Autumn Budget 2026

Market reaction

The initial market reaction has been muted. Ten-year gilt yields were around two basis points lower at approximately 5.33%, broadly tracking global bond markets rather than signalling a distinct vote of confidence in the Budget. Sterling was trading 0.1% lower against the dollar at $1.33.

In bond markets, planned gilt sales for the financial year ending March 2027 have increased modestly, from £246bn to £250.6bn, broadly in line with market expectations. The additional supply has brought little immediate disruption, although borrowing costs remain elevated. Interest-rate expectations have also changed little: markets continue to price around four Bank of England hikes, with a high probability of an increase in November. Our view remains that the Bank will ultimately deliver considerably less tightening than markets currently anticipate.

The clearer response has been in equities, supported by banks after a smaller-than-feared, temporary increase in the profits surcharge, from 3% to 6%, rather than the feared 8%, applying for 15 months from January. As a result UK bank stocks are up around 3%. Gambling stocks also rallied as Machine Games Duty rose from 20% to 25%, rather than the feared 40%, with gaming stocks Entain and Rank initially gaining around 6% and 8% respectively. These moves look more like relief at avoiding worse outcomes for particular sectors than a broader reassessment of the UK’s growth prospects.

Against this backdrop, this year, we have reduced gilt exposure, maintained a moderate tactical overweight in UK equities and increased gold exposure. That positioning balances participation in equity markets with diversification against an uncertain economic backdrop.

That caution reflects our view that the test is not simply whether the fiscal rules are met on paper, but whether the projected improvement can withstand further disappointment in growth, inflation or borrowing costs.

Behind that relatively muted market response, however, the economic backdrop remains challenging. Fiscal headroom of £15bn in 2029/30, down from £23.6bn forecast in March, leaves a smaller cushion against further economic shocks. The Chancellor also reported an additional £14bn of debt-interest spending this year, illustrating how higher borrowing costs constrain the government’s choices.

The Middle East remains central to that challenge. With oil above $100 a barrel again since the Iran war broke out, the government is trying to cushion households against an external shock it cannot control. Sustained energy costs would squeeze spending power and business margins while keeping inflation pressure elevated.

The growth forecasts underline the difficult balance. Growth this year has been upgraded slightly to 1.2%, from 1.1%, but next year’s forecast has been cut from 1.6% to just 1%. Support for energy bills may soften the immediate squeeze, but it cannot by itself resolve the underlying challenge of weak growth alongside persistent price pressures.

Defence adds to the medium-term spending pressures. The stated ambition is to reach 3% of GDP by 2030, with the delivery plan deferred to next year’s Spending Review. For investors, the important question is how that commitment will be accommodated alongside other public-service demands and the fiscal rules.

For clients, however, the most immediate consequences of the Budget are likely to be felt not in markets, but in their own tax and financial planning.

Savings and property income tax rates rise further

From April 2027, the rates applying to savings income and property income will rise by a further two percentage points. This is in addition to the two-percentage-point increase announced at last year’s Budget, resulting in a cumulative four-percentage-point increase compared with current rates. The applicable basic, higher and additional rates will therefore be 24%, 44% and 49% respectively.

For savers, this means interest earned on cash deposits and other taxable savings held outside tax-efficient arrangements could face a higher tax charge. For property owners, the change will similarly increase the tax payable on taxable rental profits, potentially reducing the net income generated from personally owned investment property.

What to consider:

With tax on savings and property income increasing further, it will become increasingly important to consider the after-tax return generated by these assets rather than focusing solely on the headline interest rate or rental yield.

At Brown Shipley, we can review how your cash, investments and other assets are structured across your wider wealth plan and assess the potential impact of the higher tax rates on the returns you retain. This may include making effective use of available ISA allowances and other tax-efficient investment structures, reviewing the level of cash held for short- and longer-term needs, and considering how assets are held across a family where appropriate. For property owners, we can also assess how property fits alongside your wider investment portfolio and financial objectives, helping you make informed decisions about whether existing holdings remain appropriate.

ISA announcements

Cash ISA allowance

Against the backdrop of higher taxes on savings income, the Government’s decision to retain the existing Cash ISA allowance is particularly relevant. Under plans announced at the 2025 Autumn Budget, individuals under age 65 would have been restricted to paying £12,000 a year into Cash ISAs from April 2027, rather than the existing £20,000. This change will no longer go ahead, meaning savers will continue to be able to contribute up to the full £20,000 annual ISA allowance to a Cash ISA, or split their allowance between cash and investments.

Other ISA changes

A new First Time Buyer ISA and changes to LISA charges were also announced, aimed at supporting those saving for their first home and encouraging more investment in stocks and shares.

What to consider:

Your Advisor can help determine the appropriate balance between cash and investments based on your short- and long-term objectives, while ensuring available tax-efficient allowances are used effectively. We can also consider ISA planning as part of a wider family strategy, including how savings and investments could be structured to support children or grandchildren with future goals such as purchasing their first home.

Business Asset Disposal Relief

The chancellor announced a reduction to the current £1m limit for Business Asset Disposal Relief (BADR) to £500,000 from 6 April 2027. This relief limits the capital gains paid on the sale of a qualifying business asset to the basic rate of 18% on lifetime gains within the threshold. 

This reduction will mean those selling business assets will pay higher rate tax of 24% earlier than was previously the case. For someone selling business assets that generate £1m of gains or more and had never sold a business asset for a gain before, the change will result in £30,000 of additional capital gains tax from 6 April 2027.

For entrepreneurs who have built or invested in UK businesses, the significance of the change is therefore not simply the potential additional tax payable, but whether it affects the timing of a planned business sale.

What to consider: 

If you have business assets that you are planning on selling for a gain that will exceed £500,000, you may wish to consider realising this gain in the 2026/27 tax year, before the reduction comes into force. However, if the business asset is a company that you founded, you may wish to defer the sale until the 27/28 tax year or later, due to the planned introduction of Founders Relief.

No changes to capital gains tax, pensions or inheritance tax 

As trailed in the press during the run-up to the budget, the Chancellor chose not to introduce further significant reforms affecting capital gains, pensions or inheritance tax.

Pension tax-free cash remains unchanged. There were no further increases to Capital Gains Tax and proposals for a broader wealth tax remain outside government policy.

For investors seeking greater certainty, this may allow attention to shift from speculation back towards long-term planning objectives.

But the absence of a new announcement does not mean there are no changes to prepare for. One of the most significant reforms for wealthy families is already scheduled to take effect from April 2027.

The changes still to come

Pensions and inheritance tax

From 6 April 2027, most unused pension funds and pension death benefits are expected to be included within the value of an individual's estate for Inheritance Tax purposes.

Existing exemptions are expected to continue, including the exemption for pension assets passing to a spouse or civil partner. However, families intending to leave pension wealth to children or other beneficiaries could face a larger inheritance tax liability as a result of the reforms.

What to consider: 

This may be a good time to review how pension assets fit within your wider estate planning arrangements. Families who have historically viewed pensions as an efficient wealth transfer vehicle may wish to revisit their plans and understand how the forthcoming rules could affect future generations.

A time to review, not react

Overall, this was not a Budget that demands wholesale changes to long-term plans. But it does create reasons to review them.

In particular, the inclusion of most unused pension funds and pension death benefits within estates for inheritance tax purposes from April 2027 remains one of the most significant planning changes facing wealthy families. Decisions around pension drawdown could also interact with other sources of income, making the increases to savings and property income tax more relevant for some clients.

As ever, UK taxation remains complex, so we would encourage you to speak with your Client Adviser or Wealth Planner about how these changes could affect your financial plan and investment strategy.