Autumn Budget 2026: What This Means For UK Muslims

After the tax rises in last year’s Budget, households were hoping for some relief. That’s what John Healey promised in his first Budget as Chancellor: “breathing space”.

The Budget does include some relief. The planned cash ISA cut has been dropped, a new allowance will reduce tax bills for around half a million pensioners, and up to 20 million eligible households in England will get £100 towards their energy bills.

But look at the detail, especially if you’re a saver, a landlord or a first-time buyer, and the picture is more mixed. Taxes on savings and rental income are rising again, while the electricity VAT cut and fuel duty cut are only extended until July 2027.

Here’s what the announcements mean for your money, and where Muslim households need to look more closely.

What Is The Budget And Why Does It Matter?

The Budget is essentially the UK government’s annual financial master plan, where the Chancellor (currently John Healey) lays out how the government plans to raise money and, more importantly, how they’ll spend it.

From the taxes you pay to the benefits you receive, the investments in your local area to the support for businesses, the decisions made in the Budget will hit your wallet directly.

What Are The Key Budget Announcements?

The war with Iran, and the continuing war in Ukraine, ran through this Budget. The headline measures respond to higher energy and fuel prices. The Treasury also blames conflict-related borrowing costs for a £9 billion fall in the Chancellor’s headroom, and there is more money for defence and over £10 billion for Ukraine. But alongside that relief come higher taxes on savings and rental income.

Let’s break down the key highlights that will impact you.

1. Tax on savings and rental income goes up (again)

From April 2027, tax rates on savings and rental income will rise by 2 percentage points. This comes on top of a 2-point rise announced in last year’s Budget, which also starts in April 2027, so the total increase is 4 points.

That means the basic rate rises from 20% to 24%, the higher rate from 40% to 44%, and the additional rate from 45% to 49%. 

The Treasury says 84% of taxpayers won’t see their tax bill increase as a result of this measure. This Budget leaves tax rates on wages and dividends unchanged, but frozen income tax thresholds mean rising earnings can still pull you into paying more tax.

What this means for you

If you save with an Islamic bank, this affects you too. HMRC taxes the profit on your savings in the same way as interest.

The Personal Savings Allowance lets basic-rate taxpayers earn £1,000 a year in savings income tax-free, and higher-rate taxpayers £500. Additional-rate taxpayers get no allowance. The new rates apply above your available tax-free allowances, unless the savings are held in an ISA.

With these rates rising, it’s worth checking whether you’re making full use of your tax allowances. Our halal tax planning guide explains the options available to UK Muslims.

2. The cash ISA cut has been scrapped

Last year, the government announced that under-65s would only be able to put £12,000 a year into a cash ISA from April 2027. That plan has been dropped. The full £20,000 annual ISA allowance can still go into a cash ISA, regardless of your age.

The government will also work with the industry on a new incentive for first-time stocks and shares ISA investors. We’re still waiting for the details.

What this means for you

This will probably affect Muslims less than everyone else because most Muslims do not use Cash ISAs anywhere near as much as non-Muslims (due to various reasons such as a lack of options).

That said, cash ISAs aren’t off-limits. Islamic banks offer halal cash ISAs that pay an expected profit rate instead of interest. If you use one for an emergency fund or a house deposit, you won’t now face the proposed £12,000 cap if you’re under 65.

But Muslims can still get ahead of the curve by educating themselves about the other types of ISAs and the halal options available to them. You can start by checking out our complete guide to ISA investing for UK Muslims.

3. Minimum wage increased

From April 2027, the National Living Wage for workers aged 21 and over rises by 3.9% to £13.21 an hour. The Treasury puts that at around £910 extra a year before tax for a full-time worker. The minimum wage for 18 to 20-year-olds rises to £11.27.

From April 2029, parental pay will also extend to eligible self-employed fathers, partners and adopters in Great Britain. The government expects this to benefit more than 160,000 parents. 

On the surface, this is clearly positive for workers. Anyone on lower wages will see an immediate boost to their income, which is especially important in a period of high living costs.

However, the impact on employers tells a different story.

What this means for employers

Raising the minimum wage increases the cost of hiring staff. Larger companies may absorb this more easily, but many small businesses operate on tight margins. For them, higher wage costs and rising overheads create significant pressure.

In practice, this often leads to:

• Slower hiring as firms become more cautious about taking on new staff
• Fewer opportunities for young or inexperienced workers
• Limited room for pay rises above the minimum wage
• Greater reliance on part-time or temporary staff
• Increased prices for consumers as businesses try to protect their margins

For many small employers, the higher wage floor simply reduces the financial space they have to grow, invest and reward staff.

What this means for you

If you earn minimum wage, you will receive a pay increase. If you run a business or work in a sector with tight margins, you may feel the indirect effects in the form of slower hiring or smaller annual pay reviews.

To respond, focus on improving your skills, productivity and earning potential so you remain competitive in a labour market where employers are becoming more selective. If you are a business owner, you may need to review staffing structures and costs to ensure your business remains viable in the year ahead.

4. Changes for first time buyers 

A new First Time Buyer ISA launches in April 2029. You’ll be able to save up to £4,000 a year and get a 25% government bonus when you buy a first home worth up to £450,000, with no upper age limit.

For existing Lifetime ISA holders buying above the £450,000 cap, the withdrawal charge falls to 20% from 25%.

The Your First Home scheme is expected to open in February 2027. Buyers will need a 2.5% deposit, a repayment mortgage and a government equity loan covering 20% of the price.

What this means for you

For Muslim buyers, the main concern is the interest built into Your First Home. The government equity loan is interest-free for five years, but charges 1.5% in year six and 3% from year seven. Most scholars would see that interest as a problem, even with the interest-free start, so it's worth exploring Shariah compliant home finance alternatives.

