Chancellor John Healey delivers his first Budget on Wednesday 28th October 2026, and the rumour mill is in full swing. Income tax rates look safe, but capital gains, property and pensions are all firmly in the frame.
This is the first Budget of Andy Burnham’s premiership, and both the Prime Minister and Chancellor have been careful to say little about tax. What we do know: the government has recommitted to Labour’s 2024 manifesto pledge not to raise the rates of income tax, National Insurance or VAT. At the same time, neither has ruled out tax rises elsewhere, and the Chancellor’s room for manoeuvre has narrowed after a run of higher-than-forecast borrowing.
Below, we run through what’s already locked in, what’s being rumoured for personal taxes, and what you can sensibly do before Budget day.
A word of caution: nothing below is confirmed until the Chancellor sits down on 28 October. Recent Budgets have shown that some leaks are trial balloons that never happen. Please don’t make big, irreversible decisions on the strength of a headline.
What’s already coming, whatever the Budget says
Many of the biggest changes to your tax bill over the next 18 months were legislated last year, in the November 2025 Budget and the Finance Act 2026. Unless the new Chancellor reverses them, these will happen regardless.
| Change | When | Who it affects |
|---|---|---|
| Income tax thresholds frozen (personal allowance stays £12,570) | Until April 2031 | Anyone whose pay rises: more people pulled into tax and higher rates |
| Savings income tax up 2 percentage points (22% / 42% / 47%) | From April 2027 | Savers earning interest above their Personal Savings Allowance |
| Rental profits taxed 2 points higher (22% / 42% / 47%) | From April 2027 | Landlords in England, Wales and Northern Ireland |
| Cash ISA limit cut to £12,000 a year for under-65s | From April 2027 | Cash savers under 65 (overall ISA limit stays £20,000) |
| Unused pension pots brought into inheritance tax | From April 2027 | Anyone planning to pass on a pension |
| High Value Council Tax Surcharge (“mansion tax”) of £2,500 to £7,500 a year | From April 2028 | Owners of homes in England worth £2m or more |
The OBR estimates the extended threshold freeze alone will create around 4.8 million more higher-rate taxpayers and 600,000 more additional-rate taxpayers.
Rumour 1: Income tax — a bigger personal allowance, or a longer freeze?
The rates of income tax are protected by the manifesto, so the speculation centres on thresholds. Two rumours pull in opposite directions.
A £3,000 rise in the personal allowance. The Telegraph has reported that Number 10 and the Treasury are looking at lifting the tax-free personal allowance from £12,570 to around £15,570. The proposal, put forward by Labour donor Dale Vince, would be paid for by raising capital gains tax (see below). A higher allowance would help lower earners most, saving a basic-rate taxpayer up to £600 a year. The Prime Minister has floated the idea before, but it would be expensive.
An even longer threshold freeze. The opposite rumour is that the freeze, already due to run until 2031, is stretched further. It raises money quietly without breaking the manifesto, which is why it keeps coming up.
Protecting pensioners on the State Pension. The State Pension is expected to rise by around 3.9% next April, which would take the full new State Pension above £13,000 a year and over the personal allowance for the first time. The Prime Minister has committed that low-income pensioners won’t be dragged into income tax this parliament, and reports suggest the Budget will set out how pensioners with no other income will be kept out of tax.
Rumour 2: Capital gains tax — the front runner
If there is one personal tax most likely to rise, it is capital gains tax (CGT). The i Paper has described it as the front runner among the Chancellor’s revenue-raising options, and the Prime Minister, Chancellor, Chief Secretary to the Treasury and Pensions Minister have all supported CGT rises in the past.
CGT rates are currently 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, after rises in the 2024 Budget. The options being discussed include:
- Aligning CGT with income tax rates, possibly phased in over several years. Gains could then be taxed at up to 45%.
- Ending the CGT uplift on death, so that gains built up during your lifetime no longer get wiped clean when assets pass to your heirs.
