Good news if you’re a pensioner on a lower income, less welcome news if you’re a landlord, and a sigh of relief if you love your cash ISA.
John Healey’s first Budget on 28th October brought a mix of tax breaks and higher bills.
The chancellor announced new protection for pensioners on lower incomes, higher taxes on rental income and savings interest, and changes to ISAs and inherited pensions.
Some measures could affect how much money you have to spend. Others may change how you save for retirement or pass wealth to your family.
Here’s what you need to know.
At a glance
- Pensioners on lower incomes will get new income tax protection from April 2027
- Landlords will face higher tax rates on rental profits
- Tax on savings interest will rise for some savers
- The £20,000 annual cash ISA allowance will stay
- Changes to inherited pensions could help families avoid unexpected tax bills
What the Autumn Budget 2026 means for your pension income
Imagine getting a State Pension increase, only to find that it pushes you into paying income tax. That’s what the chancellor wants to prevent.
The full new State Pension is expected to rise to around £13,036 a year from April 2027. That’s more than the standard tax-free personal allowance of £12,570, according to the government’s Pension Tax Allowance guidance.
Without a change, someone living entirely on the full new State Pension could end up with an income tax bill. Healey announced a new Pension Tax Allowance to stop this happening. From April 2027, if you’re above State Pension age and your total income is no more than the full new State Pension, you won’t have to pay income tax.
You could also receive some relief if your income is slightly higher, although the benefit will gradually reduce as your income rises.
The government estimates that around 500,000 pensioners will benefit, including approximately 290,000 who will pay no income tax as a result, according to its official guidance.
However, your total income counts, including any money from a workplace pension, private pension or other sources. If it is above the full new State Pension, you may still have tax to pay.
What this means for you: If you’re approaching retirement, check how much income you’ll receive from all your pensions. Knowing what you’ll keep after tax can help you plan your spending.
If you’re a landlord, expect a bigger tax bill
If you own a rental property, the Autumn Budget 2026 brought less welcome news.
From April 2027, tax rates on rental profits in England, Wales and Northern Ireland will rise by a further two percentage points.
The Treasury confirmed the new rates:
- Basic rate: 24%
- Higher rate: 44%
- Additional rate: 49%
What does that mean for your pocket?
Suppose you earn £20,000 a year in taxable rental profits and pay higher-rate tax on all of it. At 44%, you’d pay £8,800 in tax, compared with £8,400 at the previously planned 42% rate and £8,000 at today’s 40% rate. That’s an extra £400 a year compared with the earlier plan and £800 more than at today’s 40% rate, assuming your profits stay the same.
If you rely on rent to top up your pension, you could have less money to spend.
And remember, owning property also means paying for repairs, insurance and sometimes covering periods when you have no tenants.
What this means for you: Work out how much rental income you’ll keep after tax and expenses. If you’re relying on property to fund retirement, check whether it will still provide enough.
If you have savings, you could pay more tax
Higher interest rates can be good news for savers. But they can also mean bigger tax bills.
From April 2027, the government will increase tax rates on savings interest to 24%, 44% and 49%, depending on your income. Not everyone will be affected. You may still be able to earn some interest tax-free through the Personal Savings Allowance. Money held in ISAs also remains protected from income tax.
Here’s an example:
If you’re a higher-rate taxpayer earning £3,000 a year in savings interest, your first £500 may be tax-free under the Personal Savings Allowance rules. That leaves £2,500 subject to tax. At 44%, you’d pay £1,100, compared with £1,050 at the previously planned 42% rate and £1,000 at today’s 40% rate.
That’s £50 more than under the earlier plan and £100 more than today. The increase could be bigger if you have more savings.
What this means for you: Check how much interest you’re earning outside an ISA. You may be able to reduce your tax bill by making better use of the allowances available to you.
If you have a cash ISA, you can breathe easier
There was better news for people who prefer keeping their money in cash.
Healey reversed plans to cut the annual cash ISA allowance to £12,000 for under 65’s. Instead, you’ll still be able to put up to £20,000 a year into cash ISAs, within the overall ISA limit. The Treasury confirmed that the £20,000 cash ISA limit will remain.
Any interest you earn inside a cash ISA remains free from UK income tax, as explained in the government’s ISA guidance.
That’s useful if you’re saving for a holiday, keeping an emergency fund or putting money aside for retirement. But there’s one thing to remember: if prices rise faster than the interest you earn, your savings will lose spending power over time.
What this means for you: Think about when you’ll need your money. Cash may be suitable for short-term needs, while investments could be worth considering for longer-term goals.
If you’re leaving a pension to your family, check the rules
If you want to leave your pension savings to loved ones, the Budget included a useful change.
Previously, some inherited pension payments could become taxable if they were paid more than two years after the pension scheme became aware of the member’s death. This meant delays in dealing with an estate could sometimes lead to an unexpected tax bill. The government has now removed this two-year rule for certain pension death benefit payments made from 28 October 2026.
However, inherited pensions are not automatically tax-free. Other tax rules still apply, and separate inheritance tax changes affecting unused pensions are due from April 2027.
You can read more about the wider changes in the government’s inheritance tax guidance.
What this means for you: Check who you’ve nominated to receive your pension savings. If passing money to your family is important, make sure your plans are up to date.
What does the Autumn Budget 2026 mean for your financial plans?
The impact will depend on your individual circumstances.
Some pensioners could benefit from the new tax protection, while landlords and people earning substantial savings interest may face higher bills.
For cash ISA savers, keeping the £20,000 annual allowance provides some welcome certainty.
While not every announcement will affect you, it’s worth understanding which changes are relevant to your finances.
At Flying Colours, our financial advisers can help you understand how the latest tax changes fit into your wider financial plans, from retirement income to savings and investments.
You can arrange a conversation with an adviser here: https://fcadvice.co.uk/book-an-appointment/
Please note:
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future. Budget announcements may require legislation before taking effect. Tax treatment depends on individual circumstances. Thresholds, percentage rates and tax legislation may change in future Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term (minimum of 5 years) and should fit in with your overall risk profile and financial circumstances.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
Tax planning, retirement income and estate planning arrangements should be considered in the context of your personal financial circumstances. Financial advice does not necessarily include specialist tax or legal advice.
Featured image of John Healey by Lauren Hurley / No 10 Downing Street. It is Crown copyright and re-usable under the Open Government Licence v3.0, except where otherwise stated. To view this licence, visit: https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/