Autumn Budget 2026 for individuals

The Budget’s personal tax announcements include higher rates for property and savings income, changes to tax-free savings, and further amendments to the taxation of pension benefits.

Income tax changes for landlords

The Chancellor has announced a further increase to the new rates of income tax applying to property income from 6 April 2027. The property basic, higher and additional rates will now be 24%, 44% and 49% respectively, 4% above the corresponding ordinary rates of income tax.

Separate rates of income tax for rental profits and income distributions from REITs were first announced in last year’s Budget, when they were expected to be set 2% above the ordinary   income tax rates.

The thresholds at which these rates will apply will be the same as those which apply to income tax generally, and property income will continue to be taxed after other non-savings income, but in priority to savings income.

There will be no changes to the availability or amount of the property allowance, the relief under the rent-a-room scheme, or the relief for mortgage interest costs, however the latter will be relieved at the higher property basic rate of tax of 24% (compared to 20% currently).

Income tax changes for savers

This year’s Budget also announced a further increase in the new rates of income tax that will apply to savings income, such as interest, from 6 April 2027. The UK-wide savings basic, higher and additional rates will now be set at 24%, 44% and 49% respectively, 4% above the ordinary rates of income tax. This goes further than the 2% increase announced at last year’s Budget.

There will be no change to the availability or amount of the starting rate for savings or the Personal Savings Allowance.

The planned reduction to the annual limit on the amount that individuals can contribute into a cash ISA (currently £20,000 per year), which was also scheduled to take effect from 6 April 2027, has been scrapped and will not be introduced. This may enable savers to mitigate some of the impact of the increase in income tax rates on savings income, by continuing to save tax-free within their ISAs.

The government will also be making wider reforms to ISAs, in an effort to primarily support first time buyers. The Lifetime ISA will be replaced with a new First Time Buyer ISA which will provide a 25% bonus (up to £20,000) on withdrawal towards the purchase of a first home worth up to £450,000. Those with existing Lifetime ISAs may continue to contribute and use their accounts under the current rules.

There will also be a reduction in the withdrawal charge from Lifetime ISAs from 25% to 20% where the funds are withdrawn to purchase a property with a value exceeding the property cap of £450,000. The First Time Buyer ISA will launch in April 2029, and the relaxation to the Lifetime ISA withdrawal charge is effective for withdrawals made from 28 October 2026.

Income tax allowances

In order to provide further relief for small self-employed businesses, the trading allowance will increase from £1,000 to £3,000 from 6 April 2027, which relieves gross trading and miscellaneous income (ie before deducting expenses) from a charge to income tax. The self-assessment reporting threshold for trading income will also rise to £3,000 from the same date, simplifying reporting requirements for those with small amounts of trading income.

There will also be a welcome measure of relief for pensioners. Having announced in last year’s Budget that, from 6 April 2027, pensioners will not be required to pay income tax on income up to the value of the full new State Pension, this year’s announcements confirm that this will be achieved through the introduction of the Pension Tax Allowance where this income exceeds their tax-free personal allowance of £12,570 and is their only source of income. From 6 April 2027, pensioners will receive a Pension Tax Allowance equal to 20% of the difference between the full new State Pension and the tax-free personal allowance. This will mean that pension income exceeding the tax-free personal allowance will not give rise to an income tax liability.

If an individual’s total income exceeds the value of the full new State Pension, their Pension Tax Allowance will be tapered by £1 for every £3 of income above this level, which could lead to the allowance being withdrawn entirely.

Key takeaways

Although some of these measures have been announced previously, the further increases to the rates of income tax on property and savings income from 6 April 2027 may cause some individuals to reconsider how they hold their investments. For those with significant income from these sources, the growing difference between the tax treatment of income received personally and through alternative structures, such as companies, could make a review of existing arrangements worthwhile.

