The Autumn Budget announcement is always a big day in the UK’s financial calendar, and this year was no exception. In the hours leading up to the Chancellor’s speech, there was plenty of speculation-fuelled even more by a last-minute leak from the Office for Budget Responsibility (OBR) about the details of the budget. Social media buzzed, news outlets scrambled to interpret the hints, and many people wondered what surprises might be in store. 

As the Chancellor took to the dispatch box just after lunchtime, the country tuned in to hear what would change for the years ahead. 

 

Why this budget matters

This year’s Budget was closely watched because of ongoing debates about the country’s economic growth and the Government’s financial rules. The Government faces a challenge: it wants to help the economy grow and keep confidence in financial markets. But it needs to avoid actions that could increase costs for people and worsen the effects on the cost of living.

 

What do we make of it all?

After digging through the details of the Autumn Budget 2025, a few themes stand out. 

• Tax is on the rise: While there were no headline-grabbing tax hikes, the continued freeze on income tax thresholds means more people will gradually pay more tax as their earnings increase. This “fiscal drag” quietly raises the Government’s tax take over time. 

• Changes are mostly for the future: Many of the most significant measures won’t take effect until after April 2026. For now, overnight changes are minimal, so most people won’t see an immediate impact. It’s notable that several tax increases are delayed, which came as a surprise to us. 

• Limited boost for productivity: There’s little in this Budget to encourage “productivity”-which, in simple terms, means helping people and businesses get more done, earn more, or work more efficiently. For those caught in the so-called “tax trap,” where high earners face marginal tax rates of 60–80%, the incentive to work longer hours or seek promotion is reduced. When extra effort doesn’t result in much extra take-home pay, it can discourage people from aiming higher or working harder, which ultimately holds back overall productivity in the economy. 

• No new wealth tax or pension lump sum cap: Despite rumours, these measures didn’t materialise. 

 

Overall, this Budget indicates the Government is prioritising stability and future flexibility over immediate, bold changes. For most people, the impact will be gradual rather than sudden, with the effects of frozen allowances and delayed tax changes becoming more noticeable in the years ahead. 

 

Key announcements from the Autumn Budget 2025

 

Income tax thresholds frozen

What are they?

Income tax thresholds are the levels of income at which you start paying different rates of tax. As your income rises above certain thresholds, you pay a higher percentage in tax. These thresholds are usually reviewed and sometimes increased to keep up with inflation.

 

What’s changed?

Before this Budget, the main income tax thresholds had already been frozen at their 2021/22 levels and were due to remain unchanged until April 2028. This meant the Personal Allowance (the amount you can earn before paying any income tax) was set at £12,570, and the higher rate threshold (where you start paying 40% tax) was set at £50,270. The additional rate threshold (where you start paying 45%) was £125,140. These thresholds had not been rising with inflation or wage growth, so more people were gradually paying more tax as their incomes increased.

 

The Government announced that these income tax thresholds will now remain frozen for an extra three years, until April 2031. This means:

• The Personal Allowance stays at £12,570 until April 2031.
• The higher rate threshold stays at £50,270 until April 2031.
• The additional rate threshold stays at £125,140 until April 2031.

 

This freeze also applies to the equivalent National Insurance thresholds for employers and the self-employed.

 

Why it matters

Over time it means a larger share of your income could go to tax, even if tax rates themselves haven’t changed.

If you’re working, your pay will hopefully increase over time, in line with inflation. But because the income tax thresholds are frozen and not rising with the cost of living, you’ll find that more of your pay ends up being taxed— even if your income is just keeping up with inflation.

This effect is sometimes called “fiscal drag”. Here’s how it works in practice:

 

Example 1: Average earner

• Let’s say you earn £35,000 a year. If your salary goes up by 4% (roughly in line with recent inflation), you’d earn £36,400 next year. Because the Personal Allowance (the amount you can earn before paying tax) is frozen at £12,570, all of that pay rise is taxed at 20%. You’ll pay an extra £280 in tax, just because your pay went up with inflation.

Example 2: Mid earner

• If you earn £60,000 a year, a 4% pay rise takes you to £62,400. The higher rate threshold (where you start paying 40% tax) is frozen at £50,270. More of your income is now taxed at 40%, so you’ll pay even more extra tax- about £856 more, just from your pay keeping up with inflation.

 Example 3: High earner

• If you earn £120,000 a year, a 4% pay rise takes you to £124,800. The higher rate threshold (where you start paying 40% tax) is frozen at £50,270. You’ve also lost part of your Personal Allowance for earning above £100,000. More of your income is now taxed at 40%, plus your Personal Allowance will fall from £2,570 to £170, so you’ll pay an extra £2,880 in tax, just from your pay keeping up with inflation.

