UK Budget 2026: What Rachel Reeves' Autumn Statement Actually Does to Your Money

The headline that matters most: income tax rates aren't going up, but you'll still pay more

Rachel Reeves kept the manifesto promise. Income tax rates stay at 20%, 40%, and 45%. Employee National Insurance rates aren't changing.

What she didn't promise is that tax thresholds would rise with inflation. They won't. The personal allowance stays at £12,570, the higher-rate threshold at £50,270, and both are frozen until 2028.

In practice this is a tax rise. As wages rise with inflation, more of your salary crosses the higher-rate thresholds. Economists call this fiscal drag. The Treasury raises more revenue without ever changing a published rate. You pay more, the politician gets to say they didn't raise income tax. Both statements are true.

If you sit between £100,000 and £125,140 of annual income, there's a specific trap worth understanding. In that band, every £1 you earn costs you 60p in tax. The reason is mechanical: above £100,000 you start losing your personal allowance at a rate of £1 of allowance for every £2 of income, and you're already paying 40% on the income itself. The combined effective rate is 60%. The clearest single piece of advice for anyone in that band is to push earnings down into pension contributions until you're under £100,000. A £5,000 pension contribution costs you £3,000 after tax relief at 40%, and saves you from losing personal allowance you'd otherwise lose entirely.

On the employer side, National Insurance rose from 13.8% to 15%, and the threshold at which it kicks in dropped from £9,100 to £5,000 per employee. That's around £900 a year extra for every employee on the books. If you're employed and you're wondering why your March payslip felt smaller than expected, or why your pay rise was less than inflation, this is part of the reason. The Office for Budget Responsibility models around 0.5% of wage growth quietly absorbed by employers covering the NI increase. You're not imagining it.

If you're approaching a pay review, this is worth raising directly. Asking for 6–7% rather than 3% isn't aggressive — it's roughly the figure that gets you back to where you were in real terms once fiscal drag and the employer NI suppression are factored in. Most managers won't volunteer this conversation. That doesn't mean you can't lead it.

Capital Gains Tax: where the next big move is

Capital Gains Tax is the area where the Budget's direction is clearest and the timing matters most.

CGT rates have not yet been raised to income-tax levels, but the Treasury has signalled that's the direction. Current rates of 10% and 20% on most assets and 18% and 24% on residential property are expected to converge toward income-tax bands (20%, 40%, 45%) at some point in the next 24 months. Separately, the annual CGT allowance has already been brought down hard, from £12,300 in 2022/23 to £3,000 now. Every gain above £3,000 is now taxable.

This affects you if you have investments outside an ISA, a second property you might sell, a buy-to-let portfolio, crypto holdings, or a business you might exit.

A few things worth doing before April:

If you have investments outside an ISA with unrealised gains, look at a "bed and ISA" — selling the investment and immediately repurchasing it inside your ISA wrapper, up to the £20,000 annual ISA allowance. Future gains on the same investment are then sheltered permanently. The transaction itself crystallises a CGT event, so plan it against your £3,000 allowance.

If you're married or in a civil partnership and one of you has unused CGT allowance or sits in a lower tax band, transferring assets between spouses before sale is a legal and common way to halve the effective CGT bill. There's no spousal transfer tax.

If you own a buy-to-let or second property you've been considering selling, the maths is now meaningfully worse if you wait. A landlord selling at a £100,000 gain in early 2026 might pay £19,400 in CGT at current rates. If CGT aligns with income tax and the seller is in the higher band, that bill could double.

If you have crypto holdings with gains, the same logic applies. Digital assets get no exemption.

If you're planning to sell a business, talk to an M&A adviser this month, not in summer. Pre-April 2026 transactions could save six-figure tax bills.

I'm not telling you to panic-sell. I'm telling you that anything that was going to happen in the next 18 months is worth bringing forward, and anything in the more distant future is worth modelling at the higher rate.

Inheritance Tax: the change retirees should know about

Inheritance tax reform is the area where the Budget has the most disruptive long-term effect for people with substantial pensions or family businesses, and where most people will pay it relatively little attention because the words "estate planning" make eyes glaze over.

