Welcome to the Fairstone initial Budget 2026 round-up.

Main measures

Income tax, National Insurance, VAT

• Existing income tax thresholds in England, Wales and Northern Ireland frozen until the end of the 2029/30 financial year at:

o  Personal allowance: £12,570

o  Basic rate: £12,571 to £50,270 – 20%

o  Higher rate: £50,271 to £125,140 – 40%

o  Additional rate: £125,141+ – 45%

• Scottish taxation rates are set by the Scottish Government – current rates can be found by clicking here.
• National Insurance rates frozen
• VAT frozen

Pensions

• Maximum tax-free lump sum unchanged at £268,275
• New tax-free allowance for low-income pensioners, to ensure those with income up to the value of the full new State Pension will not pay income tax
• No change to most unused pension funds and pension death benefits being included in estates for Inheritance Tax from April 2027

ISAs, savings and investments

From April 2027:

• Planned cash ISA limit reduction from £20,000 to £12,000 a year for under-65s scrapped
• First-time Buyer ISA introduced to replace Lifetime ISA
• Withdrawal penalty cut from 25% to 20% for existing Lifetime ISA holders who use their savings to buy a first home that costs above the current £450,000 limit
• New ‘Starter ISA’ to be introduced for first-time investors
• Stocks and shares ISA limit and cash ISA limit frozen at £20,000 a year
• Tax on savings interest to rise by a further 2% to make it 24%, 44% and 49% for basic, higher and additional tax rate payers from April 2027

Property

• Basic, higher and additional rate tax rates on property rental income all increased by an additional 2% to stand at 24%, 44% and 49% respectively from April 2027
• £100 payment for 20 million households in council tax bands A-D in England to help deal with rising energy bills, with equivalent funding for Scotland, Wales and Northern Ireland
• Introduction of Government-backed equity loan scheme for first time buyers – ‘Your First Home’ – in Spring 2027

Businesses

• Business Asset Disposal Relief allowance to be cut from £1m to £500,000 from April 2027
• New ‘Founder’s Relief’ introduced with a 10% rate of Capital Gains Tax to qualifying disposals of shares, up to a lifetime limit of £10m of gains per person
• New ‘Young Entrepreneurs Allowance’ announced

Other changes

Road and vehicle tax

• Fuel duty frozen until July 2027

Business taxes

• Surcharge banks pay on their profits to rise from 3% to 6% for 15 months, starting in January
• Threshold at which High Street shops start paying business rates in England to be increased from £12,000 to £18,000, meaning businesses would pay no rates on properties with a rateable value below this level
• Adult games centres and vape shops will not qualify for business rates relief
• Taxes on gambling machines to rise from 20% to 25% for higher stakes machines
• Requirements for online marketplaces like Amazon, eBay and Temu to be strengthened to prevent sellers using their platforms avoiding paying VAT

Minimum wage

• The minimum wage for over-21s will go up by 39p an hour to £13.20 in April 2027
• For workers aged 18 to 20, the minimum wage will rise to £11.27, an increase of 42p. The government wants to eventually scrap the separate rate for this age group, creating a single minimum wage for all adults.

Energy measures

• Standing charges for household gas bills will be removed for about 23 million homes in 2027
• VAT cut on electricity bills to be extended to July 2027

Government benefits

• Unpaid carers will no longer lose their entire Carer’s Allowance if they earn more than £204 a week after tax, with a taper rate introduced instead
• Parental pay extended to self-employed fathers and parents in same-sex couples

For more information please contact antony.pearse@fairstone.co.uk.’