What investors should take from the Autumn Budget

Many investors will welcome the ISA reversal. Still, did chancellor John Healey leave important opportunities on the table in his first Budget?

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The measures announced by chancellor John Healey in his first Autumn Budget on 28 October will largely come as a relief to investors.

Healey backed away from the controversial ISA changes and, to investors' relief, left dividend income tax untouched.

Bond investors reacted positively, though without much enthusiasm. Ten-year gilt yields barely moved on 28 October, the day of the Budget, then opened 0.9% lower the next morning.

Some of the announced changes will materially alter how Brits manage their portfolios.

ISA pivots

Before Healeys speech, reports had already pointed to one major announcement: he would reverse his predecessor Rachel Reevess decision to reduce the annual cash ISA allowance for people under 65 from 20,000 to 12,000.

Getting more people to invest instead of simply save was a worthy goal, but the policy was plainly unpopular. Healey's decision to reject Rachel Reeves's proposal to reduce the deposit limit makes sense if keeping the ISA system simple matters - especially with the proposed new Starter ISA potentially filling that role.

There is very little information available at the moment. The Budget document merely states:

The government plans to work with the investment industry on a new ISA incentive aimed at first-time stocks and shares ISA investors. Its detailed design will be developed in consultation with the industry.

We'll have to see how it develops, but encouraging people to invest seems better than penalizing those who save.

The scheme also needs to stay simple. Some people have warned that adding another type of investment ISA could make things needlessly complicated.

Richard Wilson, chief executive of investment platform Interactive Investor (ii), welcomed the chancellor's decision to drop the proposed cash ISA changes. But he said the details of the Starter ISA were still needed before deciding whether the government had merely replaced one round of tinkering with another. His preference was simple: "One ISA only please."

Dividend tax left alone, while property-income tax rises again

Those expecting another increase in dividend-income tax can relax: Healey decided not to raise the levy on investment dividends any further.

Property investors face another two-percentage-point income tax rise from April 2027, in addition to the increases Reeves announced last year. The same increase will apply to savings held outside an ISA.

Encouraging entrepreneurship?

Healey's speech placed strong emphasis on supporting the nation's entrepreneurs. The measures announced included a more favourable tax regime.

From 6 April 2027, qualifying business founders will be able to use a new Capital Gains Tax Founders Relief scheme, with a reduced 10% rate applying to up to 10 million of lifetime gains. Healey also announced an additional 20.4 billion for the National Wealth Fund and British Business Bank. The Trading Allowance will rise from 1,000 to 3,000 per year.

While it won't affect investors directly, the aim is to build a livelier domestic economy with more opportunities for British investors.

Missed opportunities

Even with efforts to support UK growth, Healey left one of the economy's main weaknesses for investors untouched.

John Owen, who heads the Investment Association, the industry group for the UK's asset managers, says the Budget should have scrapped stamp duty on shares listed in the UK. He calls its failure to do so a "missed opportunity."

"The UK's tax on shares makes investing in British businesses more expensive and directly discourages investment," Owen said. "The country is trying to attract and retain listed businesses, so adding barriers to investment makes little sense. If the government is serious about growth, it should abolish this counterproductive tax."

Tax thresholds were left untouched. Frozen since 2022, they will stay that way until April 2031.