A quiet budget that may still change the landscape

The 2026 Budget was trailed as a quiet budget. A Budget designed, in the words of Chancellor John Healey, to “steer us through the global economic storms today”.

In many ways, it proved to be just that. However, there are key areas where it may still recast landscapes and potentially change behaviour.

In this article, we review the main Budget announcements for individuals, with particular reference to aspects that may have a longer-term impact. Rothschild & Co does not provide tax advice, and you should always seek guidance from your tax advisers.

Personal tax rates and allowances

In line with this being a quiet Budget, there were limited changes to personal tax rates and allowances. The personal allowance and basic, higher and additional rate tax thresholds all remain frozen until 2031.

The government stuck to its manifesto commitment of not raising income tax rates on earned income and, as anticipated, CGT rates also remained at their pre-Budget levels.

For example, a tax rate of 49% makes it ever more attractive to receive capital rather than income returns. It may also encourage the use of tax-efficient 'wrappers' to hold investments.

Wrappers enable the return on investments to be received in a favourable tax environment, normally delaying the higher tax charges until value is extracted from the wrapper. Examples include family investment companies, offshore bonds and open-ended investment companies, such as our New Court Fund.

It is important, however, to select a wrapper with care, and find the one that most suits the objectives of you and your family. The long-term viability of a wrapper should also be considered. For example, protected cell companies were an increasingly popular way of deferring a CGT charge on the sale of assets.

However, the worry was that it only required a short stroke of the Chancellor’s pen to negate their effectiveness, and he did indeed pick up his pen and the main advantages of protected cell companies were removed from 28 October 2026.

Changes for family companies

As anticipated, there were no changes to the corporation tax rate of companies and so more individuals may explore the possibility of moving their property portfolios into a UK company to shelter the rent from higher rates of tax. Although, of course, there will be a further tax charge when monies are extracted from the company.

It is in the context of family companies that the landscape will change the most as a result of the 2026 Budget. The Chancellor introduced four measures that will impact shareholders in such companies.

First, the Chancellor is to reduce the level of Business Asset Disposal Relief from £1m to £500,000, with effect from 6 April 2027. The relief is now worth £30,000 per qualifying shareholder.

Second, and in better news, there will be a new CGT relief — 'Founders Relief' — again operative from 6 April 2027, with a consultation period ending on 30 November regarding the terms of the relief.

Subject to the outcome of that consultation, the relief will provide for a CGT rate of 10% on a sale of shares in a trading company, up to a lifetime cap of £10m. To qualify for the relief, an individual must have been a UK resident for five years or more and have held at least 25% of the ordinary shares of the company for at least five years before a disposal of the shares, starting from when the company commenced its trade.

The company must be a trading company and have continued the same trade since the formation of the company (and not all trades will qualify for the relief). In addition, the company must have generated at least £10m in the accounting period prior to disposal and have 15 or more employees. There will also be turnover tests and growth tests, consistent with the new relief being directed at companies that grow and innovate.

The Founders Relief is welcome, but shareholders (and their companies) will need to take care to ensure that they qualify for the relief and monitor the position ahead of any corporate or personal actions.

The third change for shareholders is more technical and will not be operative until April 2028. However, it may be of longer-term significance to family companies, as evidenced by the number who commented on an HMRC consultation document about the changes that was issued ahead of the Budget.

The fourth change relates to share options, which are an important way to incentivise employees who are critical to the growth of a business. The Company Share Option Plan has been renamed EMI2, and from next April the limits on qualifying options rise from £60,000 to £120,000. The maximum exercise period for options has also been extended to 15 years.

Wider changes

There were a number of other Budget announcements that may be of interest to individuals.

First, the limit on cash ISAs is to remain at £20,000, rather than be reduced to £12,000 as proposed previously. Furthermore, a First Time Buyer ISA is to replace the Lifetime ISA for new savers from April 2029, offering a 25% government bonus, capped at £20,000, towards a first home worth up to £450,000.

Given the rise in tax rates on savings income, families should ensure that they make optimal use of their ISAs.

There were no major changes to inheritance tax (IHT) rules, and no wealth tax, meaning families may wish to consider the possibility of lifetime gifts. The charge on residential properties in England worth £2m or more remains scheduled for April 2028.

The proposal to bring pensions within the IHT net from 6 April next year remains. There were no proposals to introduce a CGT 'exit tax'.

Final thoughts

Some commentators have described the 2026 Budget as something of a “damp squib”.

That is perhaps unfair on Chancellor Healey, whose Budget may have longer-term implications, certainly for shareholders and property owners. There was also a host of HMRC policy papers behind the headlines, detailing measures that will likely add to the complexity of the tax system.

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