Autumn Budget 2025

Chancellor Rachel Reeves gave her second Budget speech on 26 November 2025. After much worry and speculation, there were thankfully no changes announced to the rules around pension tax relief and tax-free cash (pension commencement lump sums). However, there are going to be changes to the salary sacrifice rules for pension contributions – from April 2029, only the first £2,000 per annum of sacrificed salary will be exempt from employer and employee National Insurance (NI).

Other announcements included an increase in the rates of income tax on dividends, property and savings income by 2 percentage points (some changes from April 2026 and some from April 2027) and a freezing of the income tax bands in England, Wales and Northern Ireland for a further three tax years until April 2031.

From April 2027, changes will be made to the ISA allowance so that only the over 65s will be able to place the full £20,000 into Cash ISAs (capped at £12,000 into Cash ISAs for the under 65s).

We have summarised the main points of the Budget relevant to financial planning below, along with a reminder of various changes from April 2026 that we were already aware of.

PENSIONS

Salary sacrifice

From April 2029, anyone sacrificing more than £2,000 per tax year for employer pension contributions won’t save NI on the excess. Employers will also pay NI on any excess. So, as long as the employer agrees, an employee will still be able to sacrifice more than this amount but won’t benefit from an NI saving on anything above £2,000pa. Higher and additional rates of income tax relief will still be achieved upfront when salary sacrifice is used (although, the overall income tax relief is the same whichever tax relief method is used – as long as you remember to claim back higher and additional rate relief where relief at source is used of course!).

GOV.UK : Changes to salary sacrifice for pensions from April 2029

Pensions and Inheritance Tax (IHT)

Whilst the plans to include most pensions in the estate for IHT purposes for deaths from 6 April 2027 remain in place, an administrative change was announced alongside the Budget. It’s going to be possible for the personal representatives to instruct scheme administrators to withhold 50% of taxable benefits for up to 15 months and pay the IHT in certain circumstances. This won’t apply to exempt benefits, funds under £1,000, or continuing annuities. Also, the personal representatives will be discharged from liability to pay the IHT on pensions that are discovered after they have received clearance from HMRC. Further guidance is awaited on this subject.

State pension

  • The triple lock means the new state pension and basic state pension are expected to increase by 4.8% in April 2026. This will mean a full new state pension figure of £241.30 per week and a full basic state pension of £184.90 per week. The government has committed to maintaining the triple lock for the duration of this Parliament.
  • The Pension Credit Standard Minimum Guarantee will also increase by 4.8% from April 2026.
  • Restrictions will be introduced on the making of (the cheaper) Class 2 voluntary NI (VNICs) to achieve state pension for those living overseas by increasing the initial residency or contributions requirement for VNICs to 10 years. The government is also launching a wider review of VNICs, with a call for evidence to be published in the new year.
  • Changes will be made from 2027 to avoid those whose sole income is the state pension having to pay small amounts of income tax through Simple Assessment (which will become increasingly likely as the state pension increases, and the personal allowance remains frozen). Further detail to follow.

Defined Benefit (DB) surpluses

 From April 2027, well-funded DB pension schemes will be able to pay surplus funds directly to scheme members over the normal minimum pension age, where scheme rules and trustees allow.

Pension Protection Fund / Financial Assistance Scheme

The government will introduce payment of inflation increases on pre-97 pensions to PPF and Financial Assistance Scheme (FAS) members of up to 2.5 per cent. This will apply to those members whose original schemes provided for indexation on pre-97 pensions. The move will broadly align re-97 indexation rules with those already in place for post-97 pensions for PPF and FAS members.

Mineworkers Pension Scheme

The government has decided to transfer the surplus in the British Coal Staff Superannuation Scheme back to its members.

INVESTMENTS

Individual Savings Accounts

From April 2027, changes will be made to the ISA allowance so that only the over 65s will be able to place the full £20,000 into Cash ISAs – those under 65 are capped at £12,000 into Cash ISAs with the balance having to be placed in other ISA types if they wish to make use of the full allowance.

The annual subscription limits all remain at their current levels and are frozen until April 2031, i.e.

  • £20,000 ISA
  • £4,000 Lifetime ISA
  • £9,000 Junior ISA (and Child Trust Fund)

Lifetime ISA

Consultation to take place early next year on replacing the Lifetime ISA (LISA) with a new product for first time buyers.

Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCT)

Changes to be introduced in Finance Bill 2025-26 to take effect from 6 April 2026:

  • The Income Tax relief that can be claimed by an individual investing in VCT to reduce to 20% from the current rate of 30% (but capped at the level of the investor’s income tax bill)
  • The gross assets requirement that a company must not exceed for the EIS and VCT to increase to £30 million (from £15 million) immediately before the issue of the shares or securities, and £35 million (from £16 million) immediately after the issue
  • The annual investment limit that companies can raise to increase to £10 million (from £5 million) and for knowledge-intensive companies to £20 million (from £10 million)
  • The company’s lifetime investment limit to increase to £24 million (from £12 million) and for knowledge-intensive companies to £40 million (from £20 million)
  • No changes to EIS or VCT subscription limits or to the income tax relief rate for EIS

The increases to the annual, lifetime and gross asset limits apply only to qualifying companies that are not registered in Northern Ireland trading in goods or the generation, transmission, distribution, supply, wholesale trade or cross-border exchange of electricity. These companies will remain eligible for the current scheme limits.

Help to Save scheme

The Help to Save scheme is to be made permanent and, from April 2028 eligibility will be widened to include all Universal Credit claimants who receive the child element, the caring element or both.

Enterprise Management Incentive (EMI) scheme

The measure will amend provisions for some of the limits relating to the EMI scheme. For eligible companies, the changes that will apply to EMI contracts granted on or after 6 April 2026 are the limit on:

  • Company options will be increased from £3 million to £6 million
  • Gross assets will be increased from £30 million to £120 million
  • The number of employees will be increased from 250 employees to 500 employees

TAXATION

Income tax

Income tax bands in England, Wales and N. Ireland have been frozen for a further three tax years to April 2031 (had already been frozen to April 2028). Tax bands and rates differ in Scotland. The personal allowance is also now fixed to April 2031 (Scotland included).

The Married Couple’s Allowance and Blind Person’s Allowance will increase in April 2026 by 3.8%.

All income tax rates and bands remain at their current levels in 2026/27 apart from as outlined below.

Changes to tax rates for property, savings & dividend income

  • Tax on dividend income will increase by 2 percentage points. The ordinary rate will rise from 8.75% to 10.75%, and the upper rate from 33.75% to 35.75% from April 2026. The additional rate will remain unchanged at 39.35% (and will continue to apply to discretionary trusts). The £500 dividend allowance remains in place for individuals (not trusts)).
  • Tax on savings income will increase by 2 percentage points across all bands. The basic rate will rise from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47% from April 2027. The starting rate band and personal savings allowance remain unchanged. In terms of investment bonds, the current understanding is that non-dividend income within a UK bond will be taxed at 22% from April 2027 leading to a corresponding increase in the tax credit to 22% on chargeable gains (not mentioned in the Budget documents but apparently confirmed to the ABI). The income tax rate on property and savings income for discretionary trusts will rise to 47% and for interest in possession trusts, to 22%.
  • The government is creating separate tax rates for property income (any income from letting land and buildings). From April 2027, the property basic rate will be 22%, the property higher rate will be 42% and the property additional rate will be 47%. Finance cost relief (e.g. mortgage interest relief) will be provided at the separate property basic rate (22%). The £1,000 property allowance and Rent a Room Scheme remain in place.

The way individuals report and pay tax on property, savings and dividend income will remain the same – it is only the rates of tax charged that will change.

The income tax ordering rules will be changed from April 2027 so that the Personal Allowance will be deducted against employment, trading or pension income first. Any unused balance of personal allowance will then be deducted from property, savings and dividend income in the most beneficial way for the individual.

The changes to property income rates will apply in England, Wales and Northern Ireland. The government will engage with the devolved governments of Scotland and Wales to provide them with the ability to set property income rates in line with their current income tax powers in their fiscal frameworks. The changes to dividend and savings income rates will apply UK-wide as these rates are reserved.

GOV.UK : Changes to tax rates for property, savings & dividend income

Tax and NI thresholds

  • No increases to the headline rates of income tax, National Insurance contributions (NICs) or VAT (see above regarding future income tax rates for savings/dividend/property income)
  • Income tax thresholds and the equivalent NICs thresholds for employees and self-employed frozen at current levels for a further three years so now frozen until April 2031. This means the Primary Threshold (the level at which employees start paying NI) and the Lower Profits Limit (self-employed) will remain at £12,570 and the Upper Earnings Limit and Upper Profits Limit will be maintained at £50,270.
  • NI Secondary Threshold frozen at its current level until April 2031 (so, remaining at £5,000 as currently)
  • Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) will increase in April 2026 by 3.8% to give an LEL of £6,708 per annum (£129 per week) and SPT of £7,105 per annum and then be frozen until 2031
  • Voluntary NI rates will also increase by 3.8% in April 2026 to £3.65pw (class 2) and £18.40pw (class 3)
  • Plan 2 student loan repayment threshold will be frozen at its 2026/27 level for three years from April 2027

National Minimum/Living Wage

From April 2026, the minimum wage for over 21s will rise to £12.71. For 18 to 20-year-olds, the minimum wage will rise to £10.85. Apprentices will get an increase to £8.00 an hour.

