The Budget and you

The days following any Budget tend to involve a lot of noise: headline figures, behavioural rules of thumb, predictions about what was 'about to come' but didn't. Most of it doesn't change a long-term financial plan in any meaningful way. A small number of things do. The trick is telling them apart.

Here's a short tour of the changes that have shaped the current planning landscape, and how we use them with clients.

Frozen thresholds — quietly the biggest tax change of the decade

Many tax thresholds in the UK are frozen rather than indexed to inflation. The personal allowance and the higher rate threshold are frozen until April 2028. The Inheritance Tax nil-rate band and residence nil-rate band are frozen until April 2030. Frozen thresholds are often described as 'fiscal drag': as wages and asset values grow, more people pay tax, and more pay it at higher rates, without any rate change being announced.

For long-term planning, this matters more than most one-off announcements. It means more estates will pay IHT, more retirees will pay tax in higher bands, and the value of using ISA, pension, and gifting allowances each year keeps rising. None of it is dramatic in any single year — but compounded over a decade, it's substantial.

Allowances worth using each year

Several annual allowances reset each tax year. Used well, they're worth a great deal; left unused, they don't carry forward (with one exception, noted below):

• ISA allowance: £20,000 a year per adult, tax-free on income and growth.
• JISA allowance: £9,000 a year for a Junior ISA per child.
• Pension annual allowance: typically £60,000 a year (or 100% of relevant UK earnings, whichever is lower), tapered for very high earners. Unused allowance from the previous three tax years can be carried forward, which is a useful tool around bonuses and sales of businesses.
• Capital Gains Tax allowance: £3,000 in 2025/26 — much smaller than it used to be, which makes harvesting gains more important than it once was.
• Dividend allowance: £500 in 2025/26.
• IHT annual gift exemption: £3,000 per donor, plus various smaller exemptions.

Tax treatment depends on individual circumstances and may be subject to change in future.

The Inheritance Tax changes that matter

Two recent IHT changes are reshaping how we think about estate planning:

From April 2026, full Business Relief and Agricultural Relief will be capped at the first £1 million of qualifying assets, with 50% relief on amounts above that. For families with farms or trading businesses worth more than £1 million, this is a meaningful change — and one that may take years to plan for properly.

From 6 April 2027, unused defined contribution pensions are due to come within the IHT regime. For decades, pensions have been one of the most IHT-efficient assets to hold; that won't be true after 2027. Clients with significant pension wealth are increasingly thinking about whether to draw more income earlier (and gift from surplus income), whether to use part of a pot to buy an annuity (which has no residual estate value), and how to balance pension and ISA holdings going forward.

What hasn't changed (and is worth remembering)

Pension contributions still attract tax relief at your marginal rate, which makes them especially valuable for higher and additional rate taxpayers. The 25% tax-free cash from pensions remains, capped at £268,275 in most cases. ISAs remain free of UK income tax and capital gains tax. The marriage allowance is still available where one spouse earns below the personal allowance and the other is a basic rate taxpayer.

How to act — and how not to

Two principles serve clients well around any Budget:

First, don't restructure a long-term plan around a short-term announcement. Most Budget changes phase in gradually, and rumoured changes that don't materialise are even more numerous than ones that do. Acting on a rumour can leave you with the wrong structure when the rule lands somewhere different.

Second, do use the allowances you have, every year. The ISA allowance, the pension annual allowance (and carry-forward), the gift exemptions, and the CGT allowance are the workhorses of long-term tax efficiency. They look small in any given year and meaningful over a decade.