Rathbones Autumn Budget 2026 Commentary

Help for low-income pensioners

Olly Cheng, Financial Planning Divisional Lead at Rathbones commented:

“Pensioners relying solely on the State Pension have precious little financial wiggle room, so protecting them from being dragged into the income tax net is welcome. It would be perverse for increases intended to protect pensioners’ incomes to leave some facing a tax bill simply because tax thresholds have failed to keep pace."

“But there is a bigger lesson here. The recent decision to adjust the triple lock from April 2030 is a timely reminder that the rules governing the State Pension are not set in stone. The Government says the new approach will continue to protect pensioners against inflation and maintain its value relative to earnings over time, but the mechanism itself is changing."

"For younger generations in particular, the message is clear: don’t bank on the State Pension doing all the heavy lifting. Building a decent retirement nest egg of your own is becoming increasingly important. The State Pension can provide the foundations, but your own pension and savings will determine how much financial freedom you have in retirement.”

Chancellor U-turn on cash ISA allowance

Isabella Galliers-Pratt, Senior Investment Director at Rathbones, commented:

“This U-turn is a victory for common sense. You don’t create investors by penalising savers. Cutting the cash ISA allowance risked leaving people with an uncomfortable choice: take more investment risk than they are comfortable with, or keep their savings outside an ISA and potentially pay more tax."

“Our research shows why changing the ISA rules was never going to be a silver bullet. More than a quarter (27%) of people think stocks and shares are too risky, while 28% say they lack the know-how to manage investments themselves. At the same time, almost a third (32%) are willing to take a high level of risk in pursuit of stronger returns. There is an appetite to invest, but confidence and understanding remain real barriers for many."

“Cash and investments also do different jobs. Cash can provide an emergency buffer or somewhere to keep money needed in the short term, while investing is generally about building wealth over the longer term. It shouldn’t be a case of cash versus investing. Both can have an important place in a well-rounded financial plan."

“The ambition to get more people investing is absolutely right, but education and confidence-building are better tools than restriction. Helping people understand investment risk, diversification and the impact inflation can have on cash savings is more likely to encourage sustainable, long-term investing than trying to push them towards it through changes to the tax rules."

“We hadn’t materially changed how we manage client portfolios in anticipation of the proposed cash ISA changes, particularly while the detail remained unclear. Where appropriate, we already use short-dated gilts as an alternative to holding excess cash because they can offer attractive returns relative to cash rates. That wasn’t a response to potential ISA reform; it is simply part of how we seek the best outcomes for clients."

“The proposals also raised significant practical questions. Trying to distinguish between invested and uninvested money within an ISA for tax purposes could have been extremely difficult to police, while taxing uninvested ISA cash risked creating an administrative headache for savers, providers and HMRC alike. Abandoning the proposals avoids adding another layer of complexity to a system that should be simple for people to understand, use and trust.”

New Starter ISA and help for first time buyers

Isabella Galliers-Pratt, Senior Investment Director, Rathbones commented:

“A Starter ISA could be a much more effective way of creating a new generation of investors than trying to push people out of cash. The real barriers to investing are often confidence, understanding and fear of losing money, rather than a lack of tax-efficient products."

“The detail will matter, but a meaningful incentive to make that first investment, alongside the right education and support, could help turn more savers into long-term investors. That could take the form of a government top-up on an initial investment, for example, giving people a tangible reason to take that first step.”

Olly Cheng, Financial Planning Divisional Lead, at Rathbones, commented:

“The Bank of Mum and Dad has been working overtime to help first-time buyers get a foot on the housing ladder, and increasingly the Bank of Grandma and Grandad is being raided too. So measures that genuinely make buying that first home easier are welcome."

"What we hear from clients is that family support can make the difference between a property purchase remaining a pipe dream and becoming a reality. Parents are dipping into their own resources to help, which can put pressure on their longer-term financial plans, while grandparents are increasingly thinking about how they can pass wealth down while they are still around to see the benefit. For grandparents in particular, helping with a deposit can dovetail with wider estate planning and, where appropriate, potentially reduce a future inheritance tax liability."

“But buying your first home shouldn’t depend on winning the lottery of birth. The real prize would be a housing market where more young people can afford to take that first step without needing increasingly deep pockets elsewhere in the family.”

Maintaining CGT

Isabella Galliers-Pratt, Senior Investment Director, at Rathbones, commented:

“A potential increase in Capital Gains Tax has been one of the primary concerns we’ve heard from clients ahead of this year’s Budget, so keeping rates unchanged provides some welcome certainty. That matters because uncertainty around CGT can influence behaviour even when the rules ultimately stay the same. Investors may bring forward disposals, delay selling assets or rethink how they realise gains because they fear a future increase."

“For now, the tax goalposts haven’t moved, which should allow investors to focus on the fundamentals rather than second-guessing the Chancellor. Tax is an important part of financial planning, but it shouldn’t be the tail that wags the investment dog. Decisions about when to sell should ultimately be driven by long-term objectives, diversification and risk, rather than Budget speculation.”

