Key 2026 Budget Announcements
Business asset disposal relief threshold will fall
Healey also announced a change to business asset disposal relief within capital gains tax.
The threshold will be reduced from £1 million to £500,000. According to the chancellor, this will mean “no change for three in four claimants”.
Business asset disposal relief can reduce the rate of capital gains tax paid when qualifying business owners sell all or part of a business. It is often relevant to founders, partners and certain shareholders who dispose of qualifying business assets.
The reduction in the lifetime threshold means some business owners selling qualifying assets above £500,000 could face a higher tax bill than under the previous limit. Those with gains below the new threshold may see little or no change, assuming they meet the other qualifying rules.
This is likely to be watched closely by owners planning retirement, succession or a sale. For some, the timing of a sale and the structure of ownership may now need closer review.
The chancellor’s claim that three in four claimants will see no change is intended to show that the measure targets larger gains. Even so, a cut from £1 million to £500,000 is a significant shift for people whose business is their main long-term asset.
Chancellor Confirms £20,000 Cash ISA Allowance Remains Unchanged
The annual cash ISA allowance will remain at £20,000, after Chancellor Healey confirmed he would not press ahead with a proposed cut to the tax-free amount savers can put away each year.
The decision was one of several tax and support measures announced in the latest Budget statement, covering savings, pensions, business taxes, wages, carers and parental leave. Healey also said he would work with the savings and investment sector on a new Starter ISA, aimed at making investing more accessible.
The announcements matter because they affect several everyday financial decisions: how much people can save tax-free, whether some small firms pay business rates, how pensioners are taxed, and how work affects benefits such as Carer’s Allowance.
This article is for general information only and is not personal financial advice.
The cash ISA allowance stays unchanged
The headline measure for savers is simple: the tax-free cash ISA allowance will remain at £20,000 a year.
That means the existing annual ISA limit is not being reduced. Savers can still put up to £20,000 into ISAs in a tax year, across the permitted ISA types, without paying tax on the interest, dividends or capital gains earned inside the wrapper.
For cash ISA savers, this removes a major point of uncertainty. A cut would have reduced the amount that could be sheltered from tax, particularly affecting people who use cash ISAs for emergency funds, future house deposits, retirement plans or short-term savings.
The decision is also likely to matter more at a time when interest rates have made taxable savings more relevant again. While many people still fall within their Personal Savings Allowance, those with larger balances, higher interest returns or higher tax rates can find that ISA protection makes a noticeable difference.
The ISA allowance staying at £20,000 does not mean everyone should automatically fill a cash ISA first. The best savings choice still depends on access needs, interest rates, tax position and appetite for investment risk. But the unchanged limit gives savers one clear rule to work around.
A new Starter ISA is planned to widen access to investing
Alongside the decision not to cut the cash ISA allowance, Healey said the government would work with the sector on a new Starter ISA.
The detail has not yet been set out, so the shape of the product remains unclear. The broad aim, though, is to make investment more accessible.
That suggests the government wants to encourage more people to move beyond cash savings where appropriate. Cash is useful for short-term needs and emergencies, but over longer periods inflation can reduce its real value. Investments carry risk, and values can fall, but they can also offer the chance of higher long-term growth.
The challenge will be designing a Starter ISA that is genuinely simple without being misleading. New investors need clear information on:
what they are investing in
how fees work
how risk changes over time
when cash may be more suitable than investments
what happens if markets fall
A Starter ISA could help people who feel locked out of investing because the language feels complex or the first step feels too large. But the final design will matter. A useful version would need to be easy to understand, low cost and clear about risk.
The announcement also signals a wider policy direction. In Budget 2026, the government appears to be balancing support for cash savers with an effort to encourage broader participation in investing.
Small business rate relief threshold rises for key high street sectors
The Budget also included a measure aimed at high street businesses.
Healey announced an increase in the threshold for small business rate relief for retail, hospitality and leisure businesses, from £12,000 to £18,000.
He said the move was designed to support businesses that want to invest, recruit and expand. The immediate effect is that thousands of businesses are expected to be taken out of paying business rates.
Business rates are a major fixed cost for many physical premises. They can be especially difficult for smaller shops, cafés, restaurants, pubs and leisure venues, where rent, staffing, utilities and stock already put pressure on margins.
Raising the threshold means more eligible businesses in those sectors may qualify for relief. For a small high street firm, that could free up money for staff hours, repairs, stock, energy bills or investment in the premises.
The measure is targeted rather than universal. It focuses on retail, hospitality and leisure, which are often seen as central to local high streets and town centres.
Pensioners with income up to the full new State Pension will not pay income tax
Another major announcement was the creation of a new Pension Tax Allowance.
Under the measure, pensioners with income up to the value of the full new State Pension will not pay income tax “in this Parliament”.
This is designed to address a growing concern around pension taxation. The State Pension has risen over time, while income tax thresholds have not always moved in the same way. That can pull more pensioners into paying income tax, even when their income is modest.
The new allowance is intended to prevent pensioners whose income does not exceed the full new State Pension from being taxed on that income.
The practical effect will depend on the final rules. Key details will include how the allowance interacts with other income, private pensions, part-time work, savings interest and existing tax allowances.
Still, the political message is clear: the government wants to reassure pensioners on lower incomes that the full new State Pension alone will not create an income tax bill during this Parliament.
Carer’s Allowance will change so earnings do not trigger a full loss
Healey also announced a change to Carer’s Allowance, aimed at stopping people from losing their entire allowance when they earn above the threshold.
