In a highly anticipated announcement this week, the Chancellor unveiled her second budget, introducing a series of reforms that will reshape how Britons manage their pensions, property, savings, and investments. While the changes are staggered over the coming years, acting now could significantly soften their financial impact. Here is a five-point action plan to help you navigate the new landscape.
Maximise Your Tax-Free Savings
One of the most significant shifts involves Individual Savings Accounts (Isas). While the annual allowance remains at £20,000, the rules for those under 65 are set to change on 6 April 2027. From that date, you will only be able to put a maximum of £12,000 per year into a cash Isa, down from the current £20,000. Any additional contributions within your allowance must then go into a stocks and shares Isa. Savers aged 65 and over are unaffected and can still place the full £20,000 into cash.
This creates a window of opportunity. "If it makes sense to open a cash Isa, and you have the money and allowance available, it’s worth acting sooner rather than later, while there are still strong rates around," advises Sarah Coles of Hargreaves Lansdown. With providers like Trading 212 offering rates as high as 4.56%, using your allowance within the existing rules can provide valuable tax-free interest, especially for those who might exceed their personal savings allowance.
Shelter Your Investments from Tax Hikes
The budget contained an unexpected rise in dividend taxation, effective from April 2026. The ordinary rate will jump from 8.75% to 10.75%, and the upper rate will increase from 33.75% to 35.75%. To mitigate this, consider moving income-producing shares into a stocks and shares Isa via a process known as 'Bed & Isa'.
This involves selling the investments and immediately repurchasing them within the Isa wrapper, using your remaining £20,000 annual allowance. Be mindful of potential capital gains tax on any substantial profits. Jason Hollands of Evelyn Partners suggests married couples can leverage two sets of allowances by transferring assets between spouses, a transaction that is not considered a taxable event.
Reassess Your Pension Contributions
A well-signalled change targets salary sacrifice schemes for pensions. Currently, both employees and employers avoid National Insurance (NI) on contributions, but from April 2029, this NI exemption will be removed on payments exceeding £2,000 per year.
With nearly three-and-a-half years until implementation, now is the time to review your arrangements. Consult your employer about any planned changes to your scheme. In the short term, you might consider increasing contributions to maximise the current NI savings. Chris Britton of Reward Gateway emphasises that pension contributions remain highly beneficial, as they are still exempt from income tax, and NI savings continue on the first £2,000.
Plan Your Estate and Gifting Strategy
The Chancellor extended the freeze on Inheritance Tax (IHT) thresholds until April 2031, a move that will inevitably drag more estates into the tax net. With the standard IHT rate at 40%, proactive financial gifting is a powerful tool for reducing a future liability.
You can give away £3,000 each tax year free of IHT, plus make unlimited gifts of up to £250 to different individuals. Larger sums can be given as 'potentially exempt transfers', which fall outside your estate if you live for seven years after the gift. With unspent pensions being included in IHT calculations from April 2027, starting the gifting process early is more crucial than ever.
Navigate the New Property Surcharge
A new council tax surcharge, dubbed the 'mansion tax', will be introduced for properties in England valued over £2 million. Based on 2026 valuations and starting in April 2028, the annual charge will begin at £2,500, rising to £7,500 for homes worth more than £5 million.
The long lead time offers a period for consideration. Owners may choose to set aside funds for the future tax or contemplate downsizing. However, analysts at Morningstar predict a potential 5-10% price correction in this property bracket. For those nearing the threshold, it may be wise to reconsider major home improvements that could push the property's value over the £2 million mark when it is reassessed.
