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“Governments will tax you until the pips squeak.” Attributed to Denis Healey, Labour Party Conference 1973.

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This Budget certainly echoes that sentiment. Unlike last time when we had to wait for Rachel Reeves to deliver her budget, this time around it was leaked in advance, but only after she had changed her mind several times over what she was going to do. Polly Toynbee, writing in the Guardian newspaper, summed up Labour’s policies perfectly, that Labour budgets boost the low paid by taking from the well off. She is all in favour of this “Robin Hood” style of wealth redistribution but forgets that the burden falls on the very working people that Reeves wanted to protect. The very rich have sensibly left the country for warmer and lower taxed climes. She has neither tackled the burgeoning welfare state, nor created the framework for encouraging growth in the economy. Depending on your measure of choice, inflation stands at nearly double the target rate and job creation is at risk due to National Insurance hikes last time around and AI. However, pensioners can rejoice with a continuation of the triple lock increasing the State pension by 4.8%!

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So, in summary, where are we? Some workers have seen an increase in tax on their income via the freezing yet again of the Personal Allowance which remains at £12,570 and the amount at which tax at 40% is paid remains at £50,270. But the living wage increases to £12.71 per hour for those over 21 and the National Minimum Wage for those over 16 goes up to £8 per hour and £10.85 per hour for those over 18.

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A raft of increased taxes was introduced on dividends, property income and savings. Dividend taxation will increase by 2% to 10.75% for basic rate taxpayers and to 35.75% at the higher rate and 39.35% for additional rate taxpayers which kicks in at £125,140 for 2025/6.

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Landlords and those with income generated from holiday lets will also see rates rise by 2% to 22%, 42% or 47% according to their tax bands. Mortgage interest relief increases to 22%.

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The same rates apply to tax on cash savings above £1,000 for basic rate taxpayers and £500 for higher rate ones. Additional rate taxpayers receive no allowance.

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The much debated “Mansion Tax”, or High Value Council Tax Surcharge, will be introduced in April 2028 for properties worth more than £2 million in 2026.  The charge starts at £2,500 for properties worth up to £2.5m, £3,500 to £3.5m, £5,000 to £5m and £7,500 above £5 million.

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The Inheritance Tax Nil Rate Band on which no tax is applied, remains stubbornly at £325,000 and will do so until 2031. It has been at this level since 2009!

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It was confirmed that farmers and business owners can transfer their £1 million allowance under Agricultural Property Relief and Business Property Relief between spouses, which frankly would have been ridiculous not to have been able to.  

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Tax relief on VCTs will be reduced to 20% from 30%, but the annual investment allowance has doubled to £10 million, no doubt to encourage investment in startups. However, with the exception of a handful of firms, the track record of these vehicles has been patchy at best with the average VCT significantly underperforming UK Smaller Companies as measured by the Association of Investment Companies.

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As confirmed in the previous budget, Business Asset Disposal Relief (Entrepreneur’s Relief as it was) sees the reduced CGT tax rate, “increase” to 18% from 14% in April 2026. Corporation Tax will remain at its current level for the term of this Parliament.

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Cash ISAs have been capped at £12,000 for those under the age of 65. Actually, I think this is no bad thing as cash is wasted on ISAs as the only benefit is the tax relief on the interest paid. If the interest rate is 4% then the tax benefit to a basic rate taxpayer is just 0.8%. Cash doesn’t generate any capital gain so the freedom from CGT that is available to assets held in ISAs is lost. Far better to consider them long term investments that can benefit from tax free dividends or coupons, as well as tax free growth. There is also a better chance of receiving a rising dividend to act as a hedge against inflation, which again is not possible by holding cash on deposit.

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Pension Salary Sacrifice, whereby salary is sacrificed to increase funding to a pension thereby avoiding NI and income tax, has been capped at £2,000. However, this doesn’t come into effect until 2029 and I can already see several ways to get around this so I am not sure how effective this limit will be.

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Electric Cars will start to pay a mileage-based duty, but it is unclear how this will be reported. However, the Expensive Car Supplement, which is an additional charge on cars worth over £40,000 has increased to £50,000, no doubt to appease owners of electric cars who are about to be charged extra for driving them! Sounds a bit muddled.

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Stamp Duty for newly listed companies on the London Stock Exchange will see an exemption of duty for three years in an attempt to boost the attractiveness of the stock market. But this isn’t enough – to be truly competitive, Stamp Duty on UK share purchases should be abolished to be in line with other major financial centres such as New York or Frankfurt.

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Drinking, smoking and gambling just got more expensive too. And potholes remain.

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The Bond market, the harbinger of bad news, was steady, probably because most of the changes have been delayed, possibly to a time when we will see a change of Government.

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Thoughts on the Budget from James Scott-Hopkins, Founder of EXE Capital Management. The views are those of the author only.

The above does not constitute a recommendation to take action and advice should be sought from your financial advisor.

The value of investments can fall as well as rise. Past performance is no guarantee of future returns.

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