Three changes worth knowing:

Pensions may come within the IHT estate. Currently, a defined-contribution pension pot passes IHT-free. Under the proposed reform, pension pots count as part of the estate for IHT calculation. A couple with £1 million in combined pension savings, who previously passed that entirely tax-free, could see their children inherit £400,000 less. This is the single biggest IHT shift in a generation, and it's being added with relatively little public attention.

Agricultural Property Relief and Business Property Relief are being narrowed. APR previously gave 100% IHT relief on qualifying farmland. BPR did the same on qualifying business assets. Both are being capped or means-tested. The exact thresholds are still being worked out, but family farms and family businesses that were previously inheritable tax-free may face significant bills.

The seven-year gift rule may extend to ten years. Currently, gifts you make more than seven years before death fall outside your estate for IHT purposes. That window may extend to ten. If you've been planning to make significant gifts to children, starting the clock now matters more than starting it later.

If your estate is below £500,000 (or £1 million for a couple), none of this applies to you. The IHT nil-rate bands cover you. If you're above that, the realistic thing to do this month is book an appointment with a specialist estate planner. Generic financial advice will not be enough.

Property: first-time buyers face a deadline; landlords face a squeeze

For first-time buyers, the stamp duty relief is reverting on 1 April 2026. The current 0% band on the first £425,000 (with reduced rate up to £625,000) drops back to £300,000 (with reduced rate up to £500,000). For a purchase in the £425,000–£625,000 range, that's up to £11,250 of additional SDLT. If you're already in the buying process, the question is whether you can complete before 1 April. If you're a few months out, the maths of bringing things forward is worth doing — £11,250 covers a lot of moving costs and minor concessions.

For landlords, the squeeze is real. Mortgage interest relief is restricted to a 20% tax credit, not a full deduction. CGT on sale will probably rise further. SDLT surcharge on additional homes remains 3% plus standard rates. Some councils are introducing council tax premiums on vacant or second homes. And from 2028, properties need a minimum EPC rating of C, which costs £10,000–£15,000 per property to retrofit on average.

A portfolio review with real numbers is overdue if you haven't done one. The properties that made sense to hold at 2018 tax treatment and 2021 interest rates do not all make sense to hold at 2026 treatment and rates. If a buy-to-let is breaking even on cashflow before tax and capital growth, and EPC works are coming, the case for selling before CGT rises is a serious one. Calculate it before April.

Welfare: the most painful part of the Budget

I want to handle this carefully because it's the change with the most concentrated harm, and because the people most affected by it are the least likely to be in a position to read a financial planning article in the first place.

The work capability assessment regime is being tightened. The Office for Budget Responsibility expects around 400,000 claimants to be moved off higher-rate ESA and Universal Credit Limited Capability for Work (LCW) payments through the reassessment process. Mental health conditions face particular scrutiny under the new framework. PIP eligibility is also being tightened.

For households relying on these payments, the loss is £300–£400 a month or more. That is not a difficult month. That is the difference between paying rent and not paying rent.

If you claim any of: ESA, Universal Credit with LCW or LCWRA, or PIP — the most important practical thing to do right now is build the medical evidence file you'll need for reassessment. GP letters, specialist reports, and detailed accounts of how the condition affects daily life and capability for work. Reassessment decisions can be appealed, and the success rate at tribunal exceeds 70%, but only with proper evidence. Free help is available through Citizens Advice and welfare rights units in most local authorities — use them. The forms are deliberately complex, and the system is significantly easier to navigate with someone who knows it.

If reassessment downgrades your award, you have 28 days to request a mandatory reconsideration. Do this immediately. Do not let the deadline pass.

If you're worried about the gap that a reduced payment will create, contact your local council about the Household Support Fund. Most councils have it, awards are typically £100–£500, and processing is fast.

This is the part of the Budget where the maths is harshest and the policy debate is most active. I have my views about it. They're not relevant to what you can do this month, which is to prepare your evidence and know your appeal rights. Both of those things matter regardless of what the politics ends up looking like.

Infrastructure spending: real, but not for now

The £25 billion infrastructure package is genuinely large. £22 billion for the NHS over two years. £6.7 billion for schools, including RAAC concrete removal. £10 billion for transport. £3 billion to build 80,000 council homes over five years. £8 billion for green energy and grid upgrades.

