Ahead of Chancellor John Healey’s inaugural Budget on 28 October, we look at the key issues relating to savers and investors and what might be on the agenda.
1. Pension tax relief and tax-free cash
The new chancellor has the opportunity to put himself firmly on the side of savers by committing not to change tax relief or tax-free cash for the long term.
When people take money from their pension early, it is bad for households and bad for the economy – pulling billions of pounds out of pensions prematurely reduces the capital available for long-term investment.
FCA data suggests £14 billion of tax-free cash was irreversibly siphoned from pensions in 2025, above the average amount one would normally expect during the year as people feared Healey’s predecessor, Rachel Reeves, was planning a retirement tax raid.
The 2026 Budget represents the chancellor’s final opportunity to revisit the decision to bring unspent pensions into inheritance tax from April next year.
Bringing pensions into inheritance tax will create complexity and delays when settling estates at what will already be an emotionally difficult time for bereaved families. The proposal has faced opposition from across the industry, although whether that will be enough to force a rethink remains to be seen.
2. State pension tax and the triple lock
The government has already announced that the triple lock will be diluted from 2030, making state pension uprating one of the biggest retirement policy issues facing pensioners.
In the nearer term, attention is focused on the interaction between the state pension and the tax-free personal allowance. The full new state pension is expected to exceed the personal allowance, creating the possibility that pensioners whose only income is the state pension could face an income tax charge. The government has said that those relying solely on state pension income will not be taxed, but it still needs to set out how that protection will work in practice.
The main challenge is fairness and administration. If someone with only state pension income is protected from tax, a pensioner with a small private or workplace pension could still be dragged into the tax system. Lower-income workers may also question why their earnings are taxed while some pension income is treated differently.
The issue highlights the pressure created by frozen tax thresholds and the growing complexity of the pension tax system.
3. Capital gains tax
Prime Minister Andy Burnham has pledged to follow the Labour manifesto which stipulated it wouldn’t raise the main rates of income tax, National Insurance or VAT, which leads to debate about where Chancellor Healey could look elsewhere for revenue, including changes to capital gains tax (CGT).
The capital gains tax-free allowance now stands at just £3,000, with previous cuts meaning more investors already face a potential tax bill when selling assets outside tax shelters such as ISAs and pensions.
Further cuts to the tax-free allowance would be another blow to investors, and a large rise in CGT could discourage people from investing outside ISAs and SIPPs or encourage them to hold on to investments for longer.
Ahead of the Budget, there’s an opportunity to realise capital gains free of tax within your annual £3,000 tax-free allowance, if you have it available. The Bed and ISA process helps you sell assets and buy them back within an ISA, so you’re not out of the market for long. By moving the assets into an ISA, you’re protected from dividend tax and CGT in future, but you’ll also need to have sufficient ISA allowance left for the tax year to do this.
4. Wealth tax
A wealth tax has been discussed by some groups as another way for the chancellor to raise money from those with higher levels of assets.
One version of the proposal would apply a flat rate of tax to assets above a certain threshold. The government would need to establish the value of someone's total assets, could include property, pensions, investments, and business interests. This approach could be costly and complicated to implement and creates significant issues with paying bills for people who may live in expensive properties but have lower incomes.
5. Income tax thresholds
Frozen income tax thresholds remain one of the biggest ways the government is raising more money from households without increasing the headline rate of tax.
The prime minister has acknowledged concerns about the frozen personal allowance, but unfreezing it would be expensive. The Institute for Fiscal Studies has estimated that increasing the personal allowance from April next year would cost around £6.7 billion, even if other income tax thresholds remained frozen.
6. National Insurance
A pledge not to increase National Insurance leaves some room for maneuver, just as the pledge to not raise income tax does. We’ve seen thresholds frozen already, but Healey also has the option of extending National Insurance to income or groups of people who are currently outside of the system.
All the speculation so far about tweaks and changes has come from think-tanks with the government not even hinting at the idea yet, so it would come as a real surprise if it made it to the Budget.
7. ISA changes
The government is expected to respond to the consultation on a new First Time Buyer ISA product. This would replace the Lifetime ISA with a product aimed specifically at first-time buyers, but key details remain unclear. These include how much savers could pay in, what property price limit would apply, what bonus would be available, and what would happen to existing Lifetime ISA customers.
It’s also not clear what changes would mean for people using a Lifetime ISA as part of their retirement planning, which is why AJ Bell has urged the government to commit to improving the existing Lifetime ISA rather than launch a new ISA product.
8. ‘Your First Home’ scheme
A revival of the Help to Buy equity loan scheme is on the cards. Rebranded as the ‘Your First Home’, the government says first-time buyers with a 2.5% deposit will be able to access a 20% government-backed loan with favourable terms like an interest-free period. There are still lots of details to be made public, but the scheme should be supportive to major property developers if aspiring homeowners are attracted to the offer.
Reports have suggested the scheme may be limited to those with household earnings under a certain threshold. While a property price limit is to some extent understandable, it is hard to see how a household earnings limit could work and introduces a lot of complexity.
9. Land and property tax
Burnham has previously supported reform of property and land taxation, including council tax and stamp duty. However, he has ruled out a complete overhaul at this Budget.
Some change is already in the pipeline, with the ‘mansion tax’ due to be added to council tax for properties worth more than £2 million, from April 2028.
The consultation so far suggested that owners of homes worth between £2 million and £2.5 million would pay £2,500 a year, increasing to £3,500 a year for homes worth £2.5 million to £3.5 million, £5,000 a year for those worth £3.5 million to £5 million and at the top end a charge of £7,500 for homes worth over £5 million. These annual charges would rise with CPI inflation, and there would be revaluations every five years.
10. Higher taxes on banks, oil producers and gambling firms
If the chancellor looks for industry-specific ways to raise revenue, banks, oil producers and gambling firms are among the sectors that could face higher taxes as they deliver some of the highest annual revenues.
Higher taxes could raise money for the Treasury, but may also affect lending, competitiveness and shareholder returns, including dividends paid to investors which many rely on for income.
Oil and gas producers already face a high UK headline tax rate of 78%, made up of corporation tax, a supplementary charge and the energy profits levy. Increasing or extending the levy could raise more from the sector but may also affect investment and energy security.
The Prime Minister has been critical of the impact on society of the gambling sector in the past, which has led to suggestions that the government might hike duty on slot machines.
11. Stamp duty on UK shares
The chancellor could support UK stock market investment by removing the 0.5% stamp duty charged on UK shares.
Listing rules were relaxed in 2024 and last year saw the introduction of a three-year stamp duty holiday on newly listed stocks.
Those measures were a step in the right direction, but removing stamp duty on shares completely would be a huge step in reviving the UK stock market’s competitive advantage.
Tom Selby: Director of Public Policy
Tom Selby is AJ Bell's Director of Public Policy. He joined the company in 2016 as a Senior Analyst before becoming Head of Retirement Policy. He has a degree in Economics from Newcastle University.
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