At present, carers can face a harsh cliff edge if earnings move above the allowed limit. Even a small increase in pay, extra hours or a payroll timing issue can create serious problems.
The announced change suggests the government wants to soften that cliff edge. Instead of losing the full allowance after crossing the threshold, carers should face a less severe outcome.
The exact mechanism has not been set out in the brief, so it is not yet possible to say how the new system will work. It could involve a taper, a higher earnings limit, a grace period or another form of adjustment. The detail will be important.
For unpaid carers who also work, the current cliff edge can make it risky to accept extra hours or cover a shift. A better-designed system could reduce that fear and make work decisions less punishing.
This is one of the more practical welfare changes in the package. It does not just affect household income. It affects whether carers feel able to stay attached to work while continuing to provide care.
Minimum wage to rise by 3.9%
The chancellor confirmed that both the National Minimum Wage and the National Living Wage will increase by 3.9%.
The government says the rise will affect 2.3 million of the lowest-paid workers.
For workers paid at or near the legal minimum, the increase should lift hourly pay. The exact cash impact will depend on age, hours worked and the applicable minimum wage band.
For employers, especially in hospitality, retail, care and other labour-intensive sectors, the increase will add to wage bills. That may be partly offset for some firms by the business rates relief change, but the balance will vary widely.
The measure fits a familiar Budget trade-off. Higher pay supports household incomes, but employers need to manage the cost. For small businesses, staffing decisions often depend on several pressures at once, from rent and rates to energy, supplier costs and customer demand.
For low-paid workers, a 3.9% rise is still likely to be judged against the cost of essentials. Rent, food, transport and energy all shape whether a pay rise feels meaningful in daily life.
Self-employed fathers and partners will become eligible for paid parental leave
The Budget also included a change to parental leave for self-employed people.
Self-employed fathers and partners will become eligible for paid parental leave.
This addresses a long-standing gap between employed and self-employed parents. Employees have access to statutory parental pay and leave rights if they meet the rules. Self-employed parents often have fewer protections, even though taking time away from work after a birth or adoption can be just as important.
The measure could help self-employed families plan the first weeks of childcare with less financial pressure. It may also support partners who would otherwise feel unable to take time away from their business or freelance work.
As with several other announcements, the value will depend on the rules. The government will need to set out eligibility, payment levels, timing, application routes and how the support interacts with existing benefits or tax records.
Still, the direction is significant. It recognises that modern work does not always fit a traditional employee model.
What the announcements mean in practice
The Budget measures cover different groups, but they share one theme: targeted changes rather than one large universal reform.
For savers, the main takeaway is certainty. The cash ISA allowance stays at £20,000, and a new Starter ISA is planned.
For business owners, the picture is mixed. Some high street firms may benefit from business rates relief, while some owners selling businesses may face a lower threshold for business asset disposal relief.
For pensioners, the new Pension Tax Allowance aims to prevent those with income up to the full new State Pension from paying income tax during this Parliament.
For carers, the change to Carer’s Allowance could reduce the risk of losing full support after earning slightly too much.
For workers, the legal wage floor will rise by 3.9%.
For self-employed parents, paid parental leave could fill a gap that has existed for years.
Measure | What was announced | Who is most affected |
Cash ISA allowance | Annual limit remains at £20,000 | Savers using ISAs for tax-free interest or investment returns |
Starter ISA | Government to work with the sector on a new product | New or cautious investors |
Business asset disposal relief | Threshold falls from £1 million to £500,000 | Business owners selling qualifying assets |
Small business rate relief | Threshold rises from £12,000 to £18,000 for retail, hospitality and leisure | Smaller high street firms |
Pension Tax Allowance | Income up to the full new State Pension will not be taxed in this Parliament | Pensioners on lower incomes |
Carer’s Allowance | Change planned so earnings over the threshold do not remove the whole allowance | Working unpaid carers |
Minimum wage | National Minimum Wage and National Living Wage rise by 3.9% | Low-paid workers and their employers |
Paternity leave | Self-employed fathers and partners to get paid parental leave | Self-employed families |
The detail still matters
The ISA announcement is the clearest of the package because the £20,000 figure is already known and remains unchanged.
Several other measures need more detail before households and businesses can judge the full effect. The Starter ISA, Carer’s Allowance change, Pension Tax Allowance and self-employed parental leave all depend on final rules.
People affected by the capital gains tax change may also need advice before making major decisions. Business disposals can involve complex timing, ownership and relief conditions.
The same applies to small business rates. Eligibility often depends on property value, business type, location and relief rules, so firms will need to check how the new threshold applies once guidance is available.
The clearest short-term message is that the government has chosen to protect the ISA allowance while shifting some support towards lower-paid workers, pensioners, carers, self-employed parents and high street businesses.
For now, savers can plan around the same £20,000 annual ISA limit. Business owners, carers and pensioners should wait for the detailed rules before assuming exactly how the changes will affect them.
Overview of Founder's Relief
Founder's Relief is a newly introduced capital gains tax relief aimed at supporting the founders of thriving companies. This initiative seeks to foster entrepreneurship and reward individuals who establish and expand businesses.
Main Features of Founder's Relief
Capital Gains Tax Rate: The relief limits the capital gains tax rate to 10%.
Lifetime Gains Limit: The relief is applicable to lifetime gains up to £10 million.
Eligibility: Primarily intended for founders of successful companies.
Advantages of Founder's Relief
Reduces the tax burden on successful business founders, thereby encouraging entrepreneurship.
Encourages reinvestment into businesses and fosters innovation.
Contributes to economic growth through the success of new companies.
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