Planning your personal finances in 2026 and beyond
Partner content, in association with JP Morgan Personal Investing. By Claire Exley, head of financial advice and guidance at J.P. Morgan Personal Investing
In the run-up, the 2025 Budget was probably one of the most talked about in recent years. The telltale sign is when friends who don’t usually show much interest are suddenly asking questions about fiscal drag, economic forecasts and productivity struggles!
After months of speculation and kite-flying, we now know exactly what’s in, and what’s out, of the Government’s plans for our finances in the years ahead. So, now the dust has settled, let’s look at what’s changing, what it may mean for your money and how to plan for the years ahead.
Income Tax
The decision to extend the freeze on income tax thresholds will mean some workers may get caught by the so-called ‘fiscal drag’ phenomenon, where workers can find that they are pulled into paying a higher rate of tax when they receive a pay rise.
Fiscal drag can mean that a pay rise on paper, may actually result in less money in your bank account. For example, you could find the amount of your student loan payments has increased. Having a higher taxable income can also impact some benefits that you may currently receive, such as childcare hours.
If you’re close to the threshold you may want to consider options to reduce your taxable income that could keep you just below the threshold, such as contributing more to your pension or making a charitable donation.
ISAs
The chancellor’s decision to reduce the cash ISA allowance from £20,000 to £12,000 per tax year from 2027 for savers under 65 has generated a lot of media attention. On the surface, hearing that the Government is “slashing” your cash savings limits may cause some concern about what it means for your financial plans.
Tax-efficient cash savings, such as cash ISAs, are an important part of any financial plan. Cash saving can provide access to an easily accessible emergency fund to cover life’s unexpected bills, or if you’re saving for a goal within the next three years, the chances are investing may not be right for you.
However, UK consumers’ tendency towards cash has meant some are stashing too much in cash, which may be preventing them from reaching their goals over the medium to long term. Cash is often seen as the risk-free option, especially when compared to investing.
But over longer timeframes, cash savings can have their buying power eroded by the impact of inflation, whereas investments can deliver better returns – although returns are never guaranteed and market volatility means your investment will go up and down.
The stocks and shares ISA allowance remains at £20,000, but knowing where to start and how much risk is right for their goals and timeframes is frequently what puts people off investing.
However, wealth managers like JP Morgan Personal Investing will ask you a series of questions to help you understand how comfortable you are with risk and suggest a portfolio to match that risk level. They will also manage it for you on an ongoing basis.
If you’re used to using your ISA allowance and aren’t sure how to allocate between cash and investments, then financial guidance or advice could give you a clearer view of your options.
Pensions
One of the biggest shake-ups to salary sacrifice schemes could also be heading our way, and it will particularly impact those who are building their retirement savings. A cap on salary sacrifice is not new, but from 2029, contributions to pensions via salary sacrifice over £2,000 per tax year will no longer be exempt from National Insurance Contributions.
Salary sacrifice essentially means giving up part of your salary now and having it paid toward your pension. At the moment, contributions made this way are exempt from National Insurance contributions, but in the future when anything above £2,000 attracts NICs, less will go into your pension.
Unfortunately, the vast majority of UK adults already face a considerable shortfall between the amount they are putting away for retirement and the amount they will need to live the lifestyle they want. Recent research from J.P. Morgan Personal Investing found that just one in four (24 per cent) people feel they are saving enough for a comfortable retirement. Of those who are putting money away for life after work, workplace pensions are the most popular method – with 47 per cent of people using these.
Changes to the current workplace pension regime that may discourage people from taking advantage of generous employer workplace pension contributions and employee matching schemes, further risks increasing the levels of pensioner poverty.
Possibly the most important thing about this new policy – it isn’t due to come into effect until 2029. So, if you’re using salary sacrifice to build your retirement savings, nothing changes for at least three years.
Dividend, savings and property income
Finally, if you receive income from a rental property, dividends and savings the rates of tax will be going up, in a move the chancellor said would bring tax paid on income from assets closer to tax paid on income from work.
The government is creating separate tax rates for property income. Income Tax is already charged on property income. These separate rates mean property income will have its own individual tax rates (as already occurs for the taxation of savings and dividend income). From April 2027, the property basic rate will be 22 per cent, the property higher rate will be 42 per cent and the property additional rate will be 47 per cent.
From April 2026 the ordinary rate on dividend income will rise from 8.75 per cent to 10.75 per cent, the higher rate will rise from 33.75 per cent to 35.75 per cent and the additional rate will remain unchanged at 39.35 per cent.
Changes to dividend tax rates highlights the importance of using your tax allowances and wrappers, such as your ISA and pensions, as any returns earned on these investments will grow tax-efficiently.
Tax on savings income will also rise by 2 per cent on all bands. This means the basic rate will increase to 22 per cent from 20 per cent, the higher rate will move to 42 per cent from 40 per cent, and the additional rate band will rise to 47 per cent from 45 per cent from April 2027.
What this means for your finances
Knowing exactly how the changes announced in the Budget will impact your finances will depend on your circumstances. Whether you’re a saver or investor, receiving income from a rental property or trying to get onto the property ladder.
The important thing is, many of the measures don’t come into force for a little while, so there is time to plan ahead. If you’re unsure what the impact will be for you or what your options are, then free financial guidance or tailored financial advice might be the right next step for you.
J.P. Morgan Personal Investing is a J.P. Morgan company which offers investment products. Investments not guaranteed by JPMorgan Chase Bank.
As with all investing, your capital is at risk. The value of your portfolio can go down or up and you may get back less than you invest.
Tax rules vary by individual status and may change. This is general information, not personalised tax advice. J.P. Morgan Personal Investing provides ‘restricted advice’, meaning they only make investment recommendations on the products and services that they offer.