UK Autumn Budget 2026 keeps £20,000 Cash ISA limit; most unused pensions count for inheritance tax from 2027

The UK government had earlier planned to cut the Cash ISA limit to £12,000, but the Budget did not adopt it. Chancellor John Healey delivered the 2026 Autumn Budget on 28 October 2026, and the annual Cash ISA limit of £20,000 stays unchanged. The official documents also set out another measure already legislated: from 6 April 2027, most unused pension funds will be counted as part of an estate and be liable to inheritance tax.

People in the UK with savings, pensions or family estate planning may be affected by these two measures. However, not every detail has been settled: on the cap for pension contributions made through salary sacrifice, the official documents and financial firms still differ. This article relies on official GOV.UK documents, with information as at November 2026.

Cash ISA: the £12,000 plan is withdrawn

Paragraph 3.9 of the Budget document states that the government has decided not to reduce the Cash ISA limit. The earlier plan to cut the limit to £12,000 for savers under 65 has been scrapped.

The Overview of Tax Legislation and Rates (OOTLAR), updated by the government on 5 November 2026, adds that from April 2027 the Cash ISA limit stays at £20,000 for all savers aged 18 and over. The related secondary legislation is expected to be laid before Parliament in November 2026.

Insurer Royal London and asset manager Vanguard both say the total annual ISA allowance also stays at £20,000. Vanguard adds that other ideas linked to the earlier plan, including charging on cash interest held within stocks and shares ISAs and restricting transfers between ISA types, have also been dropped.

In other words, after April 2027 the whole £20,000 allowance can still be held entirely in cash.

Other ISA changes at a glance

• Lifetime ISA: the charge on withdrawals used to buy a property above the price cap falls from 25% to 20% from 29 October 2026; other unauthorised withdrawals are still charged at 25%. The related secondary legislation was laid on 28 October 2026.
• First Time Buyer ISA: launching in April 2029 for new savers, replacing the Lifetime ISA. The property value cap is £450,000, and the government provides a 25% bonus calculated on the final balance at withdrawal. It still needs primary and secondary legislation, and existing holders can continue to use the Lifetime ISA under current rules.
• Incentive for first-time investors: the government will work with industry on a new incentive for people investing in a stocks and shares ISA for the first time; design details have not been announced.
• Oversight of ISA managers: from 6 April 2028, HM Revenue and Customs (HMRC) can suspend non-compliant ISA managers, and a points-based penalty system will be introduced, including for failing to submit reports.

Pensions and inheritance tax: April 2027 is the turning point

Item 1.27 of OOTLAR states that from 6 April 2027, most unused pension funds and death benefits will be counted as part of an estate and be liable to inheritance tax; the measure has been written into the Finance Act 2026. The official wording is "most". Whether specific categories such as annuities are covered, and what exemptions apply, is described differently by different firms, and this article could not verify it.

Royal London says the inheritance tax rate remains 40% and the nil-rate band remains £325,000. From 6 April 2027, personal representatives may choose to include property treated as pension in either the general or the separate component, to test whether the reduced 36% rate for charitable giving applies. These figures appear only in Royal London's analysis and were not checked against the original GOV.UK text.

There are also changes to how the tax is paid. According to Royal London, the Finance Bill 2026/27 contains provisions under which, from April 2027, prospective personal representatives may, under certain conditions, instruct pension scheme administrators to pay inheritance tax due directly to HMRC. At present only confirmed personal representatives or beneficiaries can do this.

Another change is the removal of the "two-year rule". Pensions and lump-sum death benefits paid on or after 28 October 2026 will not become taxable merely because they are paid more than two years after death (OOTLAR item 1.18).

Allowances unchanged; a new pension tax allowance added

Royal London says pension allowances are unchanged (as at November 2026), including:

• Lump Sum Allowance: £268,275
• Lump Sum and Death Benefit Allowance: £1,073,100
• Annual Allowance: £60,000
• Money Purchase Annual Allowance: £10,000

According to Royal London, the new Pension Tax Allowance applies for 2027/28 to 2029/30: people who have reached state pension age and whose total income is no higher than the full new State Pension (£13,036.40 for 2027/28) pay no income tax. Arrangements after 2030 are still to be considered.

One point still unsettled: the salary sacrifice contribution cap

Salary sacrifice is where an employee gives up part of their pay and the employer makes a pension contribution instead. Paragraph 2.2 of the Budget document mentions capping the amount of such contributions, but the text we read gives neither an amount nor a start date.

Investment platform interactive investor considers that pension tax rules are unchanged in this Budget, and says the £2,000 salary sacrifice cap in 2029 is a previously announced reform. A Hargreaves Lansdown article published before the Budget (16 October 2026) says that from April 2029, contributions above £2,000 will lose National Insurance relief. However, the same article still describes the Cash ISA cut as a future reform, which does not match the Budget outcome, so it can only be treated as pre-Budget information.

The figures of £2,000 and April 2029 cannot currently be verified against the original GOV.UK text and should be treated as unconfirmed.

Before planning, separate what is legislated from what is pending

The Budget can in fact be split into three layers. Measures already legislated, such as unused pensions counting for inheritance tax, have a clear timetable. Measures whose direction is set but which await secondary legislation, such as the Cash ISA limit staying at £20,000, are next. Items with only wording and no detail, such as the salary sacrifice cap and the first-time investor ISA incentive, should be treated as undecided, and it is better to wait for the details.

This article is based on the official document passages read; the full Budget text is very long and some provisions may not be covered. For personal arrangements involving estates or pensions, consult a licensed UK tax or financial adviser.

Prices and details correct as of November 2026

This article is general information, not investment, tax or insurance advice. Everyone’s circumstances differ; consult a licensed professional before making decisions.