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If your finances fall short by a few pounds every month, imagine what it’s like to be the Chancellor of the Exchequer.
This summer, John Healey was appointed Chancellor and took the helm at the Treasury soon after Andy Burnham became the UK’s 59th Prime Minister. With his first Budget looming, Healey now faces the financial headache of balancing the books familiar to many households – but on a monumental scale.
We cut through the inevitable noise that accompanies the Budget run-up, explain what we know already, highlight potential areas of change, and suggest ways to prepare your finances whatever the year’s main fiscal event has in store.
The Budget is the government’s annual showcase where it explains its future tax and spending plans in detail.
It will take place in the House of Commons at about 12.30pm on Wednesday 28 October 2026 following Prime Minister’s questions. Having replaced Rachel Reeves as Chancellor earlier this year, this will be John Healey’s first Budget address.
The Budget’s contents are wide-ranging and will impact our finances in some way, shape, or form – from the amount we pay in taxes, to what we’re charged for a drink in a bar, or the level of state benefits that we receive.
Because of its importance, rumours and speculation inevitably accompany the Budget build-up. The countdown to last year’s event was particularly frenzied. In fact, wealth manager Quilter says three in five retirees who withdrew tax-free cash from their pension ahead of the 2025 Budget regretted doing so.
We look at what we already know below and also consider several policy areas that could be ripe for attention. But remember that nothing is set in stone at this stage and it can be financially damaging to pre-empt announcements that may never arrive.
At this stage, it’s wiser to bear in mind the decisions that are already in train, to take stock of where your own finances lie and be prepared to act smartly – should the need arise.
The Chancellor needs to plug a £10 billion shortfall in the public finances. A gap that gets worse by the day, as the UK’s borrowing bill continues to overshoot forecasts on the back of rising debt interest costs.
Unlike the Chancellor, domestic households do not have revenue-raising levers at their disposal. But that still leaves Healey facing a dilemma about how to meet his fiscal needs.
Especially as he is hemmed in by a series of self-imposed rules dictated by considerations linked to government borrowing.
The upshot is that Healey is faced with the prospect of either having to cut spending, raise taxes, or – most likely – a combination of both.
We know he won’t rely on some of the ‘big levers’ at his disposal. For example, the Labour government has said it will stick to its 2024 election manifesto pledge not to increase income tax rates, employee National Insurance contributions, or VAT.
Previous Budget announcements can take years before coming into force. What we know for certain is that significant reform to tax-friendly individual savings accounts, or ISAs, will begin in April 2027.
The existing £20,000 ISA allowance will remain for all next year. But only those aged 65 or over will retain this amount when it comes to Cash ISAs. In contrast, the under-65s will be restricted to putting a maximum of £12,000 in Cash ISAs, with an option to invest up to their £8,000 balance in riskier ISA products such as ones covering stocks and shares.
We also know that inheritance tax (IHT) rules will change significantly next year. From April 2027, many unused pension pots and pension death benefits will become part of an estate for IHT purposes for the first time.
Further ahead, a so-called ‘mansion tax’ will be levied on homes worth more than £2 million from 2028. Officially referred to as the High Value Council Tax Surcharge, it will be paid annually by homeowners above this threshold. Bills will start at £2,500 a year and will rise to £7,500 for the most expensive properties.
There is talk that the Budget could further lower this threshold to £1.5 million, but nothing has been confirmed.
Beyond this, salary sacrifice contributions to pensions after the first £2,000 will have National Insurance (NI) relief removed from April 2029.
Salary sacrifice allows a worker to reduce his or her cash pay in return for a different benefit from their employer. This is often, but not exclusively, pension related. In three years’ time, both employees and employers will pay NI on contributions over £2,000.
John Healey became Chancellor this summer soon after Andy Burnham deposed Sir Keir Starmer as Prime Minister. The newly installed pair made immediate announcements designed to ease cost-of-living pressures.
These included a tax cut on electricity bills, with a pledge to remove VAT from domestic electricity bills from 1 October 2026. The move is expected to save households £45 a year. Elsewhere, single bus fares are due to be capped at £2 from January next year.
