Chancellor of the Exchequer John Healey will deliver his UK Budget on Wednesday, promising what he has described to Treasury officials as a "breathing space Budget for households and businesses" after two years of steep tax increases.
Writing in Money Mail two days before what he calls "B Day", financial columnist Jeff Prestridge warned that while Wednesday's statement appears gentler than former Chancellor Rachel Reeves' 2024 and 2025 Budgets, households and businesses must still prepare for a wave of Labour tax rises taking effect between April next year and 2029.
Reeves' two previous Budgets raised taxes by a combined £75 billion. Prestridge said the UK economy is already creaking under £3 trillion of debt and anaemic business activity as rising inflation and energy bills worsen the cost-of-living crisis, joking that a house he fell in love with in Tavira, Portugal two months ago looked increasingly inviting.
Unlike the run-up to the 2024 and 2025 Budgets, when Treasury "kite-flying" tested public reaction to rumoured tax grabs, Healey has moved to quash false speculation. Previous leaks preceded last year's curbs on salary sacrifice company pensions, while unfulfilled rumours of cuts to the tax-free pension lump sum at age 55 caused tens of thousands of people to panic and withdraw cash they did not need.
Investing platform AJ Bell said the lack of rumours this year has not stopped some investors from withdrawing tax-free pension cash ahead of Wednesday's speech just in case. However, Healey ruled out further hikes in capital gains tax (CGT) earlier this month despite pressure from Labour MPs, leaving rates on profits from selling assets such as shares or a second home at 18 per cent for basic rate taxpayers and 24 per cent for higher and additional rate taxpayers.
Expected fuel duty and energy bill relief
Although unconfirmed, the Budget is expected to include targeted help for energy bills by raising the annual £150 Warm Home Discount for people on means-tested benefits including pension credit. The payment is automatic in England and Wales, may require an application in Scotland, and is paralleled in Northern Ireland by the "affordable warmth" scheme for low-income households.
Around one million low-income pensioners could also receive a top-up to their £12,570 tax-free personal allowance to shield more money from income tax. With petrol prices at four-year highs, Healey may scrap planned fuel duty rises on unleaded petrol, which is currently levied at 52.95p a litre and scheduled to rise to 55.95p at the start of next year and 57.95p in March, though a tax rise on imported fuel could still push pump prices higher.
Business tax cuts are also expected as Healey seeks to show he backs companies more than Reeves, whose hike in employer National Insurance bills triggered job cuts and business closures. Even so, Prestridge warned that frozen tax thresholds and oncoming tax changes require immediate action.
April cash ISA limits and savings tax hikes
Two scheduled tax changes will hit savers next April. First, only people aged 65 and over will be able to put their full £20,000 annual Individual Savings Account (ISA) allowance into a tax-free cash ISA, while anyone under 65 will be capped at £12,000 in cash and must use a stocks and shares ISA for the rest.
Second, tax on interest in ordinary savings accounts will jump by two percentage points from April to 22 per cent for basic rate taxpayers, 42 per cent for higher rate taxpayers and 47 per cent for additional rate taxpayers. The annual personal savings allowance, frozen since April 2016 at £1,000 for basic rate and £500 for higher rate taxpayers with nothing for additional rate payers, is more likely to be cut or axed for higher earners than raised.
Prestridge said Healey will not revoke the cash ISA rules despite Money Mail's "Hands Off Our Cash Isas campaign" launched in early 2025, joking he would "do a Lady Godiva" through his home town of Wokingham if the Chancellor relented. He urged savers to move taxable cash into ISAs, switch to competitive interest rates via sister website This is Money, and use tax-free inter-spousal transfers or joint accounts (which split interest 50:50 for tax purposes) so married couples and civil partners use both sets of allowances.
Bank tax impact on UK mortgage rates
An expected Budget tax hit on banks threatens to push up mortgage costs as lenders seek extra revenue alongside rising mortgage rates driven by persistent inflation and interest rate expectations. Homeowners on variable-rate loans, those nearing the end of a deal and new buyers are advised to use a mortgage broker to lock in a fixed-rate loan quickly, with five-year fixes averaging around 6 per cent but available at 5 per cent by shopping around.
Capital gains and dividend tax rules for investors
Dividend tax rose by two percentage points at the start of this tax year to 10.75 per cent for basic rate and 35.75 per cent for higher rate taxpayers, while staying at 39.35 per cent for additional rate payers. Tax-free annual allowances now stand at £3,000 for CGT and £500 for dividends, down from £6,000 and £1,000 three years ago.
While the £20,000 stocks and shares ISA allowance will stay in place, any move to align dividend tax with income tax for backbenchers or mandate a UK shares quota in ISAs would wait until next April at the earliest. Prestridge advised couples to maximise both £20,000 ISA allowances, use tax-free inter-spousal transfers to share allowances and shift surplus dividends to the lower-taxed partner, and use platform "bed and Isa" services to sell shares within the £3,000 CGT limit and buy them back inside an ISA.
Inheritance tax on pensions from next April
Silence ahead of Wednesday leaves open whether Healey will leave untouched contribution tax relief and the 25 per cent tax-free pension cash sum available from age 55 (capped at £268,275), or treat the quiet run-up as "carte blanche" for cuts. Prestridge urged savers still building retirement pots not to skimp on contributions.
From next April, unused pension pots passed to family members on death will fall into the 40 per cent inheritance tax (IHT) net, and beneficiaries will also pay income tax on withdrawals if the holder dies aged 75 or over. Older savers can reduce the bill by drawing down pension cash to spend, buying an annuity to gift surplus income, or making gifts using the £3,000 annual allowance, £250 small gifts rule, or seven-year exemption rule.
Prestridge also urged households to switch energy, broadband, phone and essential insurance deals, while joking they should stock up on tinned cans, candles, torch batteries, power packs and a wind-up radio to "rant and rave" at BBC Radio 4's Today programme if Net Zero policies cause blackouts. Alongside the guide, Simon Lambert is leading a six-week "Protect Your Money" plan that is free for M+ subscribers.