Tax changes to pension lump sum benefits

The government will be making changes to the assessment and collection process for lump sum death benefits where a pension scheme member dies before the age of 75 and their available allowance is exceeded. Instead of treating the excess as pension income of individual beneficiaries, HMRC will raise a tax charge against each beneficiary on their share of the excess, calculated using their marginal income tax rate. This new process will apply retrospectively to relevant lump sum payments made on or after 6 April 2024, with transitional provisions applying the same approach to relevant payments made in the 2023–24 tax year.

There will also be some further amendments made to both the interaction of income tax and inheritance tax where lump sum benefits are charged to both taxes, which will apply to deaths occurring on or after 6 April 2027, as well as to the calculation of certain adjustments to the application of the lifetime allowance, which will have effect from 6 April 2024.

In addition, the two-year rule for pension and lump sum death benefits will be removed for payments made on or after 28 October 2026. This will ensure that tax-free payments will not be charged to income tax, solely by reason of the fact that they are paid out more than two years after the date that the pension scheme administrator becomes aware of the member’s death.

Finally, and as originally announced in last year’s Budget, members of defined benefit pension occupational plans will be charged to income tax on direct payments of surplus pension assets, where specified conditions are met. This will apply from 6 April 2027, and protective measures will be included within these rules to prevent avoidance.

Key takeaway

The changes should provide greater certainty for beneficiaries receiving pension death benefits, particularly by removing the risk of otherwise tax-free benefits becoming taxable simply because payment is delayed. However, the retrospective changes to excess lump sum benefits mean that some historic payments may also be affected and should be reviewed.

The Budget included several measures relating to how and when tax is collected, and HMRC’s approach to tax compliance.

More timely payments for Self Assessment

From April 2029, Income Tax Self Assessment taxpayers who make payments on account will be required to make more regular payments during the year towards their final tax bill. The government has not yet decided how frequently payments will be made and will work with taxpayers, agents and other stakeholders on the detailed design.

Payments will be automated, for example by direct debit. Individuals with sufficient PAYE income from employment or a private pension will also be able to choose to make their payments through PAYE. Payments will continue to be based on the previous year’s tax liability, although taxpayers will be able to update this online if their circumstances change. This measure will change when tax is paid, rather than the amount of tax ultimately due.

The changes will affect individuals who are required to make payments on account. Broadly, payments on account are not required where the previous year’s tax liability was less than £1,000 or where more than 80% of the tax due was collected outside self-assessment, for example through PAYE.

Key takeaway

The new system should mean smaller and more regular payments, potentially making tax bills easier to budget for. However, 2029-30 could create a particular cashflow challenge, as affected taxpayers will need to make their final payment under the existing system while also starting payments under the new arrangements.

Those with fluctuating or seasonal income may also need to monitor whether payments based on the previous year’s liability remain appropriate and update them where circumstances change. Further details, including how frequently payments will be made, are expected in 2027, giving taxpayers time to understand and prepare for the transition.

Making Tax Digital for Income Tax

The government has announced two further changes to MTD for Income Tax. For taxpayers required to join MTD from April 2027, HMRC will not apply late submission penalty points to quarterly updates during the 2027-28 tax year. Quarterly updates will still need to be submitted before the taxpayer can submit their end of year return.

The government is also extending the groups that will be exempt from MTD for Income Tax until further notice. These will include non-UK resident foreign entertainers and sportspeople and expected non-resident taxpayers. Those eligible for qualifying care relief, who are already exempt for 2026-27, will also remain exempt until further notice. Separately, the government has previously confirmed that some taxpayers for whom HMRC cannot provide a digital service will not be required to use MTD, including a small number of insolvent taxpayers who are currently unable to sign up.

Those who entered MTD from April 2026 do not benefit from this additional easement and will continue to be subject to the new penalty regime for any returns submitted late, after April 2027.

Key takeaway

The penalty easement gives those entering MTD in April 2027 some breathing space while they get used to quarterly reporting, but it does not remove the requirement to submit the updates. The new exemptions will also take some individuals outside the regime altogether, so anyone who may fall within one of these groups should check their position before preparing for MTD.

