Budget 2026: UK Tax Changes and What to Check

Budget 2026, delivered on 28 October 2026, proposes higher tax on savings and property income from 6 April 2027, a larger trading allowance and changes to tax-free saving. The earlier pension salary-sacrifice cap and Plan 2 threshold freeze are not new Budget 2026 policies.

PayeTax currently supports tax years only through 2026–27. The figures below explain policy; they are not 2027–28 calculator results. This guide focuses on personal tax rather than every Budget announcement.

What changes for savings and rental income?

The proposed 24%, 44% and 49% rates apply to savings UK-wide and to property income in England, Wales and Northern Ireland. Scotland and Wales have powers to set property rates; check devolved decisions for your circumstances. Scottish employment-income bands are separate.

The change announced in 2026 is another two percentage points on the 2025 plans, or four points above the 2026–27 savings rates. It requires primary legislation in Finance Bill 2026–27. The original rates were already enacted in Finance Act 2026, sections 5–8. See HMRC’s OOTLAR, sections 1.1–1.2 and Treasury’s Budget document.

The Personal Savings Allowance stays at £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers; additional-rate taxpayers have none. The savings starting-rate limit remains £5,000, with eligibility depending on other income. Interest inside an ISA remains tax-free. HMRC Annex A sets out the rates and allowances.

Example: a higher-rate saver receiving £1,000 interest outside an ISA, with a £500 allowance and no starting-rate relief, has £500 taxable. Assuming it all stays in the higher-rate band, tax is £200 in 2026–27, £210 under the 2025 plan, or £220 under the 2026 proposal. Our updated Budget 2025 article also shows the rental-profit comparison.

Side income and ISAs: the useful changes

• Trading allowance: proposed to rise from £1,000 to £3,000 from 6 April 2027, alongside the trading-income Self Assessment reporting threshold. This concerns gross trading and miscellaneous income, not salary or a general £3,000 tax deduction on top of expenses. It needs Finance Bill 2026–27. Until then, use the existing rules. OOTLAR section 1.5.
• Cash ISA: the planned cut is being reversed, retaining £20,000 from 6 April 2027 within the overall ISA limit. It is not an extra allowance alongside a separate stocks-and-shares ISA allowance. Secondary legislation is planned for November 2026. OOTLAR section 2.5.
• Lifetime ISA: for a first-home purchase above the £450,000 property cap, the withdrawal charge is to fall from 25% to 20% on 29 October 2026 through secondary legislation. Other unauthorised withdrawals retain the 25% charge. Check with your provider before withdrawing. OOTLAR section 2.4.

Previously announced: pensions and student loans

Pension salary sacrifice: Budget 2025 announced the £2,000 annual NI-relief cap from 6 April 2029. Sacrificed pay above it is to attract employee and employer Class 1 NI; this is not a £2,000 pension-contribution limit. Income Tax relief is unchanged. The National Insurance Contributions (Employer Pensions Contributions) Act 2026 is already enacted, with operational details to be set in secondary legislation. HMRC’s earlier policy paper explains the scope.

Pension Tax Allowance: the underlying pensioner protection was announced in 2025; Budget 2026 supplies implementation detail. It is intended to prevent small Income Tax bills for pensioners whose total income does not exceed the full new State Pension, with tapered support above that level. It applies from 6 April 2027 to 5 April 2030, subject to Finance Bill 2026–27. It is not a general increase in the Personal Allowance or the pension annual allowance. Compare Budget 2025’s State Pension commitment with OOTLAR section 1.4.

Plan 2 student loans: Budget 2025 announced that the £29,385 repayment threshold would be frozen for 2027–28, 2028–29 and 2029–30. It is not a new 2026 announcement. A pay rise can increase repayments even when the threshold stays still. This sits under student-loan regulations, separate from the Finance Bill. See Budget 2025 and the Department for Education’s forecast methodology.

What to check next

Use the PAYE calculator for a supported-year estimate through 2026–27. It cannot model 2027–28, the Pension Tax Allowance or the 2029 salary-sacrifice cap. Keep future savings and rental calculations separate, and check final legislation and devolved rates before acting. Directors can use Director Intelligence for supported-year scenarios; read our methodology and limitations.

Frequently asked questions

Does Budget 2026 immediately change my salary tax rate?

No change to the main employment Income Tax rates is announced here. Savings and rental-income proposals have their own rates and start dates; they should not be applied to salary.

Is every Budget announcement already law?

No. Primary legislation means an Act passed by Parliament; secondary legislation means regulations made under existing powers. The new savings, property and trading proposals need the Finance Bill, while the ISA changes use regulations. An announcement and an effective date do not establish that legislation has passed.

Source-checked on 28 October 2026. General information, not personal tax or financial advice.