- Squeezing Business Asset Disposal Relief further, raising the tax on business owners selling their companies. This relief has already been cut twice in recent Budgets.
Who should pay attention: landlords and second-home owners thinking about selling, investors with large gains outside ISAs and pensions, and business owners planning an exit.
Rumour 3: Pensions — the tax-free lump sum (again)
The perennial pension rumour is back: that the tax-free lump sum, currently 25% of your pot up to a maximum of £268,275, will be cut. It has surfaced before almost every recent Budget and has not happened yet. Most commentators think major pension changes are an outside chance this time, not least because the government has the April 2027 inheritance tax changes to pensions already in train.
The danger is acting on the rumour. Analysis of FCA data suggests an extra £10 billion was withdrawn from pensions ahead of the 2024 Budget alone, with many people taking cash earlier than made sense for them. Money taken out can’t easily be put back, and may end up in your estate for inheritance tax.
Other pension ideas discussed around recent Budgets include a flat rate of tax relief on contributions, and a small tax charge on pension fund management fees. Neither has gained much traction so far.
Rumour 4: Property and inheritance tax
A lower “mansion tax” threshold. The High Value Council Tax Surcharge is already due from April 2028 on homes worth £2 million or more. The Times reports that cutting the threshold to £1.5 million is a live discussion in the Treasury, which would roughly double the number of homes caught. Estate agent Knight Frank has also warned the charges themselves may rise.
Holiday lets taxed as second homes. The Chancellor is reported to be considering treating holiday lets as second homes for council tax rather than as businesses, which could add £1,000 to £3,000 a year for a typical owner.
Inheritance tax: probably left alone. With the April 2026 changes for farms and businesses and the April 2027 pension changes still fresh, most commentators expect inheritance tax to be left largely untouched. The government has said it has no plans for a flat 10% inheritance tax on all estates, and a full replacement of council tax and stamp duty with a property or land value tax has reportedly been shelved.
The rumours at a glance
| Rumour | Our read |
|---|---|
| Higher capital gains tax, possibly aligned with income tax | Most likely of the personal tax rises |
| Lower mansion tax threshold (£2m to £1.5m) | Plausible: reported as under active discussion |
| Holiday lets taxed as second homes | Plausible: the Treasury has confirmed a review |
| Pensioners on the State Pension kept out of income tax | Likely: the Prime Minister has committed to it |
| Personal allowance raised to £15,570 | Possible, but costly and would need funding |
| Income tax thresholds frozen beyond 2031 | Possible |
| Tax-free pension lump sum cut | Unlikely: rumoured before most recent Budgets, never done |
| Flat 10% inheritance tax on all estates | Unlikely: government says it has no plans |
| Higher rates of income tax, NI or VAT | Ruled out by the manifesto pledge |
These are our own views based on public reporting, not predictions you should act on.
What you can do before 28th October
The best preparation is to make sure you’re using today’s rules well, rather than guessing at tomorrow’s.
- Use this year’s allowances. Your £20,000 ISA allowance, £3,000 CGT annual exempt amount and pension annual allowance all work under current rules.
- Review any planned disposals. If you were already planning to sell a property, shares or a business, talk to us about timing. Don’t rush a sale purely on a rumour.
- Check your income against the thresholds. If you’re close to £50,270 or £100,000, pension contributions, salary sacrifice or Gift Aid could keep more of your income in a lower band.
- Leave your pension alone unless it suits your plans. Taking tax-free cash early “just in case” is rarely the right move.
- Book a post-Budget review. Once the detail is published on 28 October, we’ll know exactly what has changed and when it takes effect.
Need advice tailored to you? Get in touch with the Trusted Tax Advice team. We’ll be publishing a full breakdown on Budget day and can help you work out what it means for your own tax position.
This article reflects reporting and speculation as at 2nd October 2026. It is general information, not personal tax or financial advice. Nothing is confirmed until the Budget on 28th October 2026.
