Paul Hayward

Mr Healey confirmed that banks would pay a total surcharge of 6% on profits above £100m, starting in January, to fund energy support measures. It will last 15 months. Shares in Lloyds, Barclays and NatWest rose after the announcement, as the increase was smaller and shorter than some had expected.

Mr Healey also announced a new “founder’s relief”, a 10% capital gains tax (CGT) rate on lifetime gains of up to £10m for the founders of the UK’s most successful firms, while the main rate of CGT was left untouched.

He reversed Rachel Reeves’ plan to cut the Cash ISA allowance, keeping the £20,000 limit, and confirmed a new Starter ISA aimed at encouraging first-time investors. The Personal Savings Allowance stays frozen at 2016 levels, and a rise in tax on savings income outside ISAs is going ahead from April 2027.

He also promised to “modernise” the tax treatment of foreign sovereign investment, though it would remain “one of the most generous regimes in the world”. He raised the trading allowance from £1,000 to £3,000 and pledged a further £20.4bn for the National Wealth Fund and British Business Bank to channel private capital into growth firms, including a new defence focus worth up to £5bn.

Chris Hayward, policy chairman of the City of London Corporation, said: “This budget signals serious intent on behalf of government, with measures to support enterprise and investment.

“Against a difficult fiscal backdrop, we understand that the government had to take some tough decisions. It’s important that the rise in bank taxation is time-limited – it must end as scheduled. Firms now need a strategic tax roadmap to provide certainty and confidence to business and international investors.”

He said the Chancellor could have gone further by removing stamp duty on UK shares, reinforcing the City of London “as a leading global financial centre”.

Mr Hayward added: “The Government must now double down on unlocking growth, with every new policy passing a competitiveness test. Above all, it must ensure our world-leading financial and professional services sector can continue making an outsized contribution to growth in every part of the UK.”

On the plan to keep Cash ISAs at £20,000 and introduce a new Starter ISA, he said: “We welcome moves to keep the ISA regime as simple as possible, as an important part of getting people saving and investing. Our engagement with industry has consistently shown that complexity can itself be a barrier to participation, and that changing allowances alone will not create a stronger investment culture. The focus now should be on giving people the information, guidance and confidence they need to make informed investment decisions.”

Emma Parler, financial adviser at Shackleton Advisers, said the Starter ISA has “real potential” if done properly, noting that a financial incentive would be a “good way to encourage them to take that first step”, given the hesitancy among savers to invest.

She added: “We need to be careful that incentives don’t encourage people to invest money they can’t afford to put at risk. Understanding investment risk, timescales, charges and the possibility of losses is essential.

“We already have a number of different ISA options, so any new product needs to offer a genuine benefit rather than make an already complicated system even more confusing.

“Not everyone should be investing all their savings. Having an accessible emergency fund and money set aside for short-term needs is just as important as investing for the future.

“A bonus is that this might encourage someone to open an investment account, but helping them understand what they’re investing in, why they’re doing it and how to stay invested when markets fall is just as important. Ultimately, encouraging more people to invest is a positive step, but it needs to go hand in hand with financial planning and education, helping people make the right decisions for their own circumstances.”

Jason Hollands, managing director at Evelyn Partners, said that although the Chancellor had scrapped plans to cut the Cash ISA allowance for under-65s, “there is a sting for savers”. He said the planned rise in tax on savings income from April 2027 had been doubled from two percentage points to four, taking rates to 24% for basic-rate, 44% for higher-rate and 49% for additional-rate taxpayers.

He said keeping the £20,000 Cash ISA gave savers more scope to protect their interest from tax, and underlined “the importance of making as much use of ISAs as possible”. He described the decision not to raise CGT as “a relief”, particularly for business owners, and the absence of further pension changes as “also welcome”, adding that “a period of stability would help people plan with greater confidence”.

Alex Beavis, interim director of banking at LHV Bank, called the Cash ISA decision “a welcome dose of common sense” but said it was “not all good news for savers”, pointing out that the Personal Savings Allowance has not moved since 2016.