 

Over time, as wages rise but thresholds stay the same, more people will move into higher tax bands, and everyone will pay a bigger share of their income in tax- even if tax rates themselves haven’t changed. This is why the Government expects to raise billions more in tax over the next few years, without increasing the tax rates.

 

Salary sacrifice on pensions

What does salary sacrifice on pensions mean?

Salary sacrifice is an arrangement where you agree to give up part of your salary, and your employer pays that amount directly into your pension. This means you pay less National Insurance (NI) and income tax, and your take-home pay is higher than if you made the same pension contribution from your after-tax salary. It’s a popular way to boost pension savings, especially for higher earners.

 

What’s the change?

Until now, there was no upper limit on how much of your salary you could sacrifice for pension contributions and still benefit from reduced National Insurance. Both employees and employers could save NI on the full amount of salary sacrificed, making it especially attractive for those able to contribute large sums.

 

From April 2029, the Government will cap the amount of pension contributions that can benefit from National Insurance savings through salary sacrifice at £2,000 per year, per employee. This means:

• You can still use salary sacrifice for pension contributions above £2,000, but any amount over £2,000 will no longer get the NI saving—normal NI will be charged on the excess.
• This change applies to both employee and employer National Insurance.

 

The impact on employees and employers

• If you’re contributing less than £2,000 a year via salary sacrifice to a pension you won’t notice any change. You’ll still get the full National Insurance saving on your pension contributions.
• If you contribute more than £2,000 a year via salary sacrifice, typical for many higher earners, you’ll pay more National Insurance on the amount above £2,000 from April 2029. For example:
  • If you sacrifice £5,000 of salary into your pension, only the first £2,000 will be free of NI. The remaining £3,000 will be subject to normal NI charges.
  • For an employee in the basic rate tax band, this means an extra £240 in NI for every £3,000 above the cap (at 8%), and for the employer, an extra £450 (at 15.0%).

 

How do employers use NI savings now?

It’s important to know that not all employers treat the NI saving from salary sacrifice in the same way:

• Some employers keep the NI saving themselves.
• Some pass the full NI saving on to your pension, boosting your retirement pot.
• Others might split the saving—putting some into your pension and using the rest to fund other employee benefits, like life cover or extra perks.

 

With the new cap, there will be less NI saving available, so employers will need to decide how to handle this change. If your employer currently passes on the NI saving, you may see less going into your pension above the £2,000 cap. If they use the saving for other benefits, they may need to review those arrangements too.

 

Overall

The change doesn’t take effect until April 2029, so there’s time for pension schemes, payroll providers, and employers to work out the details with the Government. It also gives the government a chance to roll back on this if the economy doesn’t grow enough.

For many, this will mean less going into employees’ pensions and more being paid as tax.

 

Cash ISA changes

What is it?

A Cash ISA is a savings account where the interest you earn is tax-free. There’s a yearly limit on how much you can put in across all your ISAs.

 

What changes are coming to the way you save?

Before the Budget, you could save up to £20,000 each tax year in ISAs, and the full amount could go into a Cash ISA if you wished, as long as you were over 16.

From April 2027, the annual limit for Cash ISAs will be reduced to £12,000 for savers under 65. The overall ISA limit (£20,000) stays the same, but only those aged 65 and over can put the full £20,000 into a Cash ISA. A younger saver can still use the rest of their allowance in other types of ISAs (like Stocks & Shares or Lifetime ISAs).

 

What’s the impact?

If you’re under 65 and have been putting the full £20,000 into a Cash ISA each year, from April 2027 you’ll only be able to put in £12,000. You can still save up to £20,000 a year tax-free, but you’ll need to use other types of ISAs (like Stocks & Shares) for the rest. If you’re 65 or over, nothing changes—you can still put the full £20,000 into a Cash ISA. And for Junior ISAs, the allowance remains the same.

The Government’s stated aim is to encourage younger savers to consider investing for the long term, as investing in equities has historically provided higher returns than cash savings (though this comes with risk, and past performance isn’t a guarantee of future results).

However, while Cash ISAs are simple and familiar, it’s not clear that changing the allowance will actually shift people’s behaviour towards investing. Many people can already earn interest on ordinary savings accounts outside an ISA; basic rate taxpayers can receive up to £1,000 in interest tax-free each year. At a 4% interest rate, that’s equivalent to having £25,000 in savings before paying any tax on the interest. There are also other tax-free options like Premium Bonds, though these don’t guarantee a set return.

