Autumn Budget Update: What the Autumn Budget Means for You

Despite Rachel Reeves’ second budget as Chancellor almost being fully revealed by a leak in the Office of Budget Responsibility before it had begun, she set out an economic plan focused on creating a ‘fairer, stronger and more secure UK’ although the general theme was higher taxes that will eventually lead to nearly 920,000 new higher rate tax payers by 2029/30. Speculative rumours in anticipation of the budget included changes to the tax-free pension amount, reducing pension tax relief, inheritance taxation and capital gains, but these were unfounded allowing many to breathe a sigh of relief. However, several other major changes were announced including Income Tax increases on savings, dividends & property income, a National Insurance exempt cap on salary sacrifice contributions into pensions from April 2029, the removal of the Lifetime ISA and changes to VCT allowances & tax relief.

Income Tax Changes

It was announced that income tax band freeze will be extended from April 2028 to April 2031, meaning a forecasted 920,000 will fall into higher tax brackets before further increases.

Income tax on property, dividend and savings income is also set to increase from April 2027 across all tax bands, changing the tax rates as follows:

Property Income – 22% for Basic Rate, 42% for Higher Rate and 47% for Additional Rate
Dividend Income – 10.75% for Basic Rate, 35.75% for Higher Rate and 39.35% for Additional Rate
Savings Income – 22% for Basic Rate, 42% for Higher Rate and 47% for Additional Rate

These changes make the use of tax planning even more valuable as tax levels increase, including contributions into pensions, ISAs & other tax-efficient solutions such as investment bond structures and making use of the Marriage Allowance where available It also highlights the need for self-employed individuals to consider their remuneration structure for how they balance taking dividends and salary.

National Insurance on Salary Sacrifice

The full exemption for National Insurance Contributions on salary sacrifice for both employees and employers will be limited to £2,000 per annum from April 2029. Any contributions made in excess of the £2,000 cap will be subject to Employee and Employer National Insurance as standard.

This measure will bring about changes to pension planning and whether salary sacrifice is the most efficient way of contribution to a pension. Considerations include whether salaries will be taken above the Higher Rate or Child Benefit thresholds. Some individuals may wish to maximise the use of their Annual Allowance before the 2029 changes using this method if suitable.

Cash ISA Allowance Changes and Lifetime ISA Removal

Whilst the overall ISA subscription limit will be maintained at £20,000 per annum, the Cash ISA limit will be reduced to £12,000 for under-65s from April 2027. The full £20,000 allowance will be protected from individuals aged 65 and over. This has been done in an attempt to drive working-age individuals to redirect their contributions to Stocks & Shares ISAs for increased growth potential over the long-term.

Some individuals may wish to use their full allowances between now and April 2027 where it remains suitable to do so.

The Lifetime ISA (LISA) is also set to be scrapped and replaced with a new ‘simpler’ product to support first-time buyers after a consultation due for publishing in early 2026.

The generous 25% government bonus remains in place until then for individuals who wish to make contributions into LISAs whilst they still exist.

Other Important Changes

A variety of other measures have been announced that may also change your overall financial plan:

• In line with the triple lock, both the basic and new state pensions will rise by 4.8% (the weekly earnings rate from July – September 2025). This means the new state pension will rise to £241.05 per week / £12,534.60 per and the basic state pension will rise to £184.90 per week / £9,614.80 per annum, both from April 2026.
• The minimum wage and national living wage are also set to increase from £10 per hour to £10.85 per hour and £12.21 per hour to £12.71 per hour respectively from April 2026.
• The income tax relief on Venture Capital Trusts (VCTs) is set to be reduced from 30% to 20% from April 2026. However, the annual limit that can be invested into VCT and Enterprise Investment Schemes (EIS) is set to increase to £10m or £20m for knowledge-intensive companies. The lifetime company investment limit will also rise to £24m or £40m for knowledge-intensive companies. The income tax relief on EIS will remain at 30%.
• The combined allowance for the 100% rate of Agricultural Property Relief (APR) and Business Property Relief (BPR) will be fixed at £1m until April 2031. Any unused allowance for the 100% rate of APR and BPR will now be transferrable between spouses/civil partners, including if the death was before 6^th April 2026.
• A new excise duty will be introduced from April 2028 on electric and hybrid vehicles. For electric cars, they will pay at a rate of 1.5p per mile whilst hybrid cars will pay at a rate of 3p per mile.
• Owners of properties worth £2m or more will face a surcharge to council tax from April 2028. The tax will be in 4 bands with properties worth £2-2.5m being charged £2,500 pa rising to properties worth £5m or more being charged £7,500 pa.
• Any individual with a pre-97 element of a pension now held by the Pension Protection Fund (PPF) or Financial Assistance Scheme (FAS) will have that element of their pension indexed in line with inflation.
• The 2-child benefit cap will be scrapped from April 2026, meaning parents can claim universal credit and tax credits for all of their children. Any benefits will also be uprated in line with inflation. Note that this does not affect the child benefit earnings cap of £80,000 per annum.

FSCS Protection Limit Increase

We would also like to mention, as we did in our communication yesterday, that the FSCS deposit protection limit per bank will rise from £85,000 to £120,000 from 1^st December 2025. There is also further protection for temporary high balances up to £1.4m for up to 6 months in specific circumstances, such as a house sale or insurance pay-out. Whilst this was not a measure brought about in the budget, it remains a key part of financial planning.

Actions to Consider in the Future

In light of the changes to tax rates and reliefs, it will be important to consider how these will impact your longer-term strategy and plan. There are a number of changes that may impact wealth in the future and therefore, it is important these changes are considered and how they relate to you. We will naturally be picking up all these changes with our clients in our next review meeting, however, if you would like to discuss any of the changes in advance, please do not hesitate in contacting us. As an overview, I’ve also provided a link to our 2025 Autumn Budget guide covering all areas of the budget in more detail.