Chancellor John Healey delivered his first Autumn Budget on Wednesday 28 October 2026. For most working people the headline was reassuring: no rise in the rates of income tax, employee National Insurance or VAT. But frozen thresholds, higher tax on savings and property income and a string of smaller changes mean many individuals will still pay more. Here is what the Budget means for your personal tax, in plain English.
Income tax rates and thresholds: frozen until 2031
The basic, higher and additional rates of income tax are unchanged. The personal allowance stays at £12,570 and the higher rate threshold at £50,270 (outside Scotland). These thresholds were already frozen until April 2031 by last year’s Budget, and this Budget did not change that.
Because thresholds are not rising with wages, more of your income is pulled into tax each year – so-called fiscal drag. If you get a pay rise that takes you over £50,270, or over £100,000 where the personal allowance starts to be withdrawn, it is worth reviewing pension contributions and other planning options. Scottish rates will be set in the Scottish Budget on 3 December 2026.
Tax on savings and property income rises again
Last year’s Budget had already announced a 2 percentage point rise in the tax rates on savings and property income from April 2027. This Budget adds a further 2 points on top. From 6 April 2027 savings and property income will be taxed at:
- 24% for basic rate taxpayers (currently 20%)
- 44% for higher rate taxpayers (currently 40%)
- 49% for additional rate taxpayers (currently 45%)
The Personal Savings Allowance is unchanged: £1,000 of interest is tax-free for basic rate taxpayers and £500 for higher rate taxpayers. Additional rate taxpayers have no allowance.
Example: a higher rate taxpayer earning £5,000 of bank interest outside an ISA currently pays 40% on £4,500 – £1,800. From April 2027 the same interest costs £1,980 at 44%.
Landlords are hit by the same rise – see our separate article on what the Budget means for landlords and savers.
Dividends
There is no further change to dividend tax in this Budget. The basic and higher dividend rates already rose to 10.75% and 35.75% from April 2026, with the additional rate at 39.35% and a £500 dividend allowance.
ISAs: £20,000 cash ISA limit kept
The government has decided to keep the cash ISA limit at £20,000, so savers can continue to shelter up to the full annual allowance in cash. With savings tax rising, using your ISA allowance each year is more valuable than ever.
A new First Time Buyer ISA will replace the Lifetime ISA for new savers from April 2029, with a 25% government bonus towards a first home worth up to £450,000. In the meantime, the penalty for withdrawing from a Lifetime ISA to buy a home above the price cap falls from 25% to 20% with effect from 29 October 2026.
Side hustles: trading allowance triples to £3,000
From 6 April 2027 the trading allowance and miscellaneous income allowance rise from £1,000 to £3,000, and the Self Assessment reporting threshold moves with them. If you earn small amounts from selling online, freelancing or occasional work, you may no longer need to register for Self Assessment at all.
Pensioners: new Pension Tax Allowance
The full new State Pension rises to around £13,036 a year from April 2027 – above the frozen personal allowance. To stop pensioners being drawn into tax solely because of this, a new Pension Tax Allowance applies from 6 April 2027 to 5 April 2030 for people over State Pension age whose total income is no more than the full new State Pension. It tapers away by £1 for every £3 of income above that level.
Employees: mileage, expenses and benefits
- The approved mileage rate above 10,000 business miles rises from 25p to 35p from 6 April 2027, and 55p for the first 10,000 miles becomes permanent.
- From April 2028 you will be able to claim unreimbursed employment expenses over £2,500 through your tax code rather than by filing a tax return.
- From 6 April 2027 company cars, vans, fuel and medical insurance must be taxed through payroll rather than on a P11D – you’ll see this in your payslip instead of a tax code adjustment.
Self Assessment payments are changing
From April 2029, Self Assessment taxpayers who make payments on account will move to smaller, more regular automated payments during the year, with an option to pay through PAYE. The aim is to bring tax payments closer to when income is earned. We will explain how this affects you well before it starts.
Inheritance tax
The inheritance tax nil-rate band remains frozen at £325,000 until April 2031. Already-legislated changes still apply: from 6 April 2027 most unused pension funds and death benefits will be included in your estate. If your estate plan relies on passing on a pension, now is the time to review it.
What should you do now?
- Use your £20,000 ISA allowance before April 2027, especially if you are a higher rate taxpayer with savings
- Review whether income-producing assets are held by the right family member
- Check whether you’ll need to register for Making Tax Digital (from April 2027 if your self-employment and property income exceeds £30,000)
- Make sure your 2025/26 tax return is filed by 31 January 2027
How My Web Accountants can help
We prepare personal tax returns for employees, sole traders, landlords, directors and pensioners, and help clients plan around the changes before they take effect. See our Self Assessment service or book a free consultation.
*This article is based on the Budget announcements of 28 October 2026 and is correct at the date of publication. Many measures still need to be legislated in the Finance Bill and may change. It is general information, not advice – please speak to us before acting on your own circumstances.*