Healey's First Budget: What It Means for Savers

5 min read

On Wednesday 28 October 2026 John Healey stood up in the Commons to deliver his first Budget as Chancellor. There was no shock for the bond market and no rise in Capital Gains Tax. There were, though, several quieter changes that will reach ordinary savers over the next few years. Here is what was announced, how markets took it and what gold did in the same week.

A careful Budget, not a dramatic one

The mood before the speech was tense. Bond markets had been jittery through the autumn. Gilt yields are the rates Britain pays to borrow, so when they jump the cost of government debt jumps with them. That is why every Chancellor watches them so closely. We covered that pressure in Britain's Bond Warning.

The Chancellor chose to play it safe. The Office for Budget Responsibility (OBR) judged that the room he had left against his main borrowing rule had shrunk from £24 billion in March to about £12 billion, largely because of the inflation pushed up by the Iran conflict. His measures lifted that buffer back to roughly £15 billion.

Rathbones described it as the fourth smallest of 35 fiscal events since 2010, measured by its effect on borrowing. In plain terms, very little changed overall.

What the OBR expects

The forecasts were not cheerful. The OBR now expects the economy to grow by 1.2% in 2026 and 1.0% in 2027. It sees inflation, measured by CPI, at 3.1% this year and 3.4% next year.

Borrowing is forecast at 4.2% of GDP in 2026-27. That is a little lower than the 4.4% of 2025-26 but well above the 3.6% the OBR pencilled in back in March.

Tax revenue is projected to reach 38.6% of GDP, a post war high. Much of that comes from frozen tax thresholds rather than new rates, which is why many households feel they are paying more even when the headline rates stay the same.

Income tax: rates held, thresholds still frozen

The basic, higher and additional rates of income tax stay at 20%, 40% and 45%. The government kept its pledge of no increase to those headline rates.

The thresholds remain frozen until April 2031, as set at the 2025 Budget. As wages and pensions rise, more of each pound earned slips into a higher band. Nobody receives a letter saying their tax has gone up. It simply happens year by year, which is why the freeze raises so much money. We explained how this works in The Freeze That Keeps Taking.

Savers: the ISA stays, interest is taxed harder

There was good news first. A planned cut to the cash ISA allowance, which would have reduced it to £12,000 for under 65s, has been scrapped. Adults keep the full £20,000 a year.

The harder news sits outside the ISA. From 6 April 2027 the tax on savings interest rises to 24% for basic rate taxpayers, 44% for higher rate taxpayers with 49% at the additional rate. Basic rate taxpayers still get the first £1,000 of interest tax free under the Personal Savings Allowance, while higher rate taxpayers get £500 and additional rate taxpayers get nothing.

HMRC estimates that 3.8 million people, around 9% of taxpayers, will pay more tax on their savings income by 2029-30. With thresholds frozen, more savers will drift into higher bands too. That is why the ISA allowance matters more than ever for cash held at the bank.

Pensions and inheritance tax

The State Pension rises by 3.9% under the triple lock. For the first time that takes it above the £12,570 personal allowance. To stop pensioners being taxed on it, the Chancellor announced a new allowance. From 6 April 2027 people whose only retirement income is the State Pension will not pay income tax on it. The triple lock stays for this Parliament, with its formula due to change from April 2030.

On inheritance tax, the nil rate band of £325,000 and the residence nil rate band of £175,000 stay frozen until April 2031. Unused pension pots come into the inheritance tax net from 6 April 2027, as announced before. Frozen bands and rising asset values mean more families will be caught over time.

A new council tax surcharge on homes worth £2 million or more starts in April 2028.

Capital Gains Tax: no change this time

In the weeks before the Budget there were reports that Capital Gains Tax rates might be raised to match income tax. Those reports proved wrong. The rates were left alone and no exit tax was introduced.

That is a relief for many, though it is worth remembering how quickly these rules can move. The rate rose at the October 2024 Budget, as we covered in After the Budget. Each Budget brings fresh speculation, which is why many savers like to know where they stand before the next one.

For UK legal tender gold coins the position is simple. Coins such as Britannias and Sovereigns are exempt from Capital Gains Tax for UK residents because they are legal tender. Any gain made when they are sold is not taxed. Gold bars and most other gold products do not share this exemption. The coins do still count as part of an estate for inheritance tax, in the same way as cash or property.

How gilts, the pound and gold reacted

The bond market took the Budget calmly. MUFG reported that the 10 year gilt yield fell by two to three basis points, a very small move. Sterling was little changed. Markets had expected a cautious Budget and that is what they got.

Gold had a bumpy week, though for reasons that had little to do with London. On Budget day itself the US Federal Reserve held its key interest rate at 3.75% to 4.00%. Ten members voted to hold while two wanted a rise. Gold tried to recover after Chair Kevin Warsh's comments sounded a little softer than expected.

According to Fortune, gold stood at $4,025 an ounce on 29 October. By the morning of 30 October it had fallen to $3,907, down 2.93% in a day. A month earlier it had been $4,213, so the price was 7.26% lower over the month.

The main pressures were a firmer US dollar plus the prospect of higher US interest rates. Gold pays no interest, so when rates rise the cost of holding it rises too. That is why gold often softens when the Fed sounds tough. Prices in pounds also depend on the exchange rate, so a UK buyer may see a slightly different picture from the dollar figures.

What it means for households

For most households this Budget was about small, slow changes rather than big headlines. Income tax rates did not rise, but frozen thresholds keep pulling more income into tax. Savings interest will be taxed more heavily from April 2027. Pensioners on the State Pension alone get some protection, while estates face frozen allowances for years to come.

None of this tells anyone what gold will do next. Gold can go down as well as up, as the last week of October showed. What the Budget did confirm is that the tax treatment of UK legal tender gold coins is unchanged. For savers weighing up where to keep their money, that is one more fact to set alongside ISAs, pensions and cash.

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Sources

This article is for information only. The value of gold can go down as well as up.

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Gold Insights are independent articles, researched and written by our own team at Gold Tier Advisory.