Prime Minister Andy Burnham has confirmed he will carry forward several Rachel Reeves policies in his first Budget and beyond, tying his and Chancellor John Healey's hands with pledges that cannot simply be undone.
New leader Mr Burnham has already announced headline policies of his own, including a six-month VAT cut on electricity bills and a £2 bus fare cap. But he and the new Chancellor are still bound to deliver key financial policies first announced by Rachel Reeves, including state pension rules and a Cash ISA cut.
Because several of Ms Reeves' policies were not scheduled to take effect until 18 months after she announced them, the new leadership is now setting out another Budget without being able to undo financial policy due to go into force less than six months from now. Burnham and Healey must also balance the books and avoid another Liz Truss economic meltdown.
Tax exemption for state pensioners
State pensioners with no other income aside from their DWP state pension benefit will not have to pay tax on any income which exceeds the £12,570 tax threshold, it has been confirmed. The Rachel Reeves policy will be carried forward by new PM Andy Burnham, confirmed by HM Treasury.
This means that if a state pensioner receives £13,000 from their state pension (having had it increased by the triple lock, which will still be in place until 2030), the £430 which would have been taxable at 20% will not be taxed. But if that pensioner has any other income at all besides the DWP state pension, they lose the exemption.
Cash ISA cut and inheritance tax on pensions
HM Treasury has confirmed that the Cash ISA cut first announced by Rachel Reeves will go ahead from April 2027. Under-65s will only be able to deposit £12,000 a year into a Cash ISA from April, down from the current £20,000 limit. Over 65s, however, will retain the full £20,000 limit as before.
Another Rachel Reeves change will see pensions included in Inheritance Tax from April 2027. Leaving behind a private or workplace pension pot will be counted towards the value of your estate, and could push more people into paying more tax. From April 2027, most unused pensions and death benefits will fall into estates for IHT purposes. In some cases, inherited pensions may be subject to both inheritance tax (IHT) and income tax.
Savings tax changes
The basic and upper rates of tax on dividend income increased by 2 percentage points from April 6. A similar tax increase on savings income will take effect a year later, from April 6, 2027.
These are the Reeves policies already announced that are currently set to go in place, barring unprecedented last-minute U-turns, based on the details confirmed to date. Further surprises, new policies and more details on existing financial plans are expected in Budget 2026.
