The Autumn Budget promised “breathing space”, but alongside a gloomy economic outlook, it delivered only modest reprieves for households with few big changes.
- Economic growth set to slow next year
- Cash ISA reprieve, but higher tax on savings income
- Bank tax surcharge doubles to 6%
Slow growth; squeezed incomes: the Autumn Budget promised “breathing space”, but alongside a gloomy economic outlook, it delivered only modest reprieves for households, with few big changes. The Office for Budget Responsibility (OBR) expects the UK economy to expand by 1.25% this year, slowing to 1% next year, and sees no growth in real earnings in 2027 or 2028. Real household disposable income per person is set to fall in the near term, and is expected to be only 1% higher than its pre-pandemic level in 2029-30. The OBR warned: “The UK’s economic and fiscal position remains very challenging”.
“The UK’s economic and fiscal position remains very challenging” (OBR)
Good and bad news for savers: the plan to cut the annual Cash ISA allowance from £20,000 to £12,000 was abandoned, and a new “starter ISA” will aim to incentivise first-time investors. A First Time Buyer ISA replaces the Lifetime ISA from April 2029. The new “Your First Home” scheme will provide first-time buyers with a 20% equity loan. However, tax rates on income from cash and property will rise by an additional two percentage points from April 2027. From April 2027, a new Pension Tax Allowance will stop pensioners with incomes just above the Personal Allowance paying income tax.
Let them eat gherkins: the VAT cut on electricity bills was extended, and households in council bands A to D will receive a one-off £100 energy rebate. Standing charges will be removed from household gas bills. The cut in fuel duty of five pence per litre was extended until July next year. Tariffs were removed on over 100 items, including gherkins and baked beans, and cut on products including kerosene and fertiliser.
Banks pay more: the Bank Corporation Tax Surcharge will increase temporarily from 3% to 6% from January 2027. The threshold for small business rate relief for retail, hospitality and leisure businesses was raised from £12,000 to £18,000. A new Capital Gains Tax Founders’ Relief will be introduced from April 2027.
Tepid business reaction: the Budget received a lukewarm response from business groups. The Confederation of British Industry commented: “The government has set out big ambitions to boost prosperity – today’s Budget does not meet the scale of that ambition.” Meanwhile, the British Chambers of Commerce said that although the Budget sent the right signals to business, it lacked “big calls that would really shift the economic dial”.
