Healey delivers “low-key” first Budget

The mood music ahead of Chancellor John Healey’s first Budget was that it would be a relatively low-key affair, providing some breathing space but avoiding major announcements.

This is exactly what he delivered with a plethora of small handouts and reliefs, but largely steering clear of such hot topics as welfare and defence spending.

The “do no harm” Budget, as more than one commentator labelled it, will have negligible impact on the public finances or the wider economy.

The bond and stock markets reacted favourably to the measured approach taken by the Chancellor, but bigger challenges and decisions await the Government over the coming months.

While much work remains to be done to ignite growth in the economy, the positive was that growth is forecast to pick up again after next year, rising to 1.6% in 2028, 1.8% in 2029 and 1.7% by the end of the decade – nothing to shout about, but stronger than many of our counterparts in the G7.

Of concern is the tax-to-GDP ratio which is tipped to surpass its historical high of 37.2% in 2027/28 and continue increasing to a record high of 38.6% of GDP in 2031/32.

From a client perspective, it was pleasing that there were no significant changes impacting people’s personal finances with inheritance tax, personal allowances and pensions left untouched.

One area of change concerns the imposition of an additional 2% tax rate (on top of 2% announced in the last Budget) on property and savings, taking the respective rates – depending on which income tax band you fall into – to 24%, 44% and 49% from April 2027.

In the positive column, the Chancellor announced that he is reversing his predecessor Rachel Reeves’ decision to cut the annual cash ISA allowance from £20,000 to £12,000, keeping it at the higher amount.

The clear message is that you are missing out if you are not taking advantage of your ISA allowance, if you have money sitting in a bank account.

The other announcement regarding ISAs was the confirmation that a First Time Buyer ISA will replace the often-criticised Lifetime ISA with the penalty for withdrawing savings from a Lifetime ISA if you are buying a home above the £450,000 threshold to be scrapped.

Other announcements in the Budget included:

• Households in council tax bands A-D to receive a £100 energy payment.
• The full state pension rises by 3.9% to £13,036 from April 2027 with the income tax-free allowance increasing to the same figure.
• The 5p-a-litre cut in fuel duty to be extended to July next year.
• The corporation tax surcharge levied on banks’ profits to increase from 3% to 6% for 15 months from January 2027.
• The threshold for small business rate relief for retail, hospitality and leisure businesses increased from £12,000 to £18,000.

Please do contact a member of our team is you would like to discuss any aspect of the Chancellor’s Budget. Our regular client reviews typically cover any requirements around inheritance tax planning, capital gains, pension and ISA contributions, thereby ensuring your financial planning is aligned with your future needs.