Following today’s Budget, please find below expert commentary from financial planning and investment management firm Tideway Wealth on two key announcements affecting pensions, savings and retirement planning.

 

The Government has announced a new Pension Tax Allowance from April 2027, meaning pensioners with total income no higher than the full annual value of the new State Pension will pay no income tax. Around 500,000 pensioners are expected to benefit, including approximately 290,000 who will pay no income tax because of the new allowance.

It has also confirmed that the £20,000 annual cash ISA allowance will be retained for all savers, reversing plans to reduce the limit for people under 65.

Ben Klein, senior manager at Tideway Wealth, examines the implications of the State Pension announcement, while Mihir Choughule, chartered wealth manager, explains why cash savings remain an important part of retirement planning.

 

Their full comments follow below:

 

STATE PENSION TAX TREATMENT

 

Ben Klein, senior manager at financial planning and investment management firm Tideway Wealth, said:

“Protecting pensioners who rely entirely on the State Pension from income tax is a sensible step, but it should not distract from the wider challenges facing people planning their retirement.

“For anyone with private pensions, investments or other retirement income, the interaction between different sources of income and the tax system remains an important consideration.

“The danger is that people concentrate on individual tax announcements without considering how much income they will actually need throughout retirement, particularly as living costs increase and people live longer.

“A sustainable retirement requires more than a favourable tax allowance. It requires a financial plan which can adapt to changing circumstances over several decades.”

 

CASH ISAS AND RETIREMENT PLANNING

 

Mihir Choughule, chartered wealth manager at financial planning and investment management firm Tideway Wealth, said:

“Retaining the full cash ISA allowance is a welcome decision, particularly for people approaching retirement who want flexibility over how they manage their savings and investments.

“Cash can play an important role in retirement planning, providing accessible funds for unexpected expenses and planned withdrawals without having to sell investments during periods of market volatility.

“However, holding too much in cash can create its own risks, particularly when inflation erodes purchasing power over time.

“The important question is not simply how much someone can save tax-free, but how their cash reserves, pensions and investments work together to provide a sustainable retirement income.

“Retirement planning should be driven by individual financial circumstances and long-term objectives, rather than changes to tax allowances alone.”

Please find below four comments from Kinbrook Group covering rental income tax, Cash ISAs and Business Asset Disposal Relief (BADR).

 

 

1)      Rental income tax and housing supply — Neal Groves, Head of Personal Tax at Kinbrook Group’s Beavis Morgan, said:

Landlords are already facing rising costs, higher mortgage payments and increasing demands to maintain safe, quality homes. This extra 2 percentage points in tax on rental income risks piling further pressure on landlords whose margins are already stretched. The consequences could be fewer landlords investing in their properties, more choosing to sell up, and reduced availability of homes to rent. The government must recognise that landlords cannot absorb endless cost increases without consequences for the supply, quality and affordability of rental housing.

2)      Cash ISA allowance — Neal Groves, Head of Personal Tax at Kinbrook Group’s Beavis Morgan, said:

“The decision to retain the £20,000 annual Cash ISA allowance will be welcomed by savers. While encouraging more people to invest and directing more capital towards UK businesses are worthwhile aims, cutting the Cash ISA limit would have been a blunt way to achieve them.

“People hold cash for good reasons, from building an emergency fund to saving for a house deposit or preparing for retirement. Investment carries risk and will not be the right alternative for everyone.

“Maintaining the full allowance preserves choice and gives households greater certainty when planning their finances.”

3)      Planning for business sales, succession and property portfolios — Amy Codd, Head of Legal at Kinbrook Group’s Duncan & Toplis, commenting on changes to Business Asset Disposal Relief (BADR) and property income tax, said:

“This is a significant shake-up for entrepreneurs, landlords and private clients. Halving the BADR lifetime limit will bring questions around business sales, retirement and succession into much sharper focus, while higher taxes on property income will prompt landlords to review, and possibly unwind, their portfolios. Given that planning needs to be in place before April 2027, it is crucial that business owners and landlords seek legal and tax advice in good time to understand their options and prepare for the changes.”

4)      Business Asset Disposal Relief and entrepreneurs — Nicholas Smith, Head of Tax at Kinbrook Group’s Duncan & Toplis, said:

“The decision to halve the lifetime limit for Business Asset Disposal Relief (BADR) from £1 million to £500,000 sends a disappointing message to entrepreneurs who have spent years building successful businesses.

“While the Chancellor is introducing new incentives to encourage high-growth businesses, reducing relief for established business owners risks creating a two-tier approach to entrepreneurship. We should be encouraging people not only to start businesses, but also to build them into successful, sustainable enterprises. The newly announced Founders’ Relief is welcome, but its focus on high-growth, innovative companies means that many established businesses may not qualify.

“For those approaching retirement or considering a business sale, this change could significantly affect their after-tax proceeds. With the new BADR limit taking effect from 6 April 2027, some owners may now consider accelerating their exit plans, potentially bringing forward transactions for tax reasons rather than commercial ones.

“The Government needs to recognise that supporting entrepreneurship means recognising those who have already taken risks, created employment and contributed to economic growth, as well as encouraging the next generation of founders.”

 

Holly Mackay – A Budget with younger savers in mind
Holly Mackay, CEO of Boring Money, comments on the Budget:
 

There were lots of welcome announcements from the Chancellor today in his Budget.

Abandoning the planned changes to Cash ISAs makes a lot of sense. Providers will have already wasted resources on projects to cater for these changes but there will be widespread relief they are not proceeding. Both cash and shares are important parts of any financial plan and simplicity was always an important part of the ISA’s popularity. The potential complexity of proposed changes for limited proven benefits were always questionable.


More helpfully, the Chancellor has mooted a new Starter ISA for first-time investors. The carrot was always going to be more effective than a stick and I think this is a brilliant idea. One of the biggest cited barriers to investing is not knowing where to start so anything we can do to remove jargon and complexity will be hugely positive for those contemplating that first step.

Amending LISA penalties so that penalties don’t apply to those whose first home costs more than the limit is also a hugely positive step. Coupled with the new First Time Buyer ISA and the Your First Home scheme, there are a handful of changes which make that first flat feel much more accessible than before.

As for pensions, the lack of any big announcement was in itself welcome. We have had so much change over recent years that I welcome the refreshing feeling of no post-Budget pension drama.

I think in general this was a Budget which paid careful attention to younger voters and has delivered some support to those starting businesses, saving for a first flat and potentially those considering investing for the first time.

 



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