Budget 2026: £150m of savings repurposed for the police pay award, tax and pension limits unchanged

The Chancellor delivered Budget 2026 today, 28 October 2026. HM Treasury published the Budget document and HMRC published its overview of tax legislation and rates (OOTLAR) with a rates and allowances annex. We have read them for anything that touches police officers and police staff. Most of the news is what did not change, plus one line on police pay.

Police pay: £150m named for the 2026 award

The Budget does not set police pay and does not announce a new award. It does say where part of the money for the current award comes from. In its list of policy decisions, the Budget document says £150 million (£150m) of savings from the Afghan Resettlement Programme "is being repurposed to support the costs of the 2026 police pay award in England and Wales", as part of the reprioritisation the Home Office announced in July.

The award itself was announced on 15 July 2026. The Police Remuneration Review Body had recommended 3.9%; the Government gave 3.5% to all ranks and pay points from 1 September 2026. It said the Home Office would give forces extra funding of £84m in 2026-27, £144m in 2027-28 and £145m in 2028-29 from contingency budgets. The Budget does not say how the £150m relates to those amounts or which years it covers. Our police pay rise 2026/27 guide explains the award and back pay. How the pay award process works covers what happens next for 2027/28.

Police staff pay is negotiated separately through the Police Staff Council. The Budget says nothing about it.

Income tax and National Insurance: frozen for 2027-28

HMRC's rates and allowances annex shows no change for officers' and staff members' pay in the 2027-28 tax year. In England, Wales and Northern Ireland the Personal Allowance stays at £12,570, the basic rate band at £37,700 (so the higher rate starts at £50,270) and the additional rate at over £125,140. The rates stay at 20%, 40% and 45%. The Personal Allowance is still withdrawn above £100,000. Scottish income tax rates and bands are set by the Scottish Parliament.

For National Insurance, the Treasury will raise the lower earnings limit by September's 3.5% CPI figure to £6,916 a year (£133 a week). OOTLAR says the remaining National Insurance limits and thresholds will be maintained at 2026-27 levels until the 2030-31 tax year, as previously announced. Because thresholds stay still while pay rises, a pay award or a move up a pay point means a larger share of your pay falls into the 20% band (and, for some sergeants and inspectors, the 40% band). Our take-home pay explainer shows how tax, NI and pension come off a police payslip.

Pensions: limits unchanged, a few tax changes

The pension tax limits are the same for 2027-28 as now: an annual allowance of £60,000, a tapered annual allowance that applies when adjusted income is over £260,000, a lump sum allowance of £268,275 and a lump sum and death benefit allowance of £1,073,100. If a promotion or a big pay rise could push a final-salary pension over the annual allowance, our police pension annual allowance guide explains how it is measured.

Changes announced today that may matter to officers and their families:

• Death benefits paid late. The two-year rule is being removed. Tax-free pension and lump sum death benefits will no longer become taxable just because they are paid more than two years after the scheme knew, or should have known, of the member's death. It applies to payments made on or after 28 October 2026.
• Terminal illness. The Finance Bill will change the definition of terminal illness so terminally ill people can reach their pension savings more easily, with overseas registered medical practitioners allowed to give the medical evidence.
• Inheritance tax on pensions from 6 April 2027. This was legislated in Finance Act 2026 and still goes ahead. The Budget adds technical changes, including letting a prospective personal representative direct scheme administrators to pay the inheritance tax due, in certain conditions.
• Salary sacrifice. The Budget refers to the existing cap on pension contributions that can be salary sacrificed. The law already sets a £2,000 a year limit for National Insurance purposes from 2029-30.

The Budget also confirms that employer contributions to public service pension schemes will be lower following the 2024 valuations. It treats this as a technical change to department budgets, made "with a view to ensuring that departments are no worse or better off". It does not publish the new employer rate for the police schemes. Nor does it announce any change to the benefits officers build up or the contributions members pay.

Savings, State Pension and other changes

From 6 April 2027 savings income will be taxed at 24% (basic), 44% (higher) and 49% (additional). New property income rates will be the same in England, Wales and Northern Ireland (Scotland and Wales can set their own property rates). Finance Act 2026 had already set 22%, 42% and 47% for 2027-28, so today's change adds two points. Savings inside an ISA are not affected; the ISA limit stays at £20,000.

In a separate statement today, the Work and Pensions Secretary said the full new State Pension will rise by 3.9% from April 2027, around £490 a year. The Budget says that from April 2030 the State Pension will rise each year by the highest of 2.5%, inflation or the amount required to maintain its value relative to earnings as reached in April 2029. The April 2027 increase for police pensions in payment is set separately by September's CPI figure: see the April 2027 police pension increase explained.

What to do now

Nothing changes on your payslip because of today's Budget. If you want to see your own figures for this year, use the free police salary calculator. Our full Budget 2026 guide for police pay, pensions and tax has been updated from today's documents, with every change and every unchanged limit in one place.