5. Fewer Pensioners will pay income tax 

From April 2027, the full new State Pension rises by 3.9% to £250.70 a week, or around £13,036 a year. That takes it above the frozen £12,570 Personal Allowance, meaning someone receiving only that pension would otherwise face an income tax bill.

The new Pension Tax Allowance prevents that. Eligible pensioners whose total income is no more than the full new State Pension will pay no income tax. Those earning slightly more may receive a smaller, tapered tax reduction.

Around 500,000 pensioners will benefit in 2027–28, including about 290,000 whose income tax bill will be removed entirely. The allowance will apply automatically and is currently set to run until April 2030.

What this means for you

If your parents or grandparents live mainly on the State Pension, this could save them a tax bill. Eligibility depends on their total income, including any private pension, earnings or rental income.

For those of us still saving for retirement, there’s a wider point. The government plans to adjust the triple lock from April 2030, changing how future pension increases are calculated.

The State Pension is an important foundation, but will it cover the retirement you want? Keep building your own pension alongside it, and check that your workplace or private pension is invested in a way that aligns with your faith.

6. Side hustles, founders and business owners 

• From 6 April 2027, the trading allowance triples from £1,000 to £3,000.
• New Founders’ Relief will offer a 10% capital gains tax rate on up to £10 million of lifetime qualifying gains from April 2027. But eligibility is narrow: companies must have at least £10 million in turnover, 15 qualifying employees and meet further growth or innovation tests. Founders must also meet ownership and residency conditions. HMRC expects around 600 people a year to qualify.
• Meanwhile, the lifetime gains limit for Business Asset Disposal Relief falls from £1 million to £500,000 from 6 April 2027. Its 18% tax rate stays the same. Business owners who don’t qualify for the new Founders’ Relief could therefore face a higher tax bill when they sell.
• From October 2027, online marketplaces will become responsible for collecting VAT on qualifying sales by UK businesses using their platforms.
• In England, retail, hospitality and leisure businesses get a package including a two-year real-terms freeze on business rates and higher relief thresholds, taking around 70,000 more properties out of business rates altogether.

What this means for you

If you sell handmade products, tutor at weekends or freelance on the side, the higher trading allowance could help. From April 2027, eligible individuals can receive up to £3,000 in total annual trading income tax-free.

For business owners, the picture is more mixed. The 10% Founders’ Relief rate sounds generous, but many business owners won’t meet the strict eligibility criteria. HMRC expects only around 600 people a year to qualify.

Meanwhile, the Business Asset Disposal Relief lifetime limit is being halved to £500,000. If you don’t qualify for the new relief, you could pay more tax when you sell.

7. Energy bills and fuel

• Up to 20 million households in council tax bands A–D in England will receive a £100 Household Energy Payment in 2027, with funding for similar support elsewhere in the UK.
• The temporary VAT cut on electricity is extended until 1 July 2027. The Treasury estimates this will reduce a typical household’s annualised price-capped bill by around £50 from April.
• The government will ask Ofgem to remove gas standing charges and move those costs into unit rates.
• The 5p-per-litre fuel duty cut is extended until 1 July 2027, with the planned inflation-linked increase also postponed until then.
• For people using their own car or van for business journeys, the 55p mileage rate for the first 10,000 miles becomes permanent. The rate above that rises from 25p to 35p from April 2027.

What this means for you

The extra support should take some pressure off household budgets. But the £100 is a one-off, and the electricity VAT and fuel duty cuts only run until July. If energy prices keep rising, those savings could quickly be swallowed up.

Removing gas standing charges should favour households that use less gas. Those using more could pay more once the costs move into unit prices, although the final impact will depend on Ofgem’s plans.

If you drive for work, check whether you can claim mileage tax relief. The higher rates don’t mean your employer has to reimburse you more.

Who’s footing the bill & where’s the money going?

Banks, gambling operators, savers and landlords are among those being asked to pay more.

• The Bank Corporation Tax Surcharge doubles from 3% to 6% between January 2027 and March 2028, raising an expected £1.5 billion.
• Machine Games Duty rises from 20% to 25% for higher-stakes gaming machines from April 2027.
• Online marketplaces will take responsibility for collecting VAT on qualifying sales by UK businesses, targeting tax that currently goes unpaid.
• Savers and landlords face the higher income tax rates outlined earlier.

There are other revenue-raising changes too, including the lower Business Asset Disposal Relief limit and changes to business investment allowances.

On investment, the National Wealth Fund and British Business Bank receive another £20.4 billion. The government expects this to create or support around 140,000 jobs.

The UK is also committing more than £10 billion in additional support for Ukraine, including military aid, loan guarantees and export finance capacity.

Defence spending is set to reach 2.7% of GDP in 2027–28. The government is targeting 3% by 2030 and 3.5% by 2035, but will set out how it plans to reach those levels at next year’s Spending Review.

How should you respond to the budget?

You don’t need to overhaul your finances because of one Budget. Start with the changes that affect you.

1. Savers: check whether you could use your ISA allowance more effectively. For emergency savings, make sure you can access the money when you need it.
2. Landlords: work out what the April 2027 tax increase means for your rental profits.
3. Side hustlers and business owners: check how the £3,000 trading allowance applies from April 2027. If you’re planning a business sale, discuss the relief changes with your accountant.
4. Those saving for retirement: review your workplace or private pension, including whether its investments are Shariah compliant.

The important thing is not to panic and to use this as an opportunity for you to review your financial situation, seek professional advice where necessary and adjust your plans accordingly.

What do you think of the changes announced in the Budget? Let us know in the comments!