What does Healey’s first Budget mean for advisers and their clients?

0:12Rachel Vahey: Hello and welcome to the FT Advisor CPD podcast where we will be talking about what Chancellor John Healy announced in his first budget and the effect it may have on people's finances and financial planning. Joining me today is Alan Barrell, financial planner at Quilter, Caroline Lehun, private client tax partner at RSM, John Phillips, CEO of Spice the Heart and Just Mortgages, and Rachel Vahey, head of public policy at AJ Bell. John Healy's first budget was delivered against a difficult economic backdrop, marred by rising fuel prices, rising food prices, and lacklustre, though resilient, economic growth.

0:50Rachel Vahey: His so-called fiscal headroom had been eroded by the spiralling cost of financing debt, giving him little space for generous giveaways. Nevertheless, he has come up with a few measures which we will discuss today. After listening to this podcast, you will be able to identify the main policies announced at Budget 2026, communicate the impact the changes might have on clients, and describe how the budget will affect financial planning. So let's get on with it and kick off with pensions. Rachel maybe I can start with you state pension tax allowance so you know they were saying no pensioner relying on just the state pension will have to pay income tax we kind of knew this was coming what's your reaction to it?

1:33John Phillips: Well I think really the government said that with the state pension with the triple lock it was obvious at some point it was going to exceed the personal allowance and that's exactly what it's going to do next April so they had to try and figure a way out. And if we were to say, has John Healy met the exam question, then I think he has met the exam question set. So what will happen is that pensioners, this only applies to pensioners, if they have earnings up to£13 ,037, then they can claim a extra pension tax allowance. And that means that they don't have to pay any tax on any income up to that amount.

2:15John Phillips: Now, is not only your state pension, it could be your basic state pension, it could be earnings-related elements for the basic state pension, it could be private income, private pension income, or even employed income or self-employed income, or dividend income, or a combination of all of those. So it's looking at all of that and saying, okay, you won't pay tax on it. But they were also aware of creating a cliff edge. So they've taken that cliff edge out by introducing a taper. And the taper effectively means that if you earn up to or you have income up to£13 ,037, then you'll get some form of pension tax allowance.

3:01John Phillips: And if you have income over£13 ,037, you won't have any pension tax allowance. So they've really done what they aim to do. But this is far from being an elegant solution. It's really quite complex. As you can see, I was struggling with those numbers. They weren't exactly tripping off the tongue then, were they? And it does mean that there's going to be elements where somebody might only have£100 extra income, sorry, about£400 extra income a year, but they will still be taxed. And it still sends out a message that if you have saved for your own pension, is it really worth doing that? Do you really get the full amount of support that you would have done had you not bothered saving in the first place?

3:50John Phillips: I think it also raises an intergenerational question as well. If you've got somebody who is, I don't know just starting off they're one of these people who are not in employment or education and they managed to get a job and it's fabulous that they've got this job and they earn £13 ,034 because it's just part-time or they're just working it in with other jobs sorry with their other lifestyle and they're just starting off they will pay tax whereas a pensioner won't pay tax. So there is a question why pensioners are allowed that little bit more tax freedom compared to somebody who is just starting out in their career.

4:35Rachel Vahey: Yeah, it's a tricky one. I mean, pensions weren't really mentioned all that much in this budget, which I think a lot of people will be quite happy with. Something which also wasn't mentioned was IHTN pensions. Alan, you've previously said you hope the government would mitigate it somehow, even if not scrapping it. How damaging is this policy?

4:58Alan Barral: Well, I mean, it's really the kind of the elephant in the room for a lot of our clients when they're starting to draw or are already drawing on their assets in retirement. But it was a really interesting change because in many ways, pensions have come full circle. So when I joined the industry in 2007, pensions were generally one of the first assets that you look to to provide retirement income because anything left within a pension was taxed at 55%. Um, now pension freedoms came in, um, under George Osborne and where you already have exposure to inheritance, that's all of a sudden your pension became a very attractive way of passing wealth onto the next generation.

5:51Alan Barral: So that often meant that the pension was the last thing that you look to, uh, for providing that income. And the situation we're in now is that from the 6th of April, next year, most unused pension funds and pension death benefits will be brought into the estate for the calculation of inheritance tax. And so the old assumption that the pension should be preserved needs to be revisited. But I wouldn't necessarily jump from that to say everybody should immediately start drawing heavily from their pension because we're in a bit of an unusual period at the moment where that new tax treatment for IHT hasn't yet started.

