John Healey delivered his first Budget against a challenging economic backdrop, balancing continuing pressure on household finances and energy costs with the need to maintain fiscal discipline. While there were relatively few broad-based tax increases, the Budget contained a surprisingly wide range of targeted measures. Alongside those intended to provide more immediate financial support, the Chancellor also announced a number of longer-term reforms that will require careful consideration as the detail emerges. In this summary, we highlight the principal announcements.

Income Tax

No changes to the main income tax rates for earnings or dividend tax.

A 2% increase in income tax rates for property and savings income, to be introduced from April 2027. This is in addition to the previously announced increase of 2% (in the October 2025 Budget) – i.e. basic rate tax for savings income increases from 20% to 24%.

The government will modernise the existing Payments on Account system for Income Tax Self Assessment (ITSA). From April 2029, taxpayers who already make Payments on Account will make smaller, more regular contributions towards their tax bill throughout the year, bringing payment closer to when income is earned. HMRC suggest that where a taxpayer has sufficient PAYE income, they will be able to choose to pay any additional tax (due on rental income or dividends for example) via PAYE. HMRC have noted 2029/30 to be a transitional year which may bring about cashflow issues for those transitioning to the new regime.

Capital Gains Tax (CGT)

No changes to the headline rates despite speculation regarding alignment with Income Tax. Recent announcements had suggested we would see no increases to CGT which is perhaps a surprise.

Founders’ Relief

The Budget announced a new “Founders Relief”. As ever, the devil is in the detail, and this is subject to a consultation closing on 30 November 2026. The relief will apply to qualifying disposals made on or after 6 April 2027.

Founders’ Relief will allow for a reduced 10% rate of CGT on qualifying disposals, up to a lifetime limit of £10 million. The limit will apply per individual, so more than one individual could claim in respect of the same company. The relief is targeted towards companies with a proven record of growth and innovation to encourage starting, scaling and staying in the UK.

Provisional conditions outlined in the consultation paper are that individuals will need to:

• Hold 25% of the company’s ordinary share capital at the point when the trading activity for which the company was formed commenced, or the preparation for that trade commenced;
• Hold the shares or securities for at least five years before their disposal; and
• Be UK resident under the Statutory Residence Test for at least five continuous tax years before the disposal.

The company itself will need to meet strict turnover and headcount tests, with a company needing to meet two of the three tests, as follows:

• Turnover test – Annual average compound growth in turnover of 25% across three consecutive accounting periods within the ten years before disposal, with turnover of at least £10 million in the accounting period before the first of these three periods.
• Headcount test – Annual average compound growth of at least 25% in qualifying full-time equivalent employees across three consecutive accounting periods within the ten years before disposal, with at least 15 full-time employees in the accounting period before the first of these three periods.
• Innovation test – The company must (1) have incurred qualifying expenditure of £1.5 million or more on research and development (R&D) for which it met all of the conditions to make an R&D tax relief claim and (2) have claimed R&D tax reliefs for that expenditure for an accounting period or periods ending within the three years before disposal.

Business Asset Disposal Relief (BADR)

From April 2027, the lifetime limit for Business Asset Disposal Relief will reduce from £1 million to £500,000 of qualifying capital gains. BADR currently allows qualifying business disposals to benefit from a reduced Capital Gains Tax rate of 18%, compared with the standard higher CGT rate of 24%.

Enterprise Management Incentive (EMI) Scheme

Changes to the EMI Scheme to be effective from April 2026, with significant expansion in eligibility limits and administrative changes.

For eligible companies, the changes that will apply to EMI contracts granted on or after 6 April 2026 are:

• Company options will be increased from £3 million to £6 million.
• Gross assets will be increased from £30 million to £120 million.
• The number of employees will be increased from 250 employees to 500 employees.

Existing EMI contracts can be amended, provided the amendment is in line with the legislation.

The Government will expand and rename the Company Share Option Plan as EMI2. From 6 April 2027, the individual option limit will increase from £60,000 to £120,000, the exercise period will be extended to 15 years and the interaction with the existing EMI option limit will be removed.

ISA Allowances

The proposed reduction in Cash ISA limits have been scrapped – the £20,000 ISA allowance remains for both Stocks & Shares and Cash ISAs.

The Government will introduce a new First Time Buyer ISA from April 2029 to replace the Lifetime ISA for new savers. Individuals will be able to contribute up to £4,000 a year and receive a 25% Government bonus towards a qualifying first-home purchase of up to £450,000 in value, subject to a maximum lifetime bonus of £20,000. Unlike the Lifetime ISA, there will be no upper age limit and the Government bonus will be paid when funds are withdrawn to purchase the property.

The withdrawal charge applying to Lifetime ISAs will reduce from 25% to 20%.

The Government are proposing to introduce a new Starter ISA aimed at encouraging first time investors in Stocks and Shares. No firm details available, only that the Government will work with the investment industry to develop a new ISA aiming to reward first-time investors.

Help for First Time Buyers

Along with the new First Time ISA, the Government is introducing the “Your First Home Scheme”. This is limited to first-time buyers only and specifically aimed at those who would otherwise struggle to purchase a property.

The distinction with the First Time ISA is this is an equity loan open to first time buyers with a deposit of 2.5% and providing an equity loan worth 20% of the value of a new build property only. Household income limits are in place (£110,000 outside London, £140,000 in London). Local property price caps will apply (rather than a national limit with inner London set at £650,000 for example). This is higher than the First Time Buyer ISA limit.

Pensions

No reduction in tax-free cash – the maximum tax-free cash for those without Lifetime Allowance protection remains the lower of £268,275 or 25% of the Pension value.

EIS & VCT Investments

No changes to the tax reliefs available following the reduction in income tax relief for VCT investments made in the last Budget. However, the Government have announced an intention to make investment into VCT, EIS and SEIS easier through a small number of “technical changes”.

This document has been prepared and distributed for information by Lincoln Private Investment Office LLP (“LPIO”) and is a marketing communication. LPIO is authorised and regulated by the Financial Conduct Authority. The information in this document does not constitute an offer by LPIO to enter into a contract/ agreement, nor is it a solicitation to buy or sell any investment. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way.