Chancellor John Healey outside Number 11 Downing Street alongside HM Treasury ministers. Picture by Alecsandra Dragoi / Treasury
Professional Adviser sister title Investment Week summarises the key points from chancellor John Healey’s "fiscally neutral" maiden Budget.
OBR cuts fiscal headroom projection to £15bn
The Office for Budget Responsibility (OBR) has slashed its projections for the UK fiscal headroom to £15bn by 2029/30, with the conflict in the Middle East cited as the main cause, although it is expected to rebound to £22bn in 2030/31.
"I have chosen to use some of the headroom established last year to absorb the impact of the Iran war, to protect the economy and to protect family budgets," Healey said.
"That is what a buffer is for. Use it when you need it. Rebuild it when you can."
The OBR also revised its estimate for GDP growth in 2026 to 1.2%, 0.1 percentage points higher than in its March forecast of 1.1% and in line with similar boosts from the International Monetary Fund and the Organisation for Economic Co-operation and Development.
However, GDP growth is expected to slow to 1% in 2027 before picking up to a high of 1.8% in 2029.
Starter ISA announced and £20k Cash ISA annual allowance restored
Healey unveiled plans for a new ‘Starter ISA' during his speech to help make investing more accessible for first-time investors – although details are currently light on the ground.
Meanwhile, the chancellor reversed his predecessor's decision to cut the Cash ISA annual tax-free allowance to £12,000, restoring the £20,000 limit, as previously reported by the FT on Tuesday (27 October).
The Lifetime ISA (LISA) is also set to be replaced by a ‘First Time Buyer ISA', with the LISA penalty dealt with from today and "if the home you want costs more than the limit, you will get back at least what you put in".
Impact of replacing Stamp Duty ‘almost nothing'
Stamp Duty charged on shares is set to be replaced by late 2027 to modernise the process, with documents accompanying the Budget revealing the introduction of a Securities Transfer Tax from late 2027 as part of the government's Finance Bill 2026-27.
Currently, the standard Stamp Duty on shares is set at 0.5%, based on the price paid for the shares, but the government has been lobbied extensively to scrap the levy to make the UK stock market more competitive.
Nick Britton, research director at the Association of Investment Companies, said the move was "a technical change, not a change to the level of taxation" and its fiscal impact would be "almost nothing".
‘Founders' relief' of 10% on CGT unveiled
The government introduced a lifetime ‘founders' relief' of 10% on capital gains tax (CGT) on the sale of company assets by a company's founder, set to come into effect from 6 April 2027.
The chancellor also announced a reduction in the threshold for capital gains eligible for business asset disposal relief from £1m to £500,000, which he said would mean "no change for three in four claimants".
However, broad CGT hikes were not forthcoming, as per reporting from The Times earlier in October, despite pressure from some Labour MPs.
Plans for DC pension scheme consolidation and collective DC introduction
The government is set to make legislative changes to enable defined contribution (DC) pension scheme consolidation, while introducing a retirement collective DC (CDC) scheme.
In supporting documents following the chancellor's Budget, the government confirmed the changes, alongside its guided retirement framework, will be introduced in the Finance Bill 2027/28.
The measures include expanding the circumstances in which a member may keep certain protections following a transfer and allowing members to transfer from a retirement CDC pension to a drawdown arrangement within a set timeframe.
State pensioners excluded from income tax
The chancellor also confirmed speculation from earlier in the week that pensioners with income up to the value of the full new state pension will be shielded from income tax.
The tax allowance decision comes amid the state pension rising to £13,036 from April 2027, pushing it above the £12,570 income tax personal allowance threshold.
According to LCP, in 2027/28, a state pension of £13,036 would mean an income tax gap of £466.40.
Former pensions minister and LCP partner Steve Webb, however, said Chancellor Healey's proposed solution looks "messy and increasingly expensive".
"The gap between the new state pension and the tax threshold is set to grow every year, which will make the policy hard to switch off," Webb explained. "But if it continues, the cost will grow and grow."
Major shake-up of UK clean energy and building plans
During the speech, Healey pledged the government "remains unshakably committed to net zero by 2050" but signalled significant changes to clean energy transition plans.
An updated approach to delivering new clean power projects will see government only provide clean power contracts for "projects when they lower bills and when they can connect to the grid".
Capital grant funding will also be cut for carbon capture and hydrogen projects, as well as the Warm Homes Plan, while exemptions from Biodiversity Net Gain requirements will be extended to more housing developments on brownfield sites.
Elsewhere, a new British Datacentre Covenant will impose "strict tests that data centres must meet to invest in local communities, create local jobs and protect local water supplies".
"In return, critical data centres will get the grid connections they need, and where necessary, be allowed to build on-site generation while they wait," he added.
This article first appeared on Professional Adviser sister title Investment Week
