The chancellor has unveiled significant financial changes in her latest budget that will impact how Britons save, invest and plan for the future. From adjustments to pension contributions and inheritance tax thresholds to new rules for ISAs and property taxes, these measures require immediate attention and strategic planning.
Maximise Your ISA Benefits Before 2027 Changes
The £20,000 annual limit for tax-efficient Individual Savings Accounts remains unchanged, but significant alterations are coming in April 2027 for those under 65. The cash ISA component will be capped at £12,000, with any additional contributions requiring placement in stocks and shares ISAs. Savers aged 65 and above can continue placing the full £20,000 into cash ISAs.
Sarah Coles of Hargreaves Lansdown advises acting quickly: "If it makes sense to open a cash ISA, and you have the money and allowance available, it's worth acting sooner rather than later, while there are still strong rates around." Current attractive rates include Trading 212's 4.56% on easy-access cash ISAs and Leeds Building Society's 4.05%.
Understanding your personal savings allowance is crucial - basic rate taxpayers can earn £1,000 interest tax-free, while higher-rate payers receive £500. With 4% returns, this means holding up to £25,000 before facing tax as a basic-rate taxpayer.
Strategic Share Transfers and Dividend Tax Planning
One unexpected budget announcement involves increased dividend taxation from April 2026. The ordinary rate rises from 8.75% to 10.75%, while the upper rate increases from 33.75% to 35.75%. These apply only after using your personal allowance and £500 annual dividend allowance.
The "Bed & Isa" process allows investors to transfer shares into ISA wrappers, protecting future growth from capital gains and dividend taxes. However, selling investments for transfer may trigger capital gains tax, making professional advice essential.
Jason Hollands of Evelyn Partners highlights opportunities for married couples: "This involves shifting investments and cash to a spouse. It does not give rise to a taxable event which it would in the case of unmarried couples." Prioritise transferring shares generating the highest dividends into your ISA first.
Salary Sacrifice Adjustments and Pension Planning
From April 2029, national insurance exemptions for salary sacrifice pension contributions will be limited to the first £2,000 annually. This gives workers nearly three-and-a-half years to optimise their arrangements.
Chris Britton of Reward Gateway/Edenred explains: "It's easy to assume that continuing to increase your pension contributions is no longer valuable, but this is not necessarily true. All contributions to your pension, even above the £2,000 threshold, are exempt from income tax."
Employers may offer alternative salary sacrifice schemes for bicycles through Cycle to Work programmes or electric vehicle leasing, providing additional ways to reduce taxable income while obtaining valuable assets.
Inheritance Tax Planning Through Strategic Gifting
Extended inheritance tax threshold freezes until April 2031, combined with including unspent pensions in IHT calculations from April 2027, make proactive estate planning essential.
RBC Brewin Dolphin's survey revealed that 73% of affluent individuals had never made financial gifts to reduce potential inheritance tax liabilities. Their advice is clear: "Start the process of gifting as soon as possible."
Several gifting allowances remain available:
- Annual exemption: £3,000 in assets or cash per tax year
- Small gift allowance: Unlimited gifts up to £250 per person
- Wedding gifts: Tax-free allowances for marriage celebrations
- Potentially exempt transfers: Gifts of any value become IHT-free if the donor lives seven years after giving
Navigating the New High-Value Property Tax
The so-called "mansion tax" introduces a council tax surcharge for English properties valued above £2 million from April 2028. Charges range from £2,500 annually for £2m+ properties to £7,500 for homes exceeding £5 million.
Morningstar analysts predict 5-10% price corrections for high-value properties, with potential ripple effects on homes just below the £2 million threshold. Chris Ball of Hoxton Wealth questions future buyer demand: "You have to question who's going to want to try to buy these properties."
Homeowners approaching the threshold might reconsider major improvements like loft conversions or conservatories that could push property values over the limit. For those considering downsizing to avoid the tax, careful calculation of moving costs including stamp duty is essential.
The extended implementation period until 2028 provides valuable time for affected homeowners to assess their options, whether that involves setting aside funds for the new tax, modifying improvement plans, or accelerating downsizing decisions.
