Healey opened by setting the Budget firmly against a backdrop of “global economic storms”, above all the continuing US-Iran conflict, which has kept energy prices and global borrowing costs elevated. The Office for Budget Responsibility (OBR) numbers tell the story: the forecast for economic growth was nudged up to 1.2% this year, but next year’s forecast has been cut from 1.6% to just 1%. UK government debt interest costs are £14bn higher this year, which has eroded the Chancellor’s ‘headroom’, the safety buffer before he has to break the government’s own borrowing and debt rules.

Key takeaways from today are that energy-driven inflation and higher-for-longer interest rates remain a live risk, and events abroad could matter as much as anything announced in the House of Commons.

Savings and ISAs: sunshine and showers

The headline-grabbing reversal was that the planned cut to the Cash ISA allowance (from £20,000 to £12,000 for under-65s) was scrapped. The full £20,000 remains available in cash for savers of all ages. The government will also consult with the industry on a new “Starter ISA” to reward first-time investors.

The catch is that tax on savings interest outside an ISA will rise by a further two percentage points from April 2027. Dividend tax is unchanged. The Chancellor says 88% of people will pay no more tax on their savings, but those with larger cash balances held outside tax wrappers such as ISAs and pensions are likely to feel the impact.

This means making full use of ISA allowances, including between spouses, may become increasingly relevant.

The Chancellor also increased the tax on income from rental properties by two percentage points.

Business owners and entrepreneurs

The most significant change for many business owners is that the Business Asset Disposal Relief limit* has been halved from £1m to £500,000. However, the Chancellor says three out of four claimants will be unaffected. More positively, widely rumoured moves to align Capital Gains Tax with Income Tax did not materialise.

For companies, a new young entrepreneurs allowance will cover a year’s living costs for young business founders, and small business rate relief thresholds for retail, hospitality and leisure rise from £12,000 to £18,000.

*Business Asset Disposal Relief is a tax incentive designed to reduce the amount of Capital Gains Tax entrepreneurs pay when they sell all or part of their business. They pay a lower rate on this amount.

Retirement

A new pension tax allowance means pensioners with income up to the value of the full new state pension will pay no Income Tax during this parliament. From 2030, the “triple lock” is set to become a “double lock” (which means the state pension will rise by inflation or 2.5%, but the link to earnings would be lost). This is subject to the outcome of the next election.

Market implications: calm waters, for now

Markets rode it out without much of a ripple. Government borrowing costs and sterling barely moved, suggesting the numbers were largely expected. That is reassuring, but it reflects anticipation rather than a resolution of the pressures on the UK’s public finances. Higher interest rates paid by government bonds continue to offer potentially attractive income for cautious investors, while UK banks face an extra 3% surcharge on their profits, lower than expected but still a modest headwind. Consumer-facing businesses may get a small lift if measures designed to help with rising energy costs ease the pressure on household finances.

The bottom line

Not a non-event, but not a raid either. Healey has chosen to batten down the hatches rather than chart a bold new course. The storm hasn’t passed, but clients now have a clearer view of how to weather it.

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This briefing is for general information only and is not personal financial advice. Tax treatment depends on individual circumstances and may change. Details are based on announcements made on Budget day and may be refined as full documentation is published. Please speak to your financial adviser before acting.