None of this hits your household budget in 2026. Some of it will start to show in services by 2028. Most of it is a 5-to-10-year story. If you're waiting on an NHS waiting list, you'll see incremental improvement, not transformation. The political bet is that voters tolerate higher taxes now in exchange for visibly better services later. Whether that bet works depends on delivery, which has not been the strongest suit of any recent government.

For planning your money, treat infrastructure spending as background context, not action.

What to do before 6 April, depending on who you are

If you're a salaried employee under £100,000: review your March 2026 payslip carefully — fiscal drag will have nudged you. Make sure your tax code is right. Increase pension contributions if you can, particularly if you're approaching £50,270 from below. Use your full £20,000 ISA allowance before the tax year ends if you haven't.

If you're in the £100,000–£125,140 band: this is the most important month of the year for you. Every £1 of salary sacrificed into your pension above £100,000 costs you 40p and restores 50p of personal allowance you'd otherwise lose. The combined effect is around 60% tax relief on those contributions. Talk to HR about increasing pension contributions before payroll closes for April.

If you have investments outside an ISA: look at a bed-and-ISA for your largest holdings. Use the full £20,000 ISA allowance. If you have unused spousal allowance, transfer.

If you own a buy-to-let: model the portfolio at CGT 40% and EPC C requirements. Decide whether to sell the marginal properties before April.

If you're approaching retirement with £500K+ in pensions: book a specialist financial planner appointment this month. The pension IHT change is the largest you'll face.

If you own a family business or farm: specialist tax adviser this month. Not next month.

If you're a first-time buyer mid-purchase: push completion before 1 April if it's at all feasible.

If you claim ESA, UC-LCW, or PIP: gather medical evidence now. Know your appeal rights. Contact Citizens Advice if you don't already have a relationship with a welfare adviser.

For everyone: assume a 10–15% rise in your total tax and cost burden over the year. Find £50–£100 a month of slack now, by reviewing direct debits, subscriptions, broadband, mobile, insurance. Most households have it. It's just not on a list anywhere.

The Budget is the worst kind of news cycle: hundreds of changes, only a few of which apply to you, all reported with the same urgency. Most of it is background. The bits that aren't background, you can act on this month. That's the one piece of good news in the whole thing.

Frequently asked questions

Will income tax rates change? No. They remain at 20%, 40%, and 45%. The personal allowance (£12,570) and higher-rate threshold (£50,270) are frozen until 2028, which produces a real-terms tax rise through fiscal drag.

How will Capital Gains Tax changes affect me? The £3,000 annual allowance is already in effect. Rate alignment with income tax bands (potentially 40% for higher-rate taxpayers) is signalled but not yet legislated. If you hold gains outside an ISA, bed-and-ISA them before April, transfer to a spouse where possible, and bring forward any planned disposals.

What inheritance tax reforms are expected? Pensions may be brought within IHT estates. APR and BPR are being capped or means-tested. The seven-year gift rule may extend to ten. If your estate is above £500,000 (£1m for couples), book specialist estate planning advice.

Will Universal Credit or PIP be cut? The work capability assessment regime is tightening. The OBR projects around 400,000 claimants moved off higher-rate ESA and UC-LCW. PIP eligibility narrows, particularly for mental health conditions. Build a medical evidence file now if you claim any of these.

What does this mean for first-time buyers? Stamp duty relief reverts from £425,000 to £300,000 on 1 April 2026. Complete before that date if at all possible. The saving on a £550,000 first-time purchase can be over £11,000.

How will businesses be affected by employer NI? Employer NI rose from 13.8% to 15%; the threshold dropped from £9,100 to £5,000 per employee. That's about £900 a year per employee. OBR projects around 50,000 job-equivalents lost. The Employment Allowance rose to £10,500, which protects the smallest businesses but offers little to anyone with more than around 10 employees.

This article covers major fiscal changes from the Autumn Budget effective from 6 April 2026. For personalised tax advice, consult HMRC, a qualified accountant, or MoneyHelper. For welfare advice, contact Citizens Advice or StepChange. This is general information, not personalised financial advice.