6:37Alan Barral: So if somebody already has a substantial estate and takes a large amount out of their pension today, then they might end up moving capital from an environment that's outside of the scope of inheritance tax into one that's immediately exposed. So for the next few months, we're kind of in limbo. And it's really about setting up the planning for next year but not necessarily doing anything as an e-jerk reaction and to be honest this is is forming a large part of most of the conversations that we've been having since the changes came in.

7:16Rachel Vahey: Yeah and there was some other little tweaks which I don't know if any of you have been managed to look at. Rachel they did say they're going to make changes to the definition of terminal illness to make it easier for terminally ill individuals to access their pension savings. Is that going to have much of an effect, do you think?

7:35John Phillips: Yes, I think it's a really positive move, this, for those people who are, I mean, obviously, there's not an awful lot of people who claim this, but for those people who do, it will make life a lot easier than it is currently. At the moment, you have to go and find, get it signed off medically and it can be really difficult it's just administration hoops to jump through unnecessarily so anything that the government can do to make this easier in practice I think for and especially is bound to be welcome and especially at that time when people will be struggling a lot with um with obviously with the um the experience of being severely ill um and having to wind up their affairs and also obviously the enormous emotional strain and the physical and wellness.

8:25John Phillips: So, yes, it's definitely a move forward.

8:30Rachel Vahey: So it was quite a non-leaky budget actually this year. You know, normally we do have leaks left, right and centre. However, the FD did announce this morning, you know, before the budget went out, that there would be a U-turn on the annual limit of tax-free cash savings from£20 ,000 to£12 ,000. Obviously, you know, this was a Labour kind of government initiative, first of all, and it was Rachel Reeves' idea. Alan, is this a good thing, what they've done? Is this U-turn going to be welcomed? I know that a lot of platforms were not best pleased because of the costs that they had already spent trying to work this out.

9:15Alan Barral: Yeah, I mean, I think reversing the rules was a really sensible change. So the intention was understandable, i.e. the government wanted to encourage more people to invest rather than leaving large amounts of money sitting in cash. but if I'm being frank the implementation was totally misguided so I think what the Chancellor's done is decided that perhaps a carrot rather than a stick was a better approach and ultimately I don't think the tax rules should influence whether someone takes investment risk or not you know that should be dictated by their financial plan about where their money goes into either cash or investments.

9:59Alan Barral: But if you've got somebody that's holding cash because they need it for a house deposit or an emergency fund over the next couple of years, cash may well be an entirely sensible approach. But equally, for somebody with a five-year or more time horizon, leaving too much money in cash carries both opportunity costs, i.e. the risk of not investing, and also inflation risk because you want to make sure that your money at least maintains its value in real terms to offset the effects of inflation over time.

10:35Rachel Vahey: And Caroline, how significant do you think this kind of move is?

10:39John Phillips: I think it's helpful. But for people who were choosing to invest anyway, you're probably just encouraging those who have less appetite for risk to save. So I think it's really helpful and really positive. But given the stated intent was to encourage investment into companies, obviously this U-turn hasn't doubled down on that.

10:59Rachel Vahey: Yes. And sticking with ISAs, goodbye to the Lysa, really. We now have a new product coming along, which is the first time buyer ISA. John, the Lysa was never particularly popular anyway is this new one going to fare any better with savers I mean it kind of does sound like previous ices we've had before yeah it's very similar but I think if you if you look at it

11:28Caroline Le Jeune: from the lens of the new uh scheme that's going to come out in September for first time buyers it's sort of we want to encourage people to save clearly for a deposit but I think sort of one potentially counterouts the other one because you would as a purchaser you would you know it's whether you want to buy a new home, excuse me, or a second round home. You know, if I was advising customers at the moment, I would be saying, you know, purchase a new home under the new scheme because technically you've only got to save 2.5 % to buy the property. So it's probably a quicker and easier way for first-time buyers to get on the market.

12:01Caroline Le Jeune: Having said that, if customers don't wish to buy a brand new home, which a lot of people don't, then I suppose we have to give credit to the government for at least having a scheme. Is it going to be a showstopper, as you said earlier a moment ago? Probably not, but at least there's something. I think that's probably the way I'd sum it up.

12:25Rachel Vahey: Yeah, there's something out there for a first-time buyer to have a look at. Indeed. Rachel, AJ Bell have been quite vocal about simplifying the ISA landscape. We now have this new first-time buyer, ISA, coming, and John Healy actually said in budget, we now might have a new starter ISA for people that are investing for the first time. Are you happy about this or is this going completely against trying to simplify ISAs?