Modernising the correction of errors in tax returns

From 1 April 2028, taxpayers will have a statutory obligation to correct inaccuracies in tax returns and other documents once they identify them. Importantly, where a taxpayer becomes aware of an inaccuracy but does not take reasonable steps to correct it or notify HMRC, the error will be treated as deliberate for penalty and assessment time-limit purposes.

HMRC will also have a new power to issue a customer correction notice where it has reason to suspect an inaccuracy. A taxpayer receiving a notice will need to check their tax affairs and either correct the error or explain why no correction is required.

Key takeaway

This places greater emphasis on taxpayers taking action when they become aware that information they have provided to HMRC may be wrong. Taxpayers should therefore act promptly where an error is identified and keep evidence of the steps taken to review and correct their position.

Tackling promoters of tax avoidance

The government is taking further action against the promotion and use of tax avoidance schemes. It will shortly consult on measures including:

• New powers targeting serious and serial users of avoidance schemes,
• Earlier recovery of liabilities from promoters and certain individuals, and
• Further strengthening of the Promoters of Tax Avoidance Schemes regime.

Separately, Finance Bill 2026-27 will make further changes to the existing rules aimed at promoters of tax avoidance.

Key takeaway

The announcements reinforce the government’s focus not only on those who promote avoidance arrangements, but also on individuals who repeatedly use them. Anyone considering arrangements presented as delivering significant or unusual tax advantages should take appropriate independent advice and understand both the tax position and the potential consequences of challenge by HMRC.

Reform of HMRC information and inspection powers

The government is modernising HMRC’s information and inspection powers to reflect an increasingly digital tax system. Changes include:

• Updating the rules for information notices relating to deceased taxpayers,
• Extending Financial Institution Notices (FIN) to crypto asset service providers,
• Removing the statutory FIN reporting requirement, and
• Streamlining the process for identifying taxpayers.

The legislation will also update the definition of computer records to ensure HMRC’s information powers can operate effectively where records are held digitally. The changes will take effect from Royal Assent to Finance Bill 2026-27.

Key takeaway

These changes strengthen and modernise HMRC’s ability to obtain information when checking an individual’s tax affairs. Taxpayers, personal representatives and their advisers should be aware that HMRC’s information-gathering powers are continuing to evolve alongside financial records and assets which are now generally stored entirely in digital form.

Collecting the right tax from wealthy individuals

HMRC has set out a new multi-year approach to the taxation of wealthy individuals, who it defines as those with income over £200,000 or assets over £2 million in any of the previous three years. Around 1.3 million individuals now fall within this population, which HMRC says contributed £160 billion in tax in 2025-26. Modernising HMRC’s approach to wealthy compliance also estimates the wealthy tax gap at £3.6 billion for 2024-25.

A central theme is greater use of data and technology. HMRC intends to connect information about individuals, companies, partnerships, trusts, overseas ownership and other third-party sources to build a more complete picture of a taxpayer’s affairs. It will use enhanced analytics, automated risk triggers and artificial intelligence to identify potential discrepancies and compliance risks earlier. HMRC also intends increasingly to pre-populate digital services and use targeted prompts to encourage taxpayers to correct errors.

HMRC’s approach will become more tailored to the perceived circumstances and risk of individual taxpayers. Lower-risk individuals should see less unnecessary contact, while more complex or higher-risk cases could receive greater oversight, including specialist or cross-tax intervention. HMRC has already identified more than 200 billionaires with a UK tax footprint and allocated a Customer Compliance Manager to each of them.

Key takeaway

For wealthy individuals, the key consideration is that HMRC will increasingly be able to compare information reported on tax returns against a much broader range of UK and international data. Individuals with complex affairs, particularly involving trusts, companies, overseas assets or multiple sources of income, should therefore ensure that their reporting is complete and consistent across the different parts of their affairs.

