Budget 2026: A Family Lawyer’s Perspective
Whilst the U-turn on cash ISA limits was welcome news, other Budget measures raise important questions for couples managing their finances or facing separation. Two developments warrant particular attention from a family law perspective: higher tax on savings interest and proposed HMRC powers to recover unpaid tax debts from bank accounts. Both could affect the resources available to families and require careful consideration when negotiating a financial settlement.
Higher tax on savings interest
From 6 April 2027, the government proposes UK-wide savings income tax rates of 24%, 44% and 49%, replacing the previously announced rates of 22%, 42% and 47%. The distinction is important: these rates apply to taxable interest, not to the savings balance itself. For couples, the implications extend beyond a reduced return on savings. Some may consider holding savings in the name of the partner who pays tax at a lower rate, making it particularly important to address ownership arrangements in prenuptial or postnuptial agreements. Higher tax could also reduce the income available from savings following a divorce or dissolution. Settlement discussions should therefore distinguish between the capital available for division and the income it can realistically generate after tax, alongside each party’s housing and ongoing financial needs.
HMRC debt recovery and joint accounts
The Budget also announced a proposed HMRC power to recover certain unpaid tax debts directly from bank accounts, including joint accounts. This could have significant implications for spouses, civil partners and cohabiting couples, particularly where one account holder owes tax and the other has no responsibility for that debt. The new regime is planned from July 2029, with phased implementation; it is not an immediate or unrestricted power. Affordability assessments, advance notice and rights to challenge recovery form part of the proposed framework.
Couples often contribute unequally to joint accounts. Nevertheless, funds in those accounts may be exposed to recovery action if HMRC considers them an appropriate source of payment. The crucial distinction is between exposure of the funds and liability for the debt: holding an account jointly does not, in itself, make both account holders responsible for the unpaid tax. An account holder who does not owe the debt may therefore need to identify and provide evidence of their interest in the funds. This can be recorded in a Declaration of Trust.
The family law takeaway
Recovery action affecting a joint account could disrupt money set aside for household bills or children’s expenses, even where only one partner owes tax. For separating couples, this underlines the importance of full financial disclosure, identifying outstanding tax liabilities and keeping clear evidence of ownership of shared funds. The announcements may also prompt couples to review their tax arrangements and consider how ownership of savings is addressed in prenuptial or postnuptial agreements. Early, coordinated family law and tax advice can help resolve these issues before a settlement is finalised.
If you are concerned about how a change in financial arrangements could affect you during a separation or divorce, our Family Law team can help. For expert advice on protecting your interests and achieving a fair financial settlement, contact us today on 0330 822 3451 or enquire online.
This article provides general information, not individual legal or tax advice. It reflects announcements and guidance available on 30 October 2026; proposed measures remain subject to legislation and further detail.