Autumn Budget 2026 - what it means for you and your clients

The Chancellor said on numerous occasions during his first Budget speech that he was providing breathing space - for households and businesses. What John Healey didn’t say, but might have, was that this fiddly and unmemorable Budget was really designed to provide breathing space for the government.

Difficult decisions have been pushed down the line to next year’s Spending Review and the 10-year plan. There were plenty of measures, but few of any real significance. Most will cost or raise less than £1bn, which is neither here nor there in a £3trn economy.

The most important line in the Treasury’s red book is the one showing the net impact of policy decisions in each of the next five years. By 2031 there will be tax rises worth £6.5bn. Compared to Rachel Reeves’s two Budgets, this is tinkering around the edges.

This was a Budget designed, first and foremost, not to rock the boat. And that is exactly what the Chancellor’s most important audience - the bond market - was looking for.

Gilt yields barely moved while he was on his feet, with the 10-year bond yielding around 5.3% at the start and end of his speech. That is still much higher than at the start of the year, but the UK is no longer such an outlier in global terms. The new government continues to get the benefit of the doubt from investors. The pound edged lower, but marginally. The Chancellor will see the market reaction as a good result.

Steady hand

The market’s sanguine response reflected the lack of surprise in the fiscal numbers. As expected, the government’s buffer has narrowed since the spring, but at £15bn it should allow the Chancellor to meet his promise to fund day-to-day spending with tax receipts by 2030. Borrowing is set to reduce to 1.8% of GDP by then and government debt as a percentage of economic output to edge lower.

The only thing that will really change that fiscal trajectory, however, is economic growth and the news on that from the Office for Budget Responsibility was mixed. The growth rate this year is slightly higher than forecast six months ago, but next year it will be notably lower at just 1%, down from the previous estimate of 1.6%.

There was plenty in today’s speech to suggest that the government is putting in place the foundations for a more sustainable growth path, including greater devolution. But the benefits will take years to show. There was nothing today to suggest that Andy Burnham is thinking seriously about an early election.

The performance of the domestically focused FTSE 250 suggests little evidence of a broad reassessment of the UK’s economic prospects. The mid cap index, like the FTSE 100, rose but only modestly.

Inflation continues to be well ahead of the Bank of England’s target. It will be 3.4% next year, well above the previous estimate of 2%.

The equity market’s main focus was on the banks. Having set investors up for a 5% increase in their profits surcharge, the 3% hike the Chancellor announced, and the fact that it is a temporary 15-month increase only, came as a relief. The shares of Lloyds, Barclays and NatWest were all usefully higher.

We knew ahead of the Budget that the banks would bear much of the cost of easing the burden of rising energy bills. Relief comes in the form of a £100 payment to households in council tax bands A to D. The bank surcharge will raise £305m this year and nearly £1bn next year.

What did come as a surprise was a renewed assault on landlords and savers. Both face another 2p in the pound hike in income tax from next April, taking the tax rates to 24p, 44p and 49p in the pound depending on your tax band. Both taxes will raise just over £500m each.

Not one but two new ISAs

ISAs were as expected in focus. Rachel Reeves’s proposed reduction in the cash ISA contribution limit from £20,000 to £12,000 has been scrapped. The Chancellor said he preferred to encourage investment over saving with a carrot, not a stick.

Perhaps that carrot will come in the form of a new Starter ISA, which will include a ‘new incentive for people investing in a stocks and shares ISA for the first time.’ Who knows? There are no further details yet on what this incentive might look like.

As expected, a replacement for the unloved LISA, a First Time Buyer ISA, will be introduced from April 2029. It will only pay the government’s 25% bonus at the time money is withdrawn to buy a first property, solving a flaw in the current system that can leave savers with less than they put in.

For most investors using stocks and shares ISAs these changes will make no difference. There will also be relief that the Chancellor largely left pensions alone. Homeowners in London and the home counties will be happy that the rumoured reduction in the threshold for the so-called ‘mansion tax’ was rejected.

A difficult job, well done

This was not a Budget that we will remember for long. The financial markets have given the Chancellor a relatively easy ride. Investors have been reassured by the absence of any unpleasant surprises, but no-one has been left excited by the prospects for much stronger growth.

The new Chancellor has passed his first test. He is fiscally credible. But the longer-term challenges remain. Britain still has high borrowing costs, not much room for manoeuvre and a disappointing growth outlook.

But nothing was broken today.