Autumn Budget 2026: What It Means for Your Pension, ISA and Inheritance Tax Plans
Tax planning
— David Gregory, DipPFS
The cash ISA cut is gone, tax on savings and property income goes up again from April 2027, and the pensions inheritance tax change is still coming. Here's what the Budget means for your plans.
The short answer
John Healey's first Budget on 28 October 2026 made three changes that matter most for savers and retirees. The planned £12,000 cap on cash ISAs is scrapped, so you can still put the full £20,000 allowance into cash. Tax on savings interest and rental income rises by a further two percentage points from April 2027. And nothing announced in the Budget changed the rule that brings most unused pensions into the estate for inheritance tax from 6 April 2027.
In practice, that makes tax wrappers like ISAs and pensions more valuable than they were before the Budget, and it keeps the April 2027 pension deadline firmly on the agenda.
The cash ISA cap is gone
The previous Budget planned to cut the cash ISA limit to £12,000 a year for under 65s from April 2027. That plan has now been dropped. The overall ISA allowance stays at £20,000, and you can hold all of it in cash if that suits you.
We're still waiting to see whether the other rules proposed alongside the cash ISA cut, such as limits on transfers between ISA types and a charge on cash held in stocks and shares ISAs, are also being withdrawn. We'll update this article once the detail is published.
The Chancellor also announced plans for a new Starter ISA to encourage first-time investors, alongside the First-Time Buyer ISA that's due to replace the Lifetime ISA. He also announced a change to the Lifetime ISA withdrawal penalty, so that someone buying a home above the property price limit gets back at least what they paid in. Further technical detail is still to come.
If you'd been planning to front-load cash ISA contributions before April 2027, there's no longer a deadline to beat. That said, holding a large cash balance for the long term usually costs you in real terms, so it's still worth deciding how much cash you actually need.
Tax on savings and rental income rises again
From April 2027, income tax on savings interest and on property income goes up by a further two percentage points, on top of the increase announced last year, which had already set rates of 22%, 42% and 47% from April 2027. Early reports put the new rates at 24%, 44% and 49% for basic, higher and additional rate taxpayers. We'll confirm these against the official Budget documents. Tax on dividends and on earnings was not changed.
Two practical points follow. Interest earned inside an ISA or a pension is untouched by these rises, so the case for using your allowances each year gets stronger. And landlords holding property personally will want to look again at how their rental income is structured.
Pensions and inheritance tax: the April 2027 change still stands
For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will be included when calculating inheritance tax. There are exceptions, including qualifying death in service benefits and dependants' scheme pensions. That change became law in the Finance Act 2026, and nothing announced in the Budget altered it.
For a family whose estate is already above the nil rate bands, a pension that was previously outside the inheritance tax net could now face tax at up to 40%. Where death occurs after 75, the beneficiary can also pay income tax on what they draw, so the combined effect on some pensions is significant.
This is the change we're spending most time on with clients. The useful questions are whether to draw more from the pension in your lifetime, whether gifting out of surplus income makes sense, and whether life cover written into trust can provide the funds to pay any bill. Taking more pension income or making gifts in your lifetime can help in some circumstances, but it can also increase your income tax or reduce what's available for your own retirement, so it needs planning carefully. Our pensions and inheritance tax planning guide and IHT calculator are a good place to start.
Salary sacrifice and the state pension
The cap on National Insurance savings for pension salary sacrifice, announced last year, wasn't changed in the speech. From April 2029, only the first £2,000 a year of sacrificed pay will be free of National Insurance. Salary sacrifice above that will be subject to both employee and employer National Insurance. The income tax relief remains, subject to the usual pension limits, and ordinary employer pension contributions are still free of National Insurance.
On the state pension, the Chancellor confirmed that pensioners whose only income is the state pension won't pay income tax on it during this parliament. He also set out plans to change how the triple lock works from 2030. Income tax thresholds were not changed.
What to review before April 2027
With that in mind, these are the areas worth looking at over the next few months:
- Your ISA allowance. Use the full £20,000 this tax year if you can, in cash or investments.
- Cash held outside ISAs. Interest above your personal savings allowance will be taxed more heavily from April 2027.
- Your pension and your estate. If your pension is likely to pass to family, check what inheritance tax could apply from April 2027.
- Rental income held in your own name. The higher rates may change which structure makes most sense.
- Life cover in trust. If an inheritance tax bill is likely, a whole of life policy can provide the funds to pay it.
Frequently asked questions
Is the cash ISA limit still being cut to £12,000?
No. The Budget on 28 October 2026 scrapped the planned £12,000 cap. You can still put the full £20,000 ISA allowance into a cash ISA.
Did the Budget change inheritance tax on pensions?
No. Unused pensions and death benefits will still count towards your estate for inheritance tax from 6 April 2027, as set out in the Finance Act 2026.
How much will tax on savings interest go up?
Tax on savings income rises by a further two percentage points from April 2027. Early reports put the rates at 24%, 44% and 49%, up from the 22%, 42% and 47% already set for April 2027. Interest inside an ISA or pension is not affected.
Did the Budget change income tax thresholds?
No changes to income tax thresholds were announced. Pensioners whose only income is the state pension will not pay income tax on it during this parliament.
Do I need to act before April 2027?
Not necessarily, but April 2027 is when both the savings tax rise and the pension inheritance tax change take effect, so it's a sensible point to review your ISAs, pensions and estate plan.
How we can help
If you'd like to talk through what the Budget means for you, book a free consultation and we can take it from there.
DISCLAIMER: This article reflects our understanding of the announcements made on 28 October 2026 and may be updated as the detailed Budget documents are published. It is general information, not personal advice. Tax treatment depends on individual circumstances and may change. The value of investments can fall as well as rise and you may get back less than you invested. Inheritance tax planning and estate planning are not regulated by the Financial Conduct Authority.