An array of rabbits pulled out of the Budget hat: Sarah Coles
In the run up to the Budget the question was whether John Healey was remaining tight-lipped because he was waiting to produce a rabbit out of a hat, or whether he was keeping schtum because he just didn’t have much to say. It turns out it was the former.
In fact, on the day, there was a whole colony of rabbits pulled from an array of millinery. There was an ISA announcement bonanza, a raft of tax changes, a host of cost-of-living support and even a joke about Andy Burnham’s appearance on Gogglebox.
ISAs
The U-turn on cutting the Cash ISA allowance for those under the age of 65 was one of the most positive pieces of news. On the face of it, this was something that would only affect younger people with significant sums of cash, so people with more typical savings might assume it doesn’t affect them. However, the unintended consequences of the change were overwhelming because it would have ushered in a raft of extra restrictions and charges which not only punished diligent savers but also added needless complexity to the ISA range and hardened the border between cash and long-term investing. It would have made it far harder for people to gradually move into less risky assets as they approached retirement, so this is a real victory for common sense.
However, it wasn’t the only ISA that made the speech. There was also news of a new starter Stocks and Shares ISA. We’ll have to wait for more details, but the idea will be some kind of incentive for people investing for the first time – using the carrot to tempt them to dabble instead of a stick forcing them to stop saving.
Healey also had news on the First Time Buyer ISA, which will be fairly similar to the Lifetime ISA, except that it can only be used for house purchases, and offers the bonus at the point of purchase, so you can withdraw for other reasons before then if you need to without paying a penalty.
However, this ISA won’t actually be on offer until 2029, so anyone putting money aside for a property deposit, who qualifies for a LISA, can take advantage. After it is replaced by the new ISA, you can still use the two ISAs alongside one another
There was more news on the new equity loan scheme for first time buyers too. We already knew Your First Home will offer people with a 2.5% deposit a loan for another 20% - so they only need apply to a mortgage lender for the rest. We knew there would be income and property price caps, but now we know a bit more about what the government gets in return for lending you the money.
The government loan will be interest- free for five years, then interest will be charged at 1.5% for the 6th year and 3% for the 7th year onwards. When you repay, you’ll have to hand over the same percentage of the property price as you borrowed. So, for example if you borrow 20% of a £200,000 property, you’ll borrow £40,000. However, if the price rises to £300,000 by the time you sell, you will need to repay £60,000.
Tax
The tax changes also flowed thick and fast, but there were a few really notable ones. There was bad news for savers, because from next April the tax rate on savings interest will rise to 24% for basic rate taxpayers, 44% for higher-rate taxpayers and 49% for additional rate taxpayers. For someone with £5,000 of savings interest above their tax-free allowances, the hike to savings rates from April will cost an extra £200 a year.
There was also misery for anyone who generates income from a property, who will see another hike to their tax rates. Following the same path as savings tax, the tax rate for property income will rise by another two percentage points on top of the planned hike – taking the rates to 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate payers from April next year.
Another big change was the extra banking surcharge. It may not immediately strike you as something that could affect you. However, there’s a risk some of this extra cost is passed on to customers through lower savings rates or more expensive mortgage deals.
On a more positive note, there was a change to the personal allowance for low-income pensioners. After the previous Budget, Rachel Reeves pledged that anyone living on just the state pension wouldn’t pay tax on it when the triple lock pushed the state pension over the personal allowance. Healey confirmed that this milestone will be passed in April, so the government will introduce a bespoke personal allowance for low-income state pensioners, which matches the state pension. This will then taper by £1 for every £3 of income above this level, after which the usual personal allowance will apply. It feels horribly complicated and needlessly confusing, but it’s definitely better than having to complete a tax return and paying tax on your state pension.
Cost-of-living
There was help for those on lower incomes who are struggling with the cost of living. Earlier in the week, the government had already announced the removal of import tariffs on over 100 products, an end to the carers’ allowance cliff edge, an extension of parental pay, and permanently higher tax-free mileage rates.
The Budget delivered more widespread changes, including support for energy bills. This included a £100 council tax rebate for those in bands A-D to help cover the cost of bills, an extension of the VAT cut on electricity bills until July, and a removal of green levies from bills. This won’t fully unwind the horrible impact of higher energy costs in January, but it will help. Healey also announced a further extension in the 5p fuel duty cut to July. Plus, the new minimum wage was announced ahead of inflation, which will help ease financial pressure on lower earners.
The fact there was more support for those on tight budgets, help for first time buyers, a tax break for low-income pensioners and relief for Cash ISA savers will help answer the question of whether this Budget can actually make life easier. The question of whether it’s enough, as the cost-of-living ratchets ever-higher, remains to be seen.
Centenarians
The King needs to buy his birthday cards in bulk nowadays, because there were 16,400 people aged 100 or over in 2025 and 760 who made it to at least 105. And while longevity is something to celebrate, if we haven’t planned our retirement incomes to ensure they last long enough, it comes with a serious downside. This is particularly the case if couples don’t think through what will happen after one of them dies.
If you have a defined benefit pension there are likely to be survivor benefits. If you have a defined contribution pension and use drawdown, you can leave your spouse the remainder of your pension pot. If you opt for an annuity, however, you will have the choice of either a single life annuity, which pays until you die, or a joint life annuity, which pays until you and your spouse have both died. Worryingly, two thirds of policies taken out are single life, and if the person with the bulk of the income takes out a single annuity and dies first, it can leave their spouse in dire straits.