Budget day is tomorrow, so here’s a plain-English guide to what’s been confirmed, what’s only rumour, and what’s best left alone for now.
The Budget is on Wednesday 28 October, and it’s the first from Chancellor John Healey under Prime Minister Andy Burnham. He is due to speak at around 12.30pm. Healey has promised a Budget built on “fiscal discipline” that meets the government’s fiscal rules.
None of the rumours below is confirmed until he sits down. Some will turn out right and some won’t.
Already decided
These changes come from earlier announcements and are happening whatever Healey says tomorrow.
- Cash ISAs: From April 2027 the cash ISA allowance for under-65s falls from £20,000 to £12,000, while older savers keep the full cash allowance. The overall £20,000 ISA limit is unchanged.
- Pensions and inheritance tax: From 6 April 2027, most unused pension funds and death benefits will count towards your estate for inheritance tax.
- Frozen thresholds: The Personal Allowance stays frozen at £12,570 until April 2031.
- Everyday cost-of-living measures: These include a £2 cap on bus fares, VAT removed from electricity bills and a business rates cut for pubs and clubs.
- Stamp duty and council tax: No immediate changes are planned to either.
The rumours worth watching
1. The state pension and the tax-free allowance
This is the most likely headline. The new state pension is set to rise by £489 to £13,036 a year from April, which pushes it above the £12,570 Personal Allowance for the first time. The government has already promised that pensioners with only the state pension won’t pay tax.
The Times reports this will be done by raising the personal allowance for low-income pensioners to £13,036. Expect details tomorrow.
2. A raid on pension tax-free cash
This is the “annual rumour”. You can currently take 25% of your pension tax-free, up to a lifetime limit of £268,275. The figure mentioned in the chatter is £100,000, and similar rumours came up before the 2024 and 2025 Budgets without anything happening.
The experts’ view is that it’s unlikely. AJ Bell says a cut would be complex and politically toxic, so it’s an unappealing option for a new chancellor. The cost of the rumours has been real, though. FCA data suggests £14 billion of tax-free cash left pensions in 2025, above what you’d normally expect.
3. Capital gains tax reform
Louise Haigh, a key Burnham ally, has argued for bringing CGT closer to income tax rates and for ending the “uplift at death” rule. But Healey has reportedly rejected the idea of raising CGT at this Budget. If you hold investments outside an ISA or pension, the annual CGT allowance is just £3,000.
4. The “mansion tax” getting wider
The high-value council tax surcharge starts in 2028 at £2,500 a year for homes over £2m, rising to £7,500 over £5m. The Times reports the threshold could drop to £1.5m, dragging in around 100,000 more homes.
5. Taxes on banks, gambling and online marketplaces
- Banks: The Guardian reports Healey could raise the bank corporation tax surcharge from 3% back to 8%, raising more than £2bn a year.
- Gambling: Doubling machine games duty to 40% is being considered.
- Online marketplaces: Platforms like Amazon and eBay could have to collect VAT on third-party sellers turning over more than £90,000, to help fund business rates cuts.
6. Help with bills and the high street
The Warm Home Discount (currently £150) could be topped up by another £100, funded by taxpayers rather than bill-payers. The Sunday Times reports the business rates threshold could rise from £12,000 to £18,000, lifting 75,000 properties out of rates altogether. Fuel duty is also in question. It’s due to rise on 1 January, and Burnham hasn’t ruled out stepping in.
7. Student loans, benefits and social care
The Plan 2 repayment threshold is frozen until 2030. The government hasn’t ruled out reversing that, saying only that it keeps student finance under review. Burnham has said some benefits will become conditional on taking work. Details of a social care overhaul are also expected.
8. Income tax: don’t hold your breath
Burnham has said the personal allowance will be reviewed, but he didn’t commit to changing it, noting it would be difficult given the finances. With Labour pledging not to raise income tax, VAT or national insurance, Rathbones says “targeted measures” on wealth, investments, pensions and property are the most likely revenue-raisers.
Should you do anything before tomorrow?
Mostly, no. The best advice from every adviser I’ve read is the same: don’t make irreversible decisions based on rumours.
After the 2024 Budget, pension providers received requests from savers who’d taken tax-free cash early and wanted to hand it back. The FCA has said taking tax-free cash doesn’t by itself give you a right to cancel. Some Budget measures take effect on Budget day itself, so a last-minute move may not get ahead of anything anyway.
Sensible, reversible housekeeping is fine:
- Check how much of your £20,000 ISA allowance you’ve used this tax year.
- If you have unused CGT allowance, you could realise gains within the £3,000 limit.
- Married couples and civil partners can move assets between each other without tax, which helps them use two sets of allowances.
The bottom line
The big themes are likely to be relief for pensioners and households, devolution of power to regional mayors, and revenue from banks, gambling, property and wealth rather than from income tax. There’s no guarantee any rumour will come to fruition.
We’ll publish a full breakdown once Healey sits down tomorrow.
This article is for information only and isn’t financial advice. If you’re considering a big decision about your pension or investments, speak to a regulated adviser.