12:55John Phillips: We're up to nine different types now, Amy. I just did a really quick calculation when John Healy was speaking and I have no idea what acronym we're going to use for a starter ISA. Maybe stiser or I don't know. It sounds horrendous or whatever it's going to be. Yeah, I think we need to take a step back. Not going ahead with the reduction in the cash ISAT allowance and those really horrible anti-circumvention rules is a really positive step forward. And it is absolutely the right outcome. but we did go through a bit of a torturous way to to get there so one of the things I was quite relieved to see was that the treasury fully intend to consult with the industry about how any new type of ISA could work in practice so it is important to encourage people to invest for the future And it sounds like from the very little bit of information we have, it sounds like it might be a feature that you could offer on an ISA rather than a whole new type of ISA, which would be really welcome.

14:13John Phillips: But yeah, I think we need to go back a step and start thinking about how people approach this question. If you are in the position that you wake up one morning and suddenly go, you know, today's the day, I'm going to do something about my future, I'm going to invest for my future or save for my future going forward. I'm going to take out an ISA because they sound great, they sound wonderful and, you know, lots of people have got them, millions of people have got them. The first question you're asked is, do you want to go cash or do you want to go investment? And it seems ridiculous that you're asked to make that stark choice at that very early stage.

14:53John Phillips: Why can't you have a little bit of both? It just makes sense. You might want to go in with some cash and then once you've got a little bit of experience or you've read around on the subject or whatever it happens to be, you then get nudged up and you can start to invest for your future. This shouldn't be two different choices. This is part of the same spectrum. And for most people, all they're thinking about is, I really need to start putting something aside for my later life. How do I do that in practice? So let's make it easy for them. Let's encourage them to do that. And I think doing that would be probably a better idea than maybe looking at a start at ISA.

15:35John Phillips: But we've really got to figure out with the government what how they envisage this working in practice and what benefits could it bring to people who want to start that savings or investing journey.

15:49Rachel Vahey: Yes, definitely. And just sticking on investments for a little bit longer. um alan we had some changes to cgt kind of reliefs is this something that's going to affect your clients or what what do you think about this kind of thinking behind it

16:06Alan Barral: is that for for people selling businesses yes yeah i mean so uh firstly if i just i'll start with business asset disposal relief because that's likely to capture or be relevant to more people than the new founders relief that was mentioned. So I think from a business asset disposal relief perspective, it wasn't that long ago that we had the previous iteration, which was entrepreneurs relief, and that allowed you to have a lifetime limit of up to£10 million taxed at 10%. That's gradually been reduced. And so the reduction from a million pounds at 18%, which is a huge difference from where we started, to now that being 50%, so£500 ,000.

17:00Alan Barral: I think that's very disappointing for entrepreneurs who have spent years building their businesses, and particularly those who are at the point where they're approaching an exit. So these people have taken often considerable financial risks, they've created jobs, they've contributed to the economy. So my concern is that we should be encouraging entrepreneurship and investment in the UK and repeatedly changing the tax treatment of business exits doesn't necessarily help that cause. I did think the founders released, I mean, I did kind of predict that there might be a small rabbit to come out of the hat during the budget.

17:44Alan Barral: And I think overall, the principle behind the new Founders Relief Fund is encouraging. And the government's recognising that we need to reward people who take risks and build successful companies. And a 10 % capital gains tax rate on up to£10 million of qualifying lifetime gains is potentially a huge incentive. But I think the important question that we all identified during the broadcast was who actually qualifies. So the relief is being targeted at founders and significant early investors in high growth, innovative companies. So what you could end up with is two very different tax outcomes for two entrepreneurs who have both built successful businesses.

18:33Alan Barral: And that's going to be the challenge. And I know that the details are still being consulted on. So I think we need to see the eligibility criteria before we can properly assess how valuable that's going to be in practice.

18:47Rachel Vahey: And Caroline, do you kind of agree with this? Is this something that's going to be complicated?

18:50John Phillips: Well, I think they've kind of given with one hand and taken away with the other. So the reduction to business asset disposal relief, I don't know why they didn't abolish it completely if they were going to go down that route, because the savings that are now available are only 30 ,000 as a result. founders relief sounds like a generous relief but I think the devil will be in the detail you know to get into this someone has to have 25 percent of the company from the outset it seems and it's got to be a company which is high growth and innovative and a UK company as well so at the moment some of the other reliefs are not restricted by geography so it will be interesting to see what

19:27Rachel Vahey: they actually mean when they publish the detail yeah well the document is out so we'll be going over that with a fine tooth comb I'm sure over the coming days the next one that everyone kind of wants to talk about and is worrying about mortgages um John this is kind of your area you know the government's maintained around 15 billion pounds of physical headroom and has pledged physical discipline and adherence to its own physical rules which has helped to calm markets and the guilt reaction has so far been kind of relatively muted. Are you filled with hope with this budget that maybe mortgage rates are going to settle down?