The Budget included a range of capital gains tax (CGT) measures affecting business owners and investors, crypto assets and the wider operation of the CGT rules.

Entrepreneurial CGT changes

A number of changes were announced to the CGT reliefs available to business owners, founders and investors, which will apply from 6 April 2027:

• A new Founders’ Relief is proposed, providing a lower rate of CGT on qualifying disposals of shares made on or after 6 April 2027. The detailed design remains subject to a technical consultation, which closes on 30 November 2026. Under the proposals, qualifying gains of up to £10 million could be taxed at 10%, although the eligibility conditions are very restrictive. The conditions currently proposed include requirements that:
  • Broadly, the individual would need to have held at least 25% of the company when the company began trading, or preparing to trade, held their shares for at least five years and been continuously UK resident for the previous five tax years.
  • The trade in question must be one which would qualify for EIS relief – so property development, leasing or energy generation may not qualify.
  • The company would also need to meet various UK trading, minimum turnover and employment conditions and meet at least two of three growth or innovation tests relating to turnover growth, employee growth and qualifying R&D expenditure.
• The reduction in the Business Asset Disposal Relief (BADR) lifetime limit from £1 million to £500,000 will increase the tax cost of qualifying disposals made on or after 6 April 2027 by up to £30,000 per vendor. Transitional and anti-forestalling provisions will need to be considered where contracts, share reorganisations or exchanges straddle that date.

Key takeaway

The measures present a mixed picture for business owners. Founders’ Relief could provide a significant new incentive for qualifying founders, although the conditions are restrictive and remain subject to consultation. Conversely, the reduction in the BADR lifetime limit from £1 million to £500,000 will increase the tax cost of business disposals from 6 April 2027.

Crypto asset changes

The Budget also announced a number of changes to the taxation of crypto assets from April 2027:

• Eligible stablecoins will be treated more like money for tax purposes, ie they will not give rise to taxable chargeable gains or losses for individuals or trustees, but lending profits will be treated like interest. The changes will apply across the tax rules for individuals, trustees and companies.
• New rules will apply to crypto asset loans and liquidity pools. From 6 April 2027, certain transfers of crypto assets by individuals and trustees into and out of qualifying lending and liquidity pool arrangements (decentralised finance or DeFi) will be treated as taking place on a no gain, no loss basis, with the tax instead arising when there is an economic disposal. 

Key takeaway

The crypto asset measures are intended to align the tax treatment more closely with the economic use of the assets. In particular, the proposed no gain, no loss treatment for qualifying lending and liquidity pool arrangements should prevent tax charges arising solely because crypto assets are transferred into or out of an arrangement, while the stablecoin changes recognise that certain stablecoins increasingly perform a money-like function. The practical effect will depend on the detailed legislation and, in particular, the definition of eligible stablecoins and qualifying arrangements. 

Other CGT changes

A number of more technical CGT changes take effect from 28 October 2026:

• The late filing penalty rules for UK property disposal returns will be amended. Where an individual fails to file the required return for a residential property disposal within the statutory deadline but later reports the disposal on their self-assessment tax return, late filing penalties relating to the property disposal return will stop accruing. The change is a helpful but does not remove the requirement to file the property disposal return.

A further technical CGT change will take effect from 6 April 2027:

• The formula that restricts the amount of CGT gift hold-over relief available on gifts of qualifying shares and securities will be amended to take account of assets within the intangible fixed assets regime and shareholdings qualifying for the Substantial Shareholding Exemption. This change should remove an existing technical distortion and could be helpful in succession planning involving groups with significant intangible assets or qualifying shareholdings.

The Budget’s international private client announcements combine targeted reliefs and further consultations, which we explore below.

Reverse hybrid entities: a proposed solution to double taxation

The government has published its response to the consultation on UK-resident individual members of US LLCs and other reverse hybrids.