In our view, rather than adjusting allowances, it would be more helpful to focus on financial education—helping people understand the differences between cash savings and investing, and how to plan for their financial future.

 

Dividends, Savings and Property income tax

What are these taxes?

• Dividend income is money you receive from shares in companies.
• Savings income is interest you earn from things like savings accounts or bonds.
• Property income is money you make from renting out property.

 

Normally, these types of income are taxed at different rates from your salary, and there are some tax-free allowances.

 

What’s the change?

From April 2026 and April 2027, the Government will increase the tax rates on these types of income:

• Dividend tax: From April 2026 the basic and higher rates will each rise by 2%(to 10.75% and 35.75%). The additional rate stays at 39.35%.
• Savings income: From April 2027 the tax rate on savings interest will rise by 2% across all bands (to 22%, 42%, and 47%).
• Property income: A new, separate tax rates for property income will apply from April 2027: 22% (basic), 42% (higher), and 47% (additional) in line with savings income tax.

 

How much more tax could you be paying?

If you receive dividends, interest from savings, or property rental income, you’ll pay more tax on these from the dates above.

For example, if you’re a basic rate taxpayer and receive £2,000 in dividends, you’ll pay £215 in tax instead of £175.

Most people with small amounts of savings, dividends, or property income won’t see a big change, as tax-free allowances still apply. But those with larger amounts will pay more tax.

 

Agricultural Property Relief (APR) and Business Relief (BR)

What are they?

Agricultural Property Relief (APR) reduces the value of qualifying agricultural assets, such as farmland, when calculating Inheritance Tax (IHT). It exists to help family farms pass down through generations without triggering a significant tax liability.

Business Relief (BR) reduces the value of certain business assets or shares in trading businesses for Inheritance Tax (IHT) purposes. Depending on the type of asset or shareholding, relief can be set at either 50% or 100%. BR is an important tool for succession planning, particularly for family-owned businesses and for investors in qualifying trading companies.

 

What’s the change?

Previously, both reliefs operated on a use-it-or-lose-it basis. If a spouse or civil partner died without fully using their available APR or BR relief, any unused portion could not be transferred to the survivor.

The new legislation changes that. A surviving spouse or civil partner can now inherit any unused APR or BR allowances from the person who has died.

This aligns these reliefs with the way transferable allowances already work for the IHT nil-rate band (NRB) and residence nil-rate band (RNRB), creating a more joined-up and predictable approach to succession planning.

 

What’s the impact?

This change makes it easier for farming families and some businesses to use the full allowance, even if one partner dies before using it all. The change brings APR and BR in line with other Inheritance Tax reliefs.

However, some may have already put planning in place, such as taking out life cover to insure against a potential inheritance tax bill or changing their Wills so that part of the farm passes directly to the next generation rather than the surviving spouse. These arrangements often come at a cost. With the changes announced in the Budget, it’s important to review these plans to see if they are still necessary, or if they should be updated to reflect these new calculations.

 

High Value council tax surcharge

What is it?

A new annual tax on owners of residential properties in valued at £2 million or more (based on 2026 prices). This is in addition to your regular council tax.

There are four bands, with charges rising as property value increases:

• £2m–£2.5m: £2,500 per year
• £2.5m–£3.5m: £3,500 per year
• £3.5m–£5m: £5,000 per year
• £5m+: £7,500 per year

 

When does it start? And who pays?

The surcharge will apply from April 2028, following a targeted valuation exercise by the Valuation Office in 2026. Revaluations will be carried out every five years. The property owner (not the occupier or tenant) will be liable for the surcharge.

A public consultation will be held in early 2026 to decide details, including reliefs, exemptions, appeals, and support for those who may struggle to pay.

The Government will also consult on how to deal with complex ownership structures (companies, trusts, partnerships) and properties where occupation is required for a job.

Local authorities will collect the surcharge on behalf of central Government and will be compensated for the extra administration costs.

 

What if I don’t have enough money to pay?

The Government has committed to consulting on support and deferral schemes for those unable to pay immediately, including possible exemptions and reliefs for hardship cases. Details of these schemes will be decided after the consultation in 2026.

 

Other changes

• State pension will rise in line with inflation. The new State Pension (for those who took the pension from April 2016) will rise to £12,547.60 per year from April 2026, an increase of £574.60. The basic State Pension (pre-April 2016) will rise to £9,614.80 per year from April 2026, an increase of £439.40.
• Venture Capital Trust (VCT) Changes – Changes to VCTs were announced. If you’ve invested in a VCT before, and you were considering doing it again, then contact us ASAP.
• Lifetime ISA Reform: The Government will consult in early 2026 on creating a simpler ISA product for first-time buyers, which will eventually replace the Lifetime ISA. (Consultation in 2026; changes to follow.)
• EV mileage charges: A new tax will be introduced on miles driven by electric vehicles (EVs), known as the EV mileage charge. This will apply alongside Vehicle Excise Duty. (Expected from April 2028.)
• Visitor Levy: in England will be able to introduce a tax on overnight stays in hotels and other accommodation. (Consultation ongoing; implementation date to be confirmed.)

