Market Impact

The Chancellor’s second Budget delivered a series of tax and welfare changes, with many details revealed earlier than planned as the Office for Budget Responsibility published its forecasts ahead of the speech. Below is a high-level overview of measures most relevant to individuals, investors and higher-value property owners.

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Headline Policy Changes

• Personal tax thresholds frozen to 2031
  The freeze on income tax bands has been extended for a further three years. As earnings rise, more individuals will gradually fall into higher tax bands, contributing an additional £8.3bn by the end of the decade.
• Salary sacrifice pension contributions capped
  Employer pension contributions via salary sacrifice will be capped at £2,000 a year before National Insurance becomes payable. This reduces the NIC saving currently available and is expected to raise £4.7bn.
• Council tax surcharge for £2m+ properties
  From April 2028, properties valued above £2m will incur an additional council tax levy, targeted mainly at higher-value urban and commuter locations.
• Two-child benefit limit removed
  The welfare cap restricting child benefit to the first two children will be scrapped. This adds approximately £3.5bn to the benefits budget.
• Reduced Cash ISA allowance for under-65s
  From April 2027, the annual ISA limit will fall from £20,000 to £12,000 for those under 65. Individuals aged 65+ will retain the current £20,000 allowance.

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Other Measures Affecting Investors & Consumers

• Dividend, savings and property income tax up by 2 percentage points
• Electric vehicles to face a pay-per-mile charge of 3p
• Higher taxes on online gaming and sports betting
• Tobacco duty rises and a new levy on vapes

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Fiscal Position

• Fiscal headroom rises to £22bn, but remains below historical averages.
• Public debt is expected to peak at 83.7% of GDP in 2028–29 before edging lower.
• Day-to-day spending is forecast to move into surplus by 2028–29, meeting fiscal rules.
• The UK tax burden is projected to reach a historic high of 38.3% of GDP by 2030–31.

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Economic Outlook

• UK growth forecasts have been downgraded for 2026, with medium-term expansion expected to average 1.5%.
• Inflation is expected to remain higher than previously forecast, especially through 2025–26.
• Slower productivity growth poses a continued challenge to wage growth and living standards.

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What This Means for Individuals and Investors

The extension of tax band freezes, changes to ISA allowances and tighter pension relief all point to a rising tax burden on income and savings over the coming years. Strategic financial planning — particularly around wealth structuring, pension funding, and investment efficiency — will therefore become increasingly important.