Commenting, Ed Wood, Financial Planning Director, at Rathbones, says:

“Families will breathe a sigh of relief. Scrapping the CGT uplift on death risked delivering a one-two punch of additional tax complexity and potentially significant record-keeping headaches for inherited assets."

"What we hear from clients is that estate planning already feels increasingly complicated, particularly against a backdrop of wider changes to the taxation of inherited wealth. Repeated speculation about further reform can make families understandably nervous about whether plans made today will still stack up tomorrow."

“Keeping the existing CGT treatment provides some welcome certainty and also avoids what could have become a significant administrative headache for executors trying to reconstruct the historic cost of assets held for many years. For now, the goalposts haven’t moved. But estate planning is inherently long term, and families ultimately need a stable and predictable tax framework that allows them to plan how wealth will pass between generations with confidence.”

Rathbones Asset Management: Bond market reaction to the Budget

Bryn Jones, Head of Fixed Income, Rathbones Asset Management:

“The Budget looks broadly consistent with market expectations, with fiscal discipline and adherence to the fiscal rules at its core. The government is maintaining around £15 billion of headroom, while targeting net debt below 83% of GDP. Elsewhere, the package combines energy measures, business-rate reductions and changes aimed at closing internet VAT loopholes, while the £20,000 cash ISA allowance is unchanged and banks see an increase in the 3% corporation tax surcharge to 6%."

"For markets, however, the important point is less the individual measures and more whether the overall fiscal arithmetic remains credible without a material increase in borrowing. At present market seems to have accepted the budget as an overall non fiscal challenging event."

The gilt reaction has so far been relatively muted. Gilts rallied ahead of the Budget but were broadly unchanged on the day going into the Chancellor’s speech, suggesting expectations of a fiscally restrained package were already reflected in valuations. The absence of a significant fiscal surprise is important given how sensitive the market remains to changes in the UK’s borrowing requirement and the quantity of duration investors will ultimately have to absorb. Attention now shifts from the political announcements to the numbers underpinning them.

The gilt remit is therefore likely to be the more important market event. A funding mix involving greater Treasury bill issuance and less long-dated gilt supply would reduce the amount of duration being pushed into the market and, at the margin, should be supportive for the long end.

Conversely, any larger-than-expected borrowing requirement or heavier conventional long-duration issuance could quickly reverse the initial reaction. For gilt investors, the key question from here is not whether the Budget sounds fiscally disciplined, but how that discipline translates into the size and maturity profile of UK government issuance.”

Rathbones Asset Management: Budget commentary on gilts

Bryn Jones, Head of Fixed Income, Rathbones Asset Management:

“The gilt remit represents a meaningful shift in issuance away from the long end. Sales of short conventional gilts will increase by £2.7bn and medium conventional gilts by £7.5bn, while the unallocated portion rises by £2.7bn."

"This is partly offset by a sizeable £7.7bn reduction in long conventional gilt sales. Long conventional gilts will now account for just 6.2% of total issuance, down from 9.1%, and dramatically below the 20% plus share seen at times over the past two decades."

“That matters for the shape of the gilt curve. The market is being asked to materially absorb less duration, with additional issuance concentrated at the short and medium parts of the curve. All else equal, that should be supportive for longer-dated gilts and creates a strong technical argument for long-end outperformance and curve flattening after a reduction of QT at the long end too. The reduction to just 6.2% also underlines how far the UK's funding mix has shifted away from long-duration issuance compared with its historical norms.”

Business rates

Please see below commentary from Rathbones on the Chancellor’s announcement to increase the threshold at which small companies start paying business rates from £12,000 to £18,000.

Ade Babatunde, Senior Financial Planning Director at Rathbones, commented:

"For small businesses watching every pound, this is a welcome shot in the arm, but it won’t transform the mood overnight. Raising the business rates threshold is a welcome move that should give qualifying firms a little more financial breathing room. But what we’re hearing from business owners is that rates are just one item on an increasingly long bill. Tax, employment costs, regulation and wider operating pressures are all weighing on businesses’ ability to plan and invest with confidence."

“This is positive, but it is a drop in the ocean compared with what is needed to really shift the dial on business confidence. What owners ultimately crave is certainty, stability and the confidence to invest in their business without constantly wondering what the next tax or cost increase might be.”

Banks to pay extra 3% on banks surcharge starting January 2027

Adam Hoyes, Senior Asset Allocation Analyst, at Rathbones, commented:

"Increasing the bank surcharge may look like a relatively straightforward way to raise revenue, but there is no such thing as a consequence-free tax rise. The bigger challenge facing the UK is how to generate stronger economic growth and investment. Banks play an important role in providing the finance businesses need to invest and expand, so increasing the tax burden on the sector needs to be weighed carefully against the Government’s wider growth ambitions."

“The Treasury needs revenue today, but it also needs a stronger tax base tomorrow. The sustainable route out of Britain’s fiscal bind is ultimately a faster-growing economy, and tax policy should be judged as much by whether it supports that goal as by the money it raises in the short term.”