The Spring Statement
2026
Measures taking effect in 2027 or later Savings income and property income: rate increase (April 2027) In November, the Chancellor announced an increase in the tax rates applicable to income from property and savings to apply from April 2027. The basic, higher and additional rates on rental and savings income will all rise by two percentage points in 2027/28 to 22%, 42% and 47%. From April 2027, there will be new rules about the order in which certain tax reliefs are deducted from income, so that they must be set first against income which is taxable at the lower rates before they can be set against savings, rental and dividend income. The November Budget document pointed out that 90% of people do not pay tax on savings income; however, for those whose income from these sources exceed their tax-free allowances, it will be necessary to calculate and settle the liability each year, usually through self-assessment. As with the April 2026 increase in dividend tax, these tax increases make tax-free ISAs even more attractive. ISA restrictions (April 2027) From 6 April 2027, no more than £12,000 of the £20,000 annual limit will be eligible for investment in a cash ISA, apart from ISAs for those aged 65 and over. In her Budget speech, the Chancellor presented this as an encouragement to invest in stocks and shares, which have performed substantially better than cash deposits over the years since ISAs were introduced. IHT on unused pension funds and death benefits (April 2027) The Finance (No.2) Bill 2026 contains major changes to the IHT rules for both unused pension funds at death and certain pension death benefits. These changes will not take effect until 6 April 2027, but they are so fundamental that they require attention as soon as possible. Currently, it is standard IHT planning to write death benefits payable from pension schemes, such as personal pensions, into trust for one or more nominated beneficiaries (usually family members). In practice, the scheme trustees are very likely to follow any guidance received from the member while they were alive (usually given by way of a completed nomination form). Under current rules, this puts the death benefits outside the IHT net if the policyholder dies: the beneficiary can receive the funds in full with no IHT payable.
the ‘old’ rules. Those who are not within MTD IT, either because their business and rental income is below the limits or because they do not have those categories of income, will continue to file income tax returns in the same way as before. The November Budget included the good news that late submission penalties will not apply for quarterly updates during the 2026/27 tax year for taxpayers required to join MTD IT. The new penalty regime for late submission and late payment will apply to all self-assessment taxpayers who are in the new system from 6 April 2027. The government will also increase the penalties due for late payment of self-assessment income tax and VAT from 1 April 2027. State Pension The State Pension will rise by 4.8% from April 2026 (to £184.90 for ‘old’ State Pension and £241.30 for ‘new’ State Pension) in line with average earnings, in accordance with the ‘Triple Lock’. The government is taking steps to deal with the possibility that the State Pension on its own, which is paid without deduction of tax, may exceed the personal tax allowance in 2027/28. The government plans to consult on ways to avoid requiring pensioners with no other sources of income to report to HMRC and pay tax. Fuel duty In November, the Chancellor decided to maintain the freeze in fuel duty and to retain the 5p cut beyond 22 March 2026, when it was supposed to come to an end. It will now be reversed in stages between 1 September 2026 and 1 March 2027. Inflationary increases in the duty are planned to resume in April 2027. National Living Wage (NLW) From 1 April 2026, the NLW which applies to those aged 21 or over will rise from £12.21 per hour to £12.71. There are also increases to the rates that apply to workers aged 18 to 20 (£10.85) and under 18s and apprentices (£8.00). Universal Credit The ‘two-child benefit cap’ will be removed with effect from April 2026, increasing the entitlement to Universal Credit for claimants with more than two children. This measure will cost between £2.3 billion and £3.2 billion a year over the forecast period. By contrast, the freezing of income tax bands and allowances is expected to raise £12.4 billion in the year 2030/31 alone.
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