The government has also announced the ‘Your First Home’ scheme which will provide first-time buyers who put down a 2.5% deposit with a 20% equity loan to help them on to the property ladder. Initially, the loan will be interest-free, but the scheme will only apply to new-build properties in England. More detail is expected in the Budget.
In his recent address to the Labour Party conference, Andy Burnham also signalled the end of the pension triple lock from April 2030 to help fund a new national care service.
The lock is essentially a guaranteed annual increase to the state pension based on three economic measures: inflation, earnings, or a figure of 2.5%. The new version will eventually ease these rules but, for now, the triple lock remains in place. This means next April’s state pension is on course to rise by about £500.
We now turn to areas which may be addressed on Budget Day itself but where, as yet, nothing has been set in stone.
For example, fuel duty, an indirect excise tax paid by motorists at the pump for petrol and diesel, was frozen under the Conservatives four years ago. Earlier this year, the Labour government continued the freeze deciding to delay what would have been a planned 3p increase in September 2026 until the end of the year.
Rising fuel prices are currently being exacerbated by the Middle East conflict. The Chancellor has said that the time and place for dealing with further increases would be on Budget day itself. But he has provided no indication whether this means a further extension of the freeze into next year.
The Prime Minister believes UK taxes work more heavily than wealth and is keen to address this perceived imbalance.
Andy Burnham says he has no intention of taxing the wealthy out of the UK. But a strong suspicion lingers that if taxes end up being raised in the 2026 Budget, then the likeliest candidates will be those involving assets, land, and capital gains.
With this in mind, Capital Gains Tax (CGT) is one area where many commentators believe changes could be announced in the Budget.
If you own assets such as shares and investment funds that sit outside of a tax efficient ISA or pension arrangement and you sell those assets for a profit, it’s possible you will be liable for CGT.
CGT also applies to other assets that you ‘dispose of’. For example, a property that’s not your main home and personal possessions worth £3,000 or more (although your car is an exception).
The tax you pay only relates to the gains that you make, not the overall amount that was generated from the sale. Each person has a CGT tax-free allowance and you are only required to pay tax if your gains in a particular tax year are worth more than the CGT allowance.
This allowance, also known as the Annual Exempt Amount, is currently worth £3,000 for individuals. For basic rate taxpayers, any gain you make over the allowance on events such as share sales is taxed at 18%. For higher and additional rate taxpayers, the rate is 24%.
These rates were only raised two years ago. But a Budget rumour around Whitehall is how CGT rates could yet be aligned with income tax rates where the rates stand at 20%, 40%, and 45% for basic, higher and additional rate taxpayers, respectively.
To be clear, nothing has been confirmed. But any changes along these lines could have future implications for asset owners and the timings of their potential disposals.
Property taxation is another area potentially in the Prime Minister’s Budget crosshairs.
Andy Burnham believes the UK’s property tax system is outdated and has suggested replacing it with a land value tax. In contrast to council tax or stamp duty, such a levy would be applied to the value of the land itself, instead of the buildings that stand on it.
Again, nothing formal has been announced, although this is an area that property owners, investors and developers with significant holdings will want to monitor closely.
The general consensus among financial planning professionals is that it is unwise to make decisions purely on Budget rumour and speculation. It is, however, worth keeping in mind the following points:
Sarah Coles, head of personal finance at AJ Bell, says the Budget countdown can prompt people nowadays into feeling there’s a need to take steps “just in case”. But she cautions that this approach can backfire later on.
Coles highlights seven decisions that savers and investors could potentially take only for them to eventually work out poorly:
None of us have a Budget crystal ball, so instead of trying to pre-empt rumours it’s much more sensible to take stock of your own arrangements and focus on long-term planning while making use of tax-efficient product wrappers as found in ISAs and pensions, as well as existing allowances.
Remember as well that married couples and those in civil partnerships benefit from extra strings to their bow by being able to take advantage of interspousal transfers enabling them to move assets without triggering a tax liability.
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