new State Pension will increase by 3.9% from April 2027, taking it to £13,036.40 a year. This is higher than the frozen Personal Allowance of £12,570, meaning some people whose only income is the State Pension could otherwise have faced a small Income Tax bill.

To address this, the Government is introducing a new Pension Tax Allowance from April 2027. Eligible pensioners with total income up to the value of the full new State Pension will not pay tax as a result of the increase. Those with slightly higher incomes may receive a partial allowance. HMRC will apply this automatically, so there will be no need to make a claim.

There are also longer-term changes to consider. The State Pension triple lock will continue until April 2029. From April 2030, annual increases are planned to be based on the highest of 2.5%, inflation or the amount needed to maintain its value relative to earnings in April 2029.

For those approaching or already in retirement, these changes are a reminder of the importance of looking at your retirement income as a whole. The State Pension is just one part of the picture. Understanding how it works alongside your personal and workplace pensions can help you plan for the income you’ll need in retirement.

2. Making the most of your savings

From April 2027, Income Tax rates on savings and property income will increase by two percentage points. The new rates will be 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers.

For savers, this means tax on interest earned outside ISAs could increase. The amount of interest you can receive before paying tax will still depend on your Personal Savings Allowance and any other allowances that apply to you.

There is some welcome certainty for cash savers. The annual Cash ISA allowance will remain at £20,000, reversing the previously proposed reduction. You can therefore continue to save up to £20,000 a year in a Cash ISA, where interest remains tax-free, subject to the usual ISA rules.

Landlords will also see changes, with tax rates on property income increasing by two percentage points from April 2027.

If you hold significant savings outside ISAs or receive rental income, it’s important to understand how these changes could affect the tax you pay. Making the most of the allowances available and considering how your savings are held can help you make informed decisions about your money.

3. Thinking about passing on your wealth

One of the Budget announcements that could be particularly relevant when planning for the next generation concerns the tax treatment of certain pension death benefits.

Previously, some pension and lump-sum death benefits that would otherwise have been tax-free could become taxable if they weren’t paid within two years of the pension provider becoming aware of the member’s death.

The Government is removing this two-year rule for payments made from 28 October 2026. This could give those inheriting pension benefits greater certainty and remove the risk of an additional tax charge simply because an estate or pension payment takes longer to administer.

It’s important to understand that this doesn’t mean all pension death benefits will be tax-free. The tax treatment will still depend on the type of benefit and individual circumstances.

Your pension arrangements can play an important part in how you pass on your wealth. Understanding how they fit alongside your wider plans can help you make informed decisions about the financial future you want for your family.

Looking at the bigger picture

You don’t necessarily need to change your financial plans because of a Budget announcement. But it’s a good opportunity to check that your arrangements still reflect your circumstances, priorities and what you want to achieve.

Whether you’re planning for retirement, making the most of your savings or thinking about what you want to leave to the next generation, your financial adviser can help you understand how these changes affect you.

At Insight, we take the time to understand what’s important to you, bringing together the right expertise to help you make informed decisions with confidence.

Sources

Government Actuary’s Department – Budget 2026 technical bulletin

HMRC – Budget 2026: Overview of tax legislation and rates

HM Treasury – Budget 2026

HMRC – Overview of tax legislation and rates

HMRC – Tax treatment of pension and lump sum death benefits under the two-year rule