 

Summary timeline of changes

What changes happen now, what happens in April 2026, and what comes later?

A very small number of changes from the Autumn Budget 2025 take effect immediately, including new restrictions on Employee Ownership Trusts (EOTs).

From April 2026, key measures such as increases to dividend tax rates and the ability to transfer unused Agricultural Property Relief (APR) between spouses or civil partners will come into force.

All other significant changes—including higher tax rates on savings and property income, the reduction in the Cash ISA limit for under-65s, the new high value council tax surcharge, the electric vehicle mileage charge, and the cap on salary sacrifice pension contributions, are scheduled for April 2027 or later.

 

The take-away points

• Tax Thresholds are going to bite: If you’re drawing income from investments or pensions, consider reviewing how and when you take withdrawals. Small changes in timing or amounts could help reduce unnecessary tax, especially as allowances remain frozen.
• Pensions and ISAs are still the most tax efficient way to save for the future If you’re saving/investing then continuing to use a pension and ISA remains the most appropriate thing to do.
• If you take dividends from your business, it may be good to review your remuneration strategy with your accountant. There may be limited scope to avoid higher tax, but planning ahead could help smooth your tax bill.
• Farmers and Agricultural Families: Update Estate Plans: If you have inheritance tax planning in place (e.g., life cover, trusts, or specific Will arrangements), review these with your adviser to ensure they’re still appropriate and make the most of the new rules.
• If you’ve invested into a VCT before and would like to do so again, then get in contact as the tax relief amount will change from April 2026.

 

For Most People: Stay the Course but Stay Informed: Many changes are delayed or gradual, and for most, there’s no urgent action required. Continue with your existing financial plans but keep an eye on how frozen allowances and future tax rises could affect you. Regular reviews with your Financial Planner will help you stay on track.

 

Rumours vs. Reality

Every Budget season brings a swirl of speculation, and this year was no different. There were plenty of headlines and social media chatter about possible new taxes on wealth, sweeping pension reforms, or major changes to gifting and inheritance tax rules. In reality, many of these widely discussed changes have not materialised.

• No new wealth tax was introduced.
• No drastic pension reforms or lump sum caps appeared.
• Inheritance tax gifting rules (including the 7-year rule) remain unchanged for now.
• No changes to the amount of Pension Commence Lump Sum (PCLS), better known as tax-free cash from your pension

Ahead of the Budget, notifications were issued by HMRC to state cancellation rights cannot be used to return tax-free cash back to a pension.

It’s a useful reminder: while it’s important to stay informed, it’s best to base decisions on what’s actually been legislated, not on rumours or predictions. We recommend reviewing your plans in light of confirmed changes, not speculation.

 

What Should You Do Now?

For most people, this Budget doesn’t require urgent action or a change of course. If you’ve been waiting for clarity before making financial decisions, you can continue with your plans. However, it’s important to recognise that, while there are few immediate changes, the impact of frozen allowances and future tax rises will build up over time.

For most, the best approach is to stay on track, keep your plans under review, and be aware of how gradual changes may affect you in the years ahead.

 

Need Advice?

With so many moving parts and individual circumstances, we believe in the value of independent, ongoing financial planning. If you don’t already have regular reviews, or if you’re unsure how these changes might affect you, please get in touch for a personal review. For clients who already benefit from our ongoing service, we’ll be happy to discuss the details and implications at your next annual review.

Remember: The best financial decisions are made with up-to-date, factual information and tailored advice. If you have questions or want to discuss your financial plan, we’re here to help.

 

Disclaimer

This summary is provided for general information purposes only and does not constitute personal financial advice, a recommendation, or guidance to make any financial decisions. The content is based on information available at the time of writing, including official Government announcements and reputable sources. Some measures discussed may be subject to further consultation, may not be implemented immediately, or could change as legislation develops.

Tax rules, allowances, and rates are subject to change and may vary depending on your individual circumstances and where you live in the UK. The impact of any changes will differ from person to person. You should not make financial decisions based solely on this summary. We strongly recommend seeking personalised, independent advice before taking any action in response to Budget announcements.

Past performance is not a reliable indicator of future results. The value of investments and the income from them can go down as well as up, and you may not get back the amount you invest.