Day-to-Day Living Costs

Several measures aim to alleviate the pressure on household budgets, albeit modestly:

• Energy Bills: Starting April 2026, energy bills will see a reduction of £150, courtesy of the elimination of green levies. Consumers on fixed-rate tariffs are expected to benefit from this adjustment.
• Rail Fares: Regulated rail fares in England will remain frozen until March 2027, providing relief for commuters.
• Buses: A cap of £3 on individual bus fares in England will continue through March 2027.
• Fuel Duty: The current 5p cut in fuel duty is set to be extended, but increases will resume gradually beginning September 2026.
• Prescriptions: The fee for prescriptions remains unchanged at £9.90, benefitting those requiring regular medication.

Your Pay Packet

Income tax thresholds will remain frozen until 2031, which can potentially elevate individuals into higher tax brackets as their earnings increase. This is particularly important for women, who may find their peak earning years coincide with significant financial responsibilities.

Sarah Coles from Hargreaves Lansdown warns that receiving a pay rise could lead to higher taxation levels, impacting personal savings allowances and other taxation rates.

To mitigate these effects, consider boosting pension contributions to benefit from tax relief or using ISAs to shield savings and investments from tax burden.

Savings and Investments

Starting April 2027, the limit for tax-free contributions to cash ISAs will decrease from £20,000 to £12,000. This shift is aimed at encouraging more people to invest, particularly crucial as women are less likely to engage with Stocks and Shares ISAs.

A reduction in cash ISA contribution limits will slow wealth accumulation, with a significant impact on those exceeding the revised threshold. Additionally, an increase in dividend tax rates will make it even more imperative to make use of ISAs for investments.

Pensions: Potential Impacts on Retirement Planning

New guidelines for salary sacrifice arrangements will come into effect in April 2029, limiting National Insurance exemptions to the first £2,000 of contributions. This could deter individuals from increasing their pension contributions.

Experts, including Helen Morrissey, suggest individuals should consider maximizing their pension contributions before this change is enacted to benefit from current rates.

Family Support

The Chancellor has announced the removal of the two-child benefit cap in Universal Credit, benefiting an estimated 560,000 families by 2029-30 with an average increase of £5,310 per year.

The earnings threshold for Carer’s Allowance has also increased, providing additional financial support for those in caregiving roles.

Property and Housing Changes

A notable introduction is the new Council Tax ‘Mansion Tax’ for properties valued over £2 million, creating an additional financial burden for high-value homeowners.

There are also discussions about revising the Lifetime ISA to facilitate first-time buyers, with consultations expected in early 2026.