This article was written in November 2026 and was correct at the time of publishing. Rules and figures may have changed since, so please get in touch before acting on it.
- Pension tax relief, the £60,000 annual allowance and the £268,275 tax-free cash limit are all unchanged.
- Pensions will still count towards your estate for inheritance tax from 6 April 2027.
- A new Pension Tax Allowance means pensioners whose only income is the full new State Pension won't pay income tax from April 2027.
- The cash ISA allowance stays at £20,000, but tax on savings interest outside ISAs and pensions rises from April 2027.
- Scottish income tax rates for 2027/28 will be set in the Scottish Budget on 3 December 2026.
Pensions: largely unchanged
After months of speculation, pensions came through the Budget almost untouched. There was no cut to the tax-free lump sum and no change to tax relief on contributions, which is still given at your highest rate of income tax.
The minimum age for taking money from a personal pension is still 55, rising to 57 from April 2028.
Thinking of taking your tax-free cash early "just in case"? There was no change this time. Taking money out of a pension before you need it can mean paying more tax, and money taken out counts towards your estate unless you spend it or give it away. It's worth getting advice first.
Pensions and inheritance tax: still going ahead
The biggest change for pensions was already on its way. For deaths on or after 6 April 2027, most unused pension funds and death benefits will count towards your estate for inheritance tax. The Budget confirmed some technical details:
- From April 2027, a prospective personal representative will be able to ask pension schemes to pay inheritance tax due, not just a confirmed executor or a beneficiary.
- The "two-year rule" for pension death benefits is being removed. Where someone dies before 75, beneficiaries will no longer lose the tax-free treatment just because the money is paid more than two years after death. This applies to payments made on or after 28 October 2026.
- Where lump sum death benefits go over the lump sum and death benefit allowance (normally £1,073,100), the way the excess is taxed is being simplified.
If your pension is a large part of what you plan to leave behind, now is a good time to look at it. Read our guide to pensions and inheritance tax from April 2027.
A new tax allowance for pensioners
From April 2027 the full new State Pension is expected to be just over £13,000 a year, which is more than the £12,570 personal allowance. Without a change, people whose only income is the State Pension would start paying a small amount of income tax.
The Budget introduced a new Pension Tax Allowance to prevent this. It applies automatically to people over State Pension age whose total income is at or below the full new State Pension, for the tax years 2027/28 to 2029/30. It's gradually withdrawn by £1 for every £3 of income above that level, so it only helps people with little or no income besides the State Pension.
Most people with private pensions won't benefit. If you draw an income from a personal pension, an annuity or a workplace pension on top of your State Pension, you're likely to be over the limit. We're still waiting for the full details, including how the allowance will work alongside Scottish income tax rates.
The State Pension and the triple lock
The triple lock stays in place until April 2029, so the State Pension will keep rising each year by the highest of inflation, average earnings growth or 2.5%.
From April 2030, it will be adjusted. The State Pension will rise by the higher of inflation or 2.5%, with an earnings adjustment where needed so that it keeps pace with average earnings over time. In practice, rises in some years may be smaller than under the current system.
ISAs: the cash ISA cut is scrapped
The plan to cut the cash ISA allowance from £20,000 to £12,000 for under-65s from April 2027 has been dropped. You can still put up to £20,000 a year into ISAs, split however you like between cash and stocks and shares.
The Lifetime ISA will be replaced by a new First-Time Buyer ISA, expected from April 2029. From 29 October 2026, Lifetime ISA holders buying a home costing more than £450,000 can withdraw their savings with a reduced 20% charge.
Tax on savings interest is going up
From 6 April 2027, interest above your personal savings allowance will be taxed at higher rates across the whole UK, including for Scottish taxpayers:
The personal savings allowance is unchanged at £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and nothing for additional-rate taxpayers. If you hold large cash savings outside an ISA or pension, this change makes it more worthwhile to use your ISA allowance each year.
Income tax
For the rest of the UK, income tax thresholds stay frozen until April 2031, so more people will be pulled into higher tax bands as incomes rise.
Scotland sets its own income tax rates and bands on earnings and pension income. The Scottish Government will announce its rates for 2027/28 in the Scottish Budget on 3 December 2026. We'll cover anything that affects pension planning once it's published. In the meantime, make sure you're claiming all your pension tax relief.
What you can do now
Use your ISA allowance
With tax on savings interest rising, sheltering cash and investments in an ISA is more valuable. The allowance resets each April and can't be carried forward.
Review your pension and estate plans
With inheritance tax on pensions starting in April 2027, check who your pension is left to and how your other savings fit around it.
Keep paying into your pension
Tax relief at your highest rate is still available, which makes pensions one of the most tax-efficient ways to save for retirement.
Don't rush
Most of these changes don't start until April 2027 or later. Decisions about taking money from your pension are hard to undo, so plan first.
How we can help
We can look at your pensions, savings and investments together and show you whether anything announced in the Budget should change your plans. Find out more about our pension review and savings and investments services, or book a free consultation.
Select Wealth
Select Wealth is an independent financial planning firm helping individuals and families across Central Scotland with pensions, investments and retirement planning. We have been VouchedFor Top Rated seven years running.
This article is for general information only and does not constitute advice. It reflects our understanding of the Budget announcements as at November 2026; some measures still need to pass into law and details may change. The tax treatment depends on your individual circumstances. The Financial Conduct Authority does not regulate tax advice. The value of investments and pensions can fall as well as rise and you may get back less than you invest.