Chancellor abandons Reeves' 'car crash' ISA reforms; property income tax rates raised

Chancellor, John Healey, has scrapped controversial plans to cut the annual cash ISA allowance from £20,000 to £12,000 and increased property income tax rates at the Autumn Budget.

Delivering his first Autumn Budget, Healey said he was taking a “new approach today” to encourage more people on “ordinary incomes to save and invest”.

He also stated that he will work with the sector to create a new “Starter ISA” for first time investors.

AJ Bell director of public policy, Tom Selby, commented: “Rachel Reeves’ ISA reforms were a car crash, lamented by most of the retail investment industry, who criticised the complexity they would add for little consumer benefit, and building societies, who warned they would increase mortgage costs.

“While the central aim of encouraging more people to invest for the long-term was the right one, the route Healey’s predecessor chose to achieve this was painfully convoluted, hardening the border between short-term saving and long-term investing and adding overwhelming complexity – not to mention a tax charge – into the system in the process.”

PensionBee VP personal finance, Maike Currie, added: “We warned at the time that restricting cash ISAs risked penalising the very people who need the most help building long-term wealth, women in particular. You don’t persuade people to eat more meat by rationing their vegetables.”

Healey also announced the government is increasing all rates of income tax applied to property income by 2 percentage points.

Delivering his first Autumn Budget today, Chancellor John Healey said from 2027 to 2028, the property basic rate will be 24 per cent, the property higher rate will be 44 per cent, and the property additional rate will be 49 per cent.

The Budget in 2025 had already set property income tax rates at 22 per cent, 42 per cent and 47 per cent from April 2027

These rates will apply across England, Wales and Northern Ireland.

"For property investors, this could significantly reduce post tax income, potentially impacting the viability of future developments and making new property acquisitions less attractive," said Goodman Jones tax director, Reena Bhudia.

"These changes could also prompt families to rethink how assets are held, financed and used to generate income, with a greater focus on long-term tax efficiency.

"The Budget may have avoided sweeping tax rises, but for business owners and private clients, the cumulative impact of these changes shouldn't be underestimated.

"With succession, retirement and inheritance planning already becoming more complex, the need to plan ahead has rarely been greater.”

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