Equiom Tax Services’ UK Budget 2026 Predictions

The date for the next UK Budget has been set for 28 October 2026, to be delivered by the new Chancellor of the Exchequer John Healey, his first since his appointment by the new Prime Minister, Andy Burnham.

It might be difficult to make predictions about the upcoming Budget based upon Mr Healey’s own personal history, but the new Prime Minister has certainly provided hints as to where the emphasis lies for his new administration; his long-standing belief is that “…we over-tax labour, people’s work, and we under-tax people’s assets”. The likelihood is that focus on taxation will now shift more towards personally held capital, rather than income, and that more radical tax reform is on the agenda.  

It is worth recapping on the more significant changes that have yet to take effect, providing further hints at the direction of travel:  

• from 6th April 2027:
  • unused funds and death benefits within pension schemes, which are currently exempt from inheritance tax, will be brought within scope;  
  • the cap on annual contributions to ISAs will fall from £20,000 to £12,000 for the under-65s;
  • income tax rates applicable to interest and rental income will increase by 2% across all marginal rates (this change applied to dividend income with effect from 6th April 2026); and
• from 6th April 2028, a new high value council tax surcharge, the ‘Mansion Tax’, will come into force, with annual charges ranging from £2,500 to £7,000 on properties with market values exceeding £2m.

What To Expect in October 2026

Wealth tax

There was speculation prior to the Budget in 2025 that a wealth tax could be introduced.  Andy Burnham has stated that his new administration will not go straight to a wealth tax, which itself suggests that it is on the agenda during the remainder of the current parliamentary term.

It is debatable whether the first stage of that process was the introduction of the Mansion Tax in last year’s Budget, it could be seen to represent the genesis of a much broader wealth tax, or it could simply be part of a continuing attack on wealthier homeowners.

The scope of the Mansion Tax could be expanded to bring in lower value properties over time, but it might represent a gradual extension beyond the annual charges on real estate to other personally held assets.

Property tax

Andy Burnham has openly stated that land is undertaxed, even though real property already suffers the highest overall burden of charges within recent history, with yet more to come.  

These existing property charges are on top of increasing regulation for landlords, which have curtailed the growth in the UK property market.  The London property market has suffered the most, and this is in no small part due to the exodus of wealthier individuals since the abolition of the regime applicable to non-UK domiciliaries in April 2025.

There is the suggestion of a national property tax to replace stamp duty land tax (SDLT), with reductions in local council taxes and the revenue to be directed to local councils.  Ultimately, it seems inevitable that property owners will suffer an increasing tax burden if changes are implemented, given the statement that property is currently undertaxed.  

Inheritance Tax

The Prime Minister has previously hinted at the abolition of inheritance tax, to be replaced by a flat levy at the rate of 10% on all estates.  Precisely how this reconciles with the government’s stance that those with the broadest shoulders should carry the burden of tax is not immediately obvious; at first sight a 10% levy would reduce the overall burden for wealthier individuals, given that their estates are currently exposed at the 40% inheritance tax rate, whilst bringing into scope lower value estates if there is no lower threshold for a flat 10% levy.

It suggests a radically different approach, with annual charges under a new wealth tax over an individual’s lifetime, accelerating tax receipts for HM Treasury in the process, and lower charges on the death estate.

Take a simple example of an individual who is worth £10m at 40 years of age, and who subsequently accumulates further wealth at £1m per year until age 80, when they die.  If there were an annual wealth tax at 1% per annum on their assets valued over £10m and a flat 10% levy on death, for example, then that individual would effectively suffer:

• wealth taxes of £8.2m over their lifetime, and  
• a final levy in their estate of £5m.

Total wealth and death taxes payable would amount to £13.5m.  Based upon a final net worth of £50m, this equates to an overall rate of 27% on their net assets, less than the current inheritance tax charge at 40% but with tax receipts significantly accelerated for the Exchequer.  

If the wealth tax rate was pitched at 2% per annum, as has been proposed in certain quarters, then in this example the aggregate tax revenue increases to £21.4m, an effective rate of 42.8% on the final net asset value on death.

Exit tax

There was speculation prior to the Budget in 2025 that the former Chancellor, Rachel Reeves, would introduce an exit tax for UK leavers, causing some panic at the time.  As things stand, UK residents are still free to emigrate without any tax charges arising on personally held assets on departure.

There are potential UK corporation charges for owner-managed companies if the company’s tax residence moves to the individual’s new place of residence.  This is not a personal exit tax, but purely a consequence of having locked assets into the UK corporation tax regime.  It is a familiar issue for new Isle of Man residents arriving from the UK, albeit not insurmountable.  

This idea of an exit charge fell away.  But given that the trend of UK leavers continues and, based upon our experience, it is those at more moderate wealth levels who are considering a move from the UK, it should not be discounted altogether.

Capital gains tax

There were rumours of an alignment of the capital gains tax (CGT) rates to the rates of income tax within recent Budgets, but in the event, the increases in the CGT rates were more modest.  

Not unlike the potential shift towards a wealth tax, this might arrive gradually within successive Labour Budgets.  It could be heralded as tax simplification, although the reality is that it would be nothing more than a revenue raising measure aimed at those who can afford it.

Income tax and national insurance

Question that arises is, given the switch of focus to capital rather than income, what should we expect in terms of income tax and national insurance (NIC)?   There could be surprises, but our prediction is that the rates and thresholds will be frozen.  Even then, this would represent an additional burden within an inflationary environment.  Stealthier methods of raising receipts from income tax, such as further restrictions in tax deductible items, could be employed.

Fiscal Pressures

Burnham’s new administration is likely to embark on a tax-and-spend manifesto which is more radical than that of the previous Labour administration.  It does not appear that there will be any relief from the high burden of taxation for those who create wealth, employers and the entrepreneurs who are more mobile.

It is worth a reminder that the UK is now over £3 trillion in debt.  We should expect this figure to increase over the next three years, given the perfect storm of the increasing burden of taxation, an ever-expanding welfare state and the exodus of contributors to the UK’s economic growth, including entrepreneurs, employers and non-UK domiciliaries.  

What the Labour government might not have factored into their calculations is that, based upon our recent experience, this exodus from the UK is now filtering down to the middle classes and those of more moderate means.  

The upcoming Budget in October is highly unlikely to stem the flow.

This article was originally published in the September 2026 issue of Portfolio magazine.

This article is written in general terms and is intended as broad guidance only. It should not be relied upon as professional advice and specific advice should be sought before taking any action. Equiom Group accepts no liability for any loss arising from reliance on this article