Autumn Budget 2026 summary

Income Tax & National Insurance

Capital Gains Tax (CGT)

There were also no changes to the individual rates of capital gains tax or Annual Exempt Amount.

New CGT Founders’ Relief

A new 10% CGT rate will apply to up to £10 million of qualifying lifetime gains per individual from 6 April 2027. The proposed relief is tightly targeted at qualifying founders and significant early investors in high-growth, innovative UK businesses, with conditions around the founder's original ownership stake, five-year holding period and UK residence, alongside company size, trading and growth/innovation tests. The £10 million lifetime limit will be reduced by gains claimed against the BADR and Investors’ Relief lifetime limits from 6 April 2027, so use of those reliefs will reduce the amount available for Founders’ Relief. The detailed design remains subject to consultation.

Business Asset Disposal Relief (BADR) – Reduced lifetime limit

From 6 April 2027, the lifetime limit on qualifying gains eligible for BADR will reduce from £1 million to £500,000. BADR provides an 18% CGT rate on qualifying gains. For gains that would otherwise be subject to the 24% main CGT rate, the reduced £500,000 lifetime limit represents a maximum potential CGT saving of £30,000.

The new £10 million Founders’ Relief lifetime limit will be reduced by gains claimed against the BADR and Investors’ Relief lifetime limits from 6 April 2027, so use of these reliefs will reduce the amount subsequently available for Founders’ Relief

CGT exit charge easement for temporarily UK-resident trusts

From 28 October 2026, the CGT exit charge will not apply where a trust becomes UK resident because one of its trustees moves to the UK and the trust subsequently ceases UK residence later in the same year or the following year.

Inheritance Tax

There were no significant changes to IHT rates or thresholds.

IHT deductions for liabilities involving trusts

New rules will clarify when liabilities incurred by trustees can be deducted when valuing settled property for IHT and align their treatment with liabilities held personally. The existing debt-deduction and anti-avoidance rules will also be extended so that certain liabilities funded using value originating from a beneficiary's own estate cannot be used to reduce an IHT charge. The change applies to deaths and other chargeable events from 28 October 2026.

Individual Savings Account (ISA)

Cash ISA

The Chancellor reversed the previously announced reduction in the Cash ISA subscription limit. The Cash ISA limit will therefore remain at £20,000 for all adult savers from April 2027. The previously proposed measures relating to money market funds and the 22% flat-rate charge on interest arising on cash held within investment ISAs will not proceed as originally proposed.

First Time Buyer ISA

This new ISA will be introduced from April 2029. The new product will replace the Lifetime ISA for new savers and provide a 25% government bonus, paid on withdrawal, towards the purchase of a home worth up to £450,000. The maximum value of the bonus will be capped at £20,000.  Existing LISA holders will be able to continue to contribute to and use their accounts under the current rules. Separately, from 29 October 2026, the LISA withdrawal charge for first-time buyers purchasing a property above the £450,000 property price cap will reduce from 25% to 20%. This allows affected savers to retain their own contributions while removing the government bonus. The 25% charge will continue to apply to other unauthorised withdrawals.

New Stocks & Shares ISA incentive

The government will work with industry to explore a new ISA incentive for people investing in a Stocks and Shares ISA for the first time. The detailed design, including the form of the incentive and eligibility conditions, has yet to be determined.

Other points of interest - taxation

Stamp duty

Stamp Duty and Stamp Duty Reserve Tax will be replaced with a single, self-assessed Securities Transfer Tax which will also simplify and digitise the administration and payment of the tax, while consolidating the legislative framework. This measure will be effective from late 2027.

Child benefit overpayment and the High-Income Child Benefit Charge (HICBC)

Child Benefit overpayments and HICBC are currently recovered separately, which can mean the same Child Benefit is effectively repaid twice.

The change will offset HICBC already paid against the related Child Benefit overpayment, so only any remaining balance is recoverable.

It takes effect from Royal Assent to Finance Bill 2026-27, with retrospective effect back to HICBC’s introduction in January 2013.

Company distributions and capital extraction

The government will reform the rules that determine whether amounts extracted from companies are taxed as income or capital. The changes are aimed particularly at arrangements that allow accumulated company profits to be extracted at CGT rates, including certain holding-company, capital reduction and share buyback structures. Genuine disposals and changes of ownership, including family business succession, are intended to retain capital treatment, with demerger and purchase-of-own-shares reliefs being modernised. Changes take effect from April 2028, with draft legislation due in 2027.

Further Tax Update in 2027

The government will hold a further Tax Update in 2027 covering measures to simplify and modernise the tax and customs system. Based on the established Tax Update format, this is a separate tax-policy event at which further announcements, consultations and/or draft legislation may be published.

Self Assessment - Timely Payments

From April 2029, taxpayers required to make Payments on Account will move from the current twice-yearly system to smaller, more regular payments during the tax year in which the income is earned. The government has not yet decided how frequently payments will be made.

Payments are expected to be automated, for example by Direct Debit, with an option to pay through PAYE where sufficient PAYE income is available. Payments will continue to be based initially on the previous year's tax liability, with taxpayers able to update the amount where circumstances change.