Capital gains tax (CGT)

The annual exemption remains at £3,000 (a maximum of £1,500 for discretionary/interest in possession trusts – shared between all settlor’s trusts subject to a minimum of £300 per trust).

CGT rates remain as they currently are:

  • 18% for any taxable gain that doesn’t fall above the basic rate band when added to income and 24% on any gain (or part of gain) that falls above the basic rate band when added to income
  • Unused personal allowance can’t be used for capital gains
  • Discretionary/interest in possession trustees and personal representatives pay at the higher rate (24%)

Inheritance tax (IHT)

  • In an improvement to the Business and Agricultural Relief changes from next April, the £1 million limit on 100% Business and Agricultural Relief will be transferable between spouses if unused on first death (including where first death was before 6 April 2026).
  • Capping inheritance tax trust charges for former non-UK domicile residents – this measure introduces a cap on relevant property inheritance tax charges for trusts which held excluded property on 30 October 2024. The relevant property charges are capped at £5 million over each 10-year cycle.
  • Anti-avoidance measures for non-long-term UK residents and trusts – this measure will look-through non-UK companies or similar bodies to treat UK agricultural land and buildings as situated in the UK for inheritance tax purposes. It also provides that where a settlor ceases to be a long-term UK resident, there will be an Inheritance Tax charge if there is a later change in situs of their trust assets. Also, Inheritance Tax charity exemption will be restricted to gifts made directly to UK charities and registered clubs and excluded from gifts to trusts which are not registered as UK charities or clubs.
  • The government will update legislation so that payments made under the Infected Blood Compensation Scheme and Infected Blood Interim Compensation Payment Scheme are relieved from inheritance tax in cases where the original infected or affected person eligible for compensation has died before the compensation is paid. The government will also legislate to allow the first living recipient to gift some or all their compensation payment without any IHT charge.
  • IHT thresholds to be fixed at their current levels for one further tax year to April 2031, as shown below:
  • Nil Rate Band at £325,000
  • Residential Nil Rate Band at £175,000
  • Residential Nil Rate Band taper, starting at £2 million
  • combined £1 million allowance for 100% Agricultural Property Relief and Business Property Relief.

Previously announced changes

The government is implementing previously announced reforms to taxes on wealth and assets including:

  • From 6 April 2026, the CGT rate for Business Asset Disposal Relief and Investors’ Relief will increase to match the main lower rate at 18%
  • From 6 April 2026, the government will reform agricultural property relief and business property relief
  • From 6 April 2026, the government will introduce a revised tax regime for carried interest which sits wholly within the income tax framework
  • From 6 April 2027, the government is removing the opportunity for individuals to use pensions as a vehicle for IHT planning by bringing unspent pots into the scope of IHT

Internationally mobile individuals

The government is to make changes to the way internationally mobile individuals are taxed, closing loopholes and capping relevant property trust charges payable by certain trusts. Further details are to follow.

New mileage tax on electric cars

From April 2028, the Electric Vehicle Excise Duty (eVED) will be 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrids. The rate per mile will increase annually in line with the CPI.

Universal credit

The two-child benefit cap is to be abolished from April 2026.

Employee ownership trusts (EOT)

With immediate effect, the 100% relief from capital gains tax on businesses sold to Employee Ownership Trusts will be reduced to 50%.

High value council tax surcharge HVCTS (‘Mansion tax’)

From April 2028, a council tax surcharge will apply to properties worth more than £2m in 2026. This will be £2,500 for properties worth £2m-£2.5m rising in bands to a maximum of £7,500 for homes valued at over £5m. Charges will increase in line with CPI inflation each year from 2029 onwards. Homeowners, rather than occupiers, will be liable to the surcharge and will continue to pay their existing Council Tax alongside the surcharge.

GOV.UK : High Value Council Tax Surcharge

Stamp duty

From 27 November 2025, there is an exemption from the 0.5% Stamp Duty Reserve Tax (SDRT) charge on agreements to transfer securities of a company whose shares are newly listed on a UK regulated market.

The exemption will apply for a 3-year period from the listing of the company’s shares.

Tax Support for Entrepreneurs

A Call for Evidence has been published seeking views on the effectiveness of existing tax incentives, and the wider tax system, for business founders and scaling firms, and how the UK can better support these companies to start, scale and stay in the UK. The Call for Evidence will close on 28 February. Watch this space.

 

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