20:11Caroline Le Jeune: Unfortunately not. I just don't. I mean, obviously, precedent inflation almost certainly will get a base rate increase next week, I think it is. And I suspect there might well be one in February as well. So, I mean, lenders already, in fairness, have factored in the increases already uh the bulk of them as we do have done that um it's to question whether they excuse me go further in the new year um i think i think the other you know the thing we we need to to bear in mind is that um you know average rates over the last 25 years are actually been higher than than than sort of average where we are now for the last five years so you do have to build that into the equation but it's it's about advising customers in the right thing to do but I'm not particularly hopeful that the rates will stay where they are.

20:59Caroline Le Jeune: I think we might see some increases and of course you know the quicker that the two wars are over then we can start stabilisation of inflation but that will take time to filter through.

21:09Rachel Vahey: So do you think you know the current environment we're in do you think it's better the same or worse for mortgages than you expected when the fallout from the Iran war kind of first started earlier this year?

21:20Caroline Le Jeune: If I'm honest, it's probably slightly worse. I think we've got the double whammy. We've obviously got Ukraine that's still going on and obviously you've got the Iran war, which we all thought would be fairly quick, but obviously clearly hasn't happened. And at the moment, it's a bit of a stalemate, to say the least. So it's beginning to drag on now. So I think it's slightly worse than we all expected.

21:43Rachel Vahey: When do you kind of, I mean, I'm asking you to get your crystal ball out here. But when do you think it might be before rates come down again? How many interest rate rises are we going to see before mortgage rates start to fall?

21:57Caroline Le Jeune: Well, as I said a moment ago, I think we're going to get one in November. I think we'll get one in February because I think inflation, there's still some tailwinds on inflation still to come through. And I think if, big if, if we can get the two wars under control, I think probably quarter three or quarter four, they'll start to come down. inflation then obviously with the price of fuel being the big thing uh that that that will take time to filter through so i think we're probably looking at quarter three quarter four next year

22:25Rachel Vahey: hopefully mine comes up in about july so fingers crossed i'm hoping that you're correct and you know going back to slightly to this lyser you know there there is this new isa for first-time buyers the lyser is kind of being gone and the withdrawal charge on the lyser is being reduced down to 20 is this a good idea you know is this going to change house prices is it going to get first

22:50Caroline Le Jeune: time buyers moving i think any any any sort of um refund of charges is is a good news for anybody you can't you've got to say that um i think i think first time buyers at the moment um are quite understandably concerned about the value of the property potentially dropping and you know certainly in in in our business and you know I look I also look after the survey department so I'm sort of close to the what the surveyors are saying that they are seeing some some drops but not not extensive and not not excessive so I think these days every price every property has a price and it's and it's it was what the customers are willing to to pay for as long as the property goes on the market at the right price then it will sell of course we've always got a percentage of people that have to move um and um having having been in industry 37 years what generally tends to happen with this this quieter period we're having now is a fairly quickly afterwards you get a you get a little bit of a spike and a boom so um you know we've had three or four months of relative quiet market i suspect we'll probably have that till christmas and we may well look for a january bounce and that'll be pent-up demand which which has happened over the last two or three years.

24:08Rachel Vahey: Yeah, well, mortgages are very hard to predict, so we'll have to see where we go with that. And there wasn't too much really, you know, big tax kind of announcements. The problem is with this budget, there wasn't a lot of money to do anything with and it's, you know, the new leadership. So Caroline, do you think that he should have just gone for it and kind of raised income tax or one of the other big taxes and funding something more groundbreaking, or do you think he's done the right thing?

24:40John Phillips: Probably overall he's done the right thing. It is more tinkering round the edges. I mean, sticking 1 % on income tax, which would be the most efficient way really of raising the revenue needed, would be so deeply unpopular. And we've got a government who quite relishes being popular at the moment, so I just think that would have been untenable for them politically. But they have changed some of the interest rates. So basically the tax rate now on unearned income, on interest and property income, is now 49 % for the very highest rate taxpayers. And I think this will have a knock-on effect. I'm already seeing at 47 % people, private landlords, leaving the industry, selling, moving on, or putting rents up, passing the costs on to the people who are renting the properties.

25:25John Phillips: And if we look at that in combination with trying to encourage first time buyers, we're seeing they won't be able to save as much because they're going to have to pay more in rent. So we kind of got slightly conflicting policies going on here.

25:39Rachel Vahey: Yes. John, did you want to add something?