A reverse hybrid is a foreign entity (such as a US LLC or French SCI) treated as opaque for tax purposes by the UK but transparent in the foreign jurisdiction. This mismatch can lead to investors facing overseas tax on underlying profits together with a separate UK charge when those profits are distributed, resulting in high effective tax rates.

As a result of the consultation, the government has confirmed plans for an elective domestic foreign tax credit mechanism for UK resident individuals investing through such entities. Claims are intended to be possible from early 2028, following further technical consultation and legislation.

The mechanism through which the relief will be provided remains subject to consultation. The government is also considering how historical and disputed cases will be treated, although further information has yet to be published.

Key takeaway

This is a pragmatic response to a longstanding double-taxation problem. Its success will depend on whether investors can obtain effective relief without disproportionate complexity.

Relief for trusts temporarily becoming UK resident

A capital gains tax (CGT) exit-charge relief has been announced with effect from 28 October 2026.

A CGT exit charge generally arises when a trust becomes non-UK resident. The new measure has confirmed that an exit charge will not apply where a trust becomes temporarily UK resident as a result of a trustee moving to the UK, and the trust then ceases to be UK resident later that year or the following year.

The announced relief is in respect of the CGT exit charge only rather than providing a general exemption from UK taxation during the trust’s period of residence.

Key takeaway

This is a welcome attempt to address a specific tax consequence of temporary trustee relocation. Our recommendation is that trustees continue to consider the wider tax consequences before relocating and take advice as early as possible.

Protected cell companies: gains attribution rules tightened

The government has confirmed that it will amend the capital gains participator rules for non-resident closely held companies to ensure they apply to protected cell companies. Broadly, the existing rules can attribute gains of a non-UK resident closely held company to its UK-resident participators. A tax charge can therefore arise even without a distribution being made.

This measure takes effect from 28 October 2026, with legislation to follow in Finance Bill 2026–27.

Offshore penalties: consultation announced

The government will publish a consultation later this year on reform to the offshore penalties framework. The announcement does not yet set out detailed proposals or an implementation date for any potential legislation.

The Budget announced two specific changes to inheritance tax. The first addresses the treatment of liabilities connected with trusts and takes effect immediately. The second makes technical changes to the rules bringing most unused pension funds and pension death benefits within inheritance tax from April 2027.

Liabilities and trust property

From 28 October 2026, the inheritance tax rules governing liabilities and trust property have changed. A statutory rule for taking account of liabilities properly incurred by trustees when settled property is valued for inheritance tax purposes is being introduced. This will align the treatment of those liabilities with personal liabilities.

There are also extensions to existing restrictions on deductions for debts and existing anti-avoidance rules. The purpose is to prevent certain liabilities which are funded using value originating from a beneficiary’s own estate from reducing inheritance tax charges. The changes apply to deaths and other chargeable events occurring on or after 28 October 2026.

Key takeaway

This measure targets schemes that artificially create liabilities with a view to reducing the IHT burden of an estate and so is likely to have limited impact more widely. The definition of “properly incurred” will need closer examination when further details are published to fully understand the reach of the measure.

Pensions and inheritance tax

The government has also confirmed technical amendments ahead of the previously announced extension of inheritance tax to most unused pension funds and pension death benefits from 6 April 2027.

A prospective personal representative will be permitted, where specified conditions are met, to direct a pension scheme administrator to pay inheritance tax due to HMRC. This change will take effect from 6 April 2027.

Estates that qualify for the reduced rate of inheritance tax because part of the estate is left to charity will also be impacted by today’s announcements. Those administering an estate will be able to decide whether notional pension property is included in the estate’s ‘general’ component or treated as a separate component for the purposes of calculating the reduced inheritance tax rate. This change will also take effect from 6 April 2027.

Key takeaway

These are largely welcome amendments to the complex administration arising from the new rules that bring pension pots into the scope of IHT from 6 April 2027. Anyone who is likely to be impacted by these new rules should seek advice before that date.