The reform changes when tax is paid, rather than the amount of Self Assessment tax due, and the annual 31 January tax return deadline will remain. A transition will be required in 2029/30 as affected taxpayers complete payments under the existing system while starting payments under the new arrangements.

Pensions

Pensions were relatively lightly impacted in this year’s Budget. There will be no changes to the main pension tax allowances, which will continue at their current levels for the 2027/28 tax year.

This means the Lump Sum Allowance, Lump Sum and Death Benefit Allowance, Overseas Transfer Allowance and Annual Allowance all remain unchanged, providing further continuity for retirement planning. This includes those elements within the Tapered Annual Allowance. So, threshold income continues at £200,000 and adjusted income stays at £260,000.

Areas of policy change include:

Tax Treatment of Pension and Lump Sum Death Benefits Under the Two-Year Rule

Currently, where a member dies before age 75, certain pension and lump sum death benefits can be paid free of income tax if paid within two years of the scheme administrator becoming aware, or reasonably being expected to have become aware, of the member’s death. If payment falls outside this period, the benefits are generally taxable.

From 28 October 2026 (i.e. Budget day), this two-year restriction has been removed, so a delay beyond two years will no longer, in itself, cause the death benefit to become subject to income tax.

Collecting tax due on Excess Lump Sum Death Benefits

Currently, where a member dies before age 75 and lump sum death benefits exceed their available Lump Sum and Death Benefit Allowance (LSDBA), the excess is taxed as pension income of the individual beneficiaries.

Budget 2026 changes how this tax is assessed and collected. Rather than treating the excess as pension income, HMRC will assess each beneficiary separately for the tax due on their share of the excess, using their marginal Income Tax rate for the year in which the lump sum was paid.

The new approach will generally apply retrospectively to relevant lump sum death benefits paid from 6 April 2024, with transitional provisions for relevant payments in 2023/24. Separate consequential changes concerning the interaction with IHT will apply where the member dies on or after 6 April 2027.

HMRC Definition of Terminal Illness for Pensions Access (Serious ill health)

The government will amend the definition of terminal illness to make it easier for terminally ill individuals to access their pension savings via a serious ill health lump sum. The changes will also allow medical evidence to be provided by registered medical practitioners based overseas. This change becomes effective on the date of royal assent of the Finance Bill.  This will give time for schemes to amend their current serious ill health processes.

Minor technical amendments to Inheritance Tax on pensions from April 2027

The minor technical changes are:

• prospective personal representative (those dealing with intestacy) will now be able to require pension scheme administrators to pay the IHT due directly to HMRC when the payment notice conditions are met.
• those administering an estate can decide whether notional pension property should be included in the ‘general’ component of the estate or as a separate component for the purposes of calculating the 36% reduced rate of inheritance tax, when part of the estate is left to charity.

Both changes are welcome small easements in an otherwise complex process.

Guided Retirement and Retirement Collective Defined Contribution (RCDR)

The government has confirmed that changes will be introduced through the Finance Bill 2027-28 to support the new Guided Retirement framework and retirement-only Collective Defined Contribution (CDC) schemes. The changes will help enable DC schemes to provide members with default retirement solutions and allow individuals to use existing DC savings to access a retirement CDC arrangement providing a target income for life.

The tax rules will also be amended to allow members to transfer from a retirement CDC arrangement into drawdown within a specified timeframe, and to expand the circumstances in which certain existing pension protections can be retained following a transfer. Further detail, including the timeframe for leaving a retirement CDC arrangement and the protections covered, is expected through the subsequent legislation.

Defined Benefit Pensions: Surplus Extraction Tax Regime

Legislation will be introduced in Finance Bill 2026-27 to allow defined benefit occupational pension schemes to make direct surplus payments to members from 6 April 2027. Payments will be subject to trustee discretion and must be permitted under the scheme rules. Where the relevant conditions are satisfied, including funding and minimum pension age requirements, the payment will be taxed as pension income. The legislation will also contain anti-avoidance provisions.

State Pension

Pension Tax Allowance

From 6 April 2027, a new Pension Tax Allowance will be introduced for people over state pension age. Where total income is no more than the full annual value of the new State Pension, £13,036.40 in 2027/28, the allowance will remove any Income Tax liability arising between the Personal Allowance of £12,570 and this amount. It applies regardless of whether the income comes from the State Pension, private pensions, earnings, savings, property or dividends.

Where total income exceeds £13,036.40, the Pension Tax Allowance will be withdrawn at a rate of £1 for every £3 of additional income. In 2027/28, it will be fully withdrawn once total income reaches £13,319. The allowance will apply for 2027/28, 2028/29 and 2029/30, with the eligibility threshold increasing in line with the full new State Pension. The State Pension itself remains taxable income.

See the Pension Tax Allowance Explainer for further details.

State Pension uprating

The State Pension will increase by 3.9% from April 2027, reflecting the earnings element of the existing Triple Lock.

Triple Lock reform

The existing Triple Lock will continue for the remainder of this Parliament. From April 2030, the State Pension will increase by the highest of 2.5%, CPI inflation, or the increase needed to maintain the State Pension at its April 2029 level relative to average earnings. This retains the inflation and 2.5% protections but changes how the earnings element operates thereafter.

Tax Table