25:42Caroline Le Jeune: Yeah, just one of the colleagues on the call earlier on said it's about trying to build confidence in the marketplace. and you're absolutely right. I mean, we've noticed our buy-to-let business, you know, dropped around about 35 % to 40 % and we've set a lot of landlords exiting. And, of course, all that does is it actually means that the rents, which, you know, people were talking about, but to try and keep them down, are actually going to go up. And putting an extra 2 % on the unearned income will only mean one thing. Sorry, two things. There'll be more landlords that exit, but the remaining ones will put the rents up because there'll be less properties.

26:19Caroline Le Jeune: And I think it's about consulting with the industry. As I say, someone earlier on said consult with the industry. And I think that's really key, especially in the buy-to-let sector. Landlords, come and talk to them. They want the same. They want good quality properties for people to live in. But if we keep taxing them the way we are, it will disappear. And that's a huge problem for the country.

26:42Rachel Vahey: And to sum up and kind of looking at the restraints the Chancellor was operating under, let's go around the room what do you make of this budget good bad lukewarm Rachel let's start with

26:56John Phillips: you I think it was probably as expected it wasn't there weren't any for tax wrappers there wasn't any enormous announcements it wasn't a mic drop moment for any of them it was just steady as she goes for tax wrappers. And I think that's probably what we expected. There's a couple of things, though. It did feel a bit isotastic, this one, and a lot of looking at ISOs, and as we mentioned earlier, bringing into possibly two new types feels a bit overkill when we really should be going for simplification. For pensions, we didn't really expect anything. I agree with what Alan was saying earlier, there was a really good opportunity for the government.

27:44John Phillips: They reversed the ISA change for 20 ,000 down to 12 ,000. I really wish they'd been big and brave and reversed the IHT and pensions change as well. Partly because what Alan was talking about earlier and people moving money around, but also because that is going to be an administration nightmare for people who are used to maybe not used to dealing with this sort of thing, winding up estates and obviously grieving at the same time. So I really just wish they had undone that change as well.

28:21Rachel Vahey: Alan, as we know, you didn't get your IHT wish, but apart from that, what did you make of the budget?

28:29Alan Barral: Well, you know, what I have to say is we probably welcome a period of calm after what's been a frantic few years in terms of personal tax policy. So when the rules themselves feel uncertain, it becomes much harder for clients to think and plan confidently about their future. So if we go back only a few months, you know, we were taking calls from clients who were concerned about a possible wealth tax, whether capital gains tax might be equalised with income tax or substantially increased, whether pensions tax relief would be reduced or completely removed. And that kind of uncertainty that all of that creates can lead to people that make irreversible decisions about their long-term wealth.

29:22Alan Barral: So I think that our job as advisors in wealth management is to be the level head in the room. so we prepare for the rumour but we react to the to the legislation rather than the speculation so I think that the fact that we've got a bit more clear air in front of us in terms of what tax policy is likely to be over the next six to twelve months we've now got an opportunity to sit down and really understand what clients are looking to achieve over the next few years and then decide what planning we can help put in place to help get them there.

29:56Rachel Vahey: Yes and that's the thing you know John Healy did come out and has said before please do not start spreading rumours um Caroline do you think this has kind of gone in his favour this time and do you think this budget has actually been quite a good one?

30:09John Phillips: I think it has but this government's sort of stated intent is to boost the economy so I think they could have gone further to be honest the way you stimulate an economy or one way is is to encourage entrepreneurship and with founders relief I fear it's going to be another one of those reliefs that they dangle out there and then put so many rules around it it's not as effective as they thought so something genuinely encouraging people

30:31Rachel Vahey: to build businesses would have been really welcome yeah and mortgages finally john is it a good

30:37Caroline Le Jeune: build trip for mortgage i think it's fairly neutral i don't think it does anything against mortgages or or or for it you know i certainly welcome the new first time buyer scheme on new build um i wish it was earlier i wish it was not spring um you know i wish it was now because i I think what it's going to do for first-time buyers is make them just sit and wait, which I'd get. I think I would advise customers to do that. But fairly neutral. But I think it's, as Alan was talking earlier on, it's about us advising our customers in the best way to purchase the property. There are still an awful lot of products out there that are well-priced, that are good for the customer.

31:16Caroline Le Jeune: And, yeah, I think it was neutral, but I do welcome the new first-time buyer scheme.

31:23Rachel Vahey: Alan, Caroline, John, Rachel, thank you so much for joining us today. It's been great to have your insight. And everyone else, thank you for tuning in today's podcast where the objectives were to identify the main policies announced at Budget 2026, communicate the impact the changes might have on clients and describe how the budget will affect financial planning. Join us next week where we will discuss what else is going on in the profession.

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