The Chancellor recently set out the Government’s financial plans in this year’s Budget. In the second of two Keynotes, our tax consultant solicitor Michael Fluss provides an overview of how the changes will impact your finances.
Property
- High Value Council Tax Surcharge (HVCTS/Mansion Tax): As originally announced last year, from April 2028, annual charges will apply to residential properties in England worth (as at “around” April 2026) £2m or more, as follows:
- £2.5k for properties worth £2m–£2.5m;
- £3.5k for properties worth £2.5m–£3.5m;
- £5k for properties worth £3.5m–£5m; and
- £7.5k for properties worth over £5m.
Charges will increase in line with CPI from 2029/30. Revaluations will be conducted every five years, with potential uprating of bands. The next revaluation will take place in 2033. A premium of 100% will be charged on properties left substantially unfurnished and unoccupied for a period of 12 months or more. Liability falls on owners (rather than occupiers).
- Annual Tax on Enveloped Dwellings (ATED): Annual charges will increase by 3.5% from 1 April 2027.
- SDLT group relief: In relation to intra-group property transfers, the clawback rules are amended to provide for group relief to be clawed back where the purchaser leaves the group within three years of the transfer, notwithstanding that the vendor has been wound up.
- SDLT – Local Government Pension Scheme (LGPS): Relief from SDLT will apply from 28 October 2026 to 31 March 2032 to qualifying transfers of freehold and leasehold interests from LGPS administering authorities to eligible investment funds operated by LGPS asset-pool companies, to facilitate the Government’s mandatory pooling of local government pension fund investments.
- Income tax on rent: From 6 April 2027, rates in England, Wales and Northern Ireland will increase to 24%, 44% and 49% for basic-rate, higher-rate and additional-rate taxpayers, respectively.
- Capital allowances – plant and machinery (including fixtures) – writing-down allowances (WDAs) and first-year allowances (FYAs): From 1 April 2027 for Corporation Tax purposes (and 6 April 2027 for Income Tax purposes), the main-rate WDA will reduce from 14% to 12%, slowing relief on expenditure relieved over time. From 1 January 2027, a 50% FYA will be available for qualifying expenditure on main-rate new plant and machinery where 100% full expensing is unavailable, allowing half the cost to be relieved upfront, with the balance generally relieved through subsequent WDAs. The 50% FYA is particularly relevant to unincorporated businesses, which cannot claim full expensing, and to businesses acquiring qualifying plant and machinery for leasing, which is generally excluded from full expensing.
- No SDLT on rent element of assured tenancies: Following on from a Written Ministerial Statement on the point earlier this year, the Budget has confirmed the introduction of legislation providing for SDLT not to be chargeable on the rent payable under assured tenancies and for SDLT returns not to be required to be submitted on account of that rent. This removes the concern previously expressed that the replacement of fixed term assured shorthold tenancies by periodic assured tenancies under the Renters’ Rights Act 2025 could give rise to rent “accumulating” under the term of the tenancy for SDLT purposes, giving rise, in turn, to the NPV of that rent exceeding the 0% threshold and, therefore, SDLT payment and filing obligations for the tenant.
Personal
- Savings income and Property Income (rent): From 6 April 2027, income tax rates will increase to 24%, 44% and 49%. The 0% starting rate for savings (up to £5k, depending on other income) and the Personal Savings Allowance (£1k for basic-rate taxpayers and £500 for higher-rate taxpayers; nil for additional-rate taxpayers) remain unchanged.
- Dividend income: No further changes announced at Budget 2026. For completeness, the ordinary and upper rates are 10.75% and 35.75%, respectively, from 6 April 2026, with the additional rate remaining at 39.35%. The £500 dividend allowance is unchanged.
- ISAs: The annual cash ISA subscription limit will remain at £20k from April 2027, reversing the previously announced reduction to £12k for under-65s. The overall annual ISA limit also remains £20k. The Government will explore a new incentive to encourage first-time investors to invest through stocks and shares ISAs.
- Lifetime ISAs: From 29 October 2026, the withdrawal charge will reduce from 25% to 20% where a first-time buyer uses Lifetime ISA funds to purchase a property costing more than £450,000, provided the other qualifying conditions are met. This reduces the financial penalty for buyers purchasing above the property-price cap. The 25% charge remains for other unauthorised withdrawals.
- Salary sacrifice (previously announced): From April 2029, the NIC exemption for employee pension contributions made through salary sacrifice will be capped at £2,000 a year, with employee and employer NICs applying to excess contributions.
If you have any questions or would like to discuss any aspects of this year’s Budget, please contact Michael Fluss.
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