Almost all about ISAs in the Budget, though advisers unimpressed with founder’s relief
Was it a quiet Budget for you? The main headlining story was the move by the Chancellor to take pensioners reliant on the state pension out of tax with a new Pension Tax Allowance.
As MoneySavingExpert reported – state pensioners with incomes under £13,037 a year will pay no Income Tax.
The method came in for some criticism from consultancy LCP which suggested those just above the level of relief may not be so happy with a tapering system applying.
It likely produced the Chancellor’s least favourite press release – Chancellor creates new 53% tax rate for around 200,000 low-income pensioners.
A fiddly reform of ISAs, which would have cut the cash component to £12,000 with a system of penalties, has been ditched. Morningstar does some analysis here.
Platforms have complained about the spend so far. Citywire even suggested fury over sunk costs.
MoneyWeek discusses the new Starter ISA designed to incentive investing after an industry consultation. A new First Time Buyer ISA will replace the Lifetime ISA in 2029, though it will retain the criticised £450,000 cap.
Advisers initially welcomed a new Founders Relief offering a 10% CGT rate on qualifying share disposals made on or after 6 April 2027, up to a lifetime limit of £10 million per individual. Here, Law firm Charles Russell Speechlys provides a detailed review.
By the end of the week, in Citywire New Model Adviser, advisers complained that almost no-one was going to qualify.
The Institute for Fiscal Studies gave this verdict – “The Chancellor’s commitment to fiscal consolidation is welcome. But it is delivery that really matters. The plan to reduce borrowing has been pushed back. The planned consolidation has an Achilles’ heel in the form of very tight plans for public service spending. This Budget has a raft of fiddly measures but very little that will move the dial on growth.”
And more generally no news was bad news as it looks as if pensions will be brought under IHT with no changes in detail.
There were two potential important tweaks for some clients. Corporate Adviser reports confirmation of the removal of the two-year rule for tax-free pension and lump sum death benefits.
The government has also changed its definition of terminal illness which should facilitate easier access of pension funds in these circumstances. All of these will be introduced through in the Finance Bill 2027-28.
There were a few non-Budget stories of interest. Dynamic Planner launched its agentic service on its platform.
The Pensions Regulator set out the seven principles it expects the workplace sector to follow when using AI. It does feel as if TPR has been clearer than the FCA.
The principles include starting with the problem rather than the technology, keeping human responsibility central, treating governance as an ongoing process, planning for disruption, ensuring good-quality data, prioritising transparency and explainability, and supporting fair and accessible outcomes. All seem fair enough.