Autumn Budget 2025: What you need to know

After weeks of unsettling speculation, the budget that was finally delivered by the Chancellor had limited surprises and was largely made up of a number of backloaded smaller measures. Changes to pension tax free cash, limits to lifetime gifting and mass income tax rises were all rumoured but were ultimately left untouched.

The range of measures announced will raise an additional £26 billion in taxes by 2030. Reeves strongly reaffirmed her party’s commitment to not raising taxes on “working people” and whilst taxation rates haven’t directly risen, stealth taxation through ‘fiscal drag’ were the main revenue raiser generating around £8 billion of the additional taxes.

The headline measures include a further three years of frozen income tax bands to April 2031, a 2% income tax rise on property, savings and dividends and national insurance now payable on salary sacrifice pension contributions above £2,000 from 2029.

The detail associated with each of the main personal finance changes are outlined below.

Investments and Income Tax

UK income tax and national insurance rates thresholds will be frozen until 2031.

Additional tax rates of 2% will apply to income derived from dividends, savings and property which will be introduced in April 2026 (dividends) and April 2027 (savings and property income) in what looks to be an attempt to distinguish between “earned” and “unearned” income and further protect working people as per the Labour party’s manifesto.

Pensions – Salary Sacrifice

The Chancellor announced that from April 2029, the exemption from National Insurance (NI) will be restricted to the first £2,000 of an employee’s contribution via salary sacrifice. Employees can continue to sacrifice more than £2,000 but will only get income tax relief on the amount above £2,000. Both employers and employees will have to pay NI on amounts sacrificed above £2,000.

This will be disappointing news for employers and employees alike who will face higher costs to provide for retirement from April 2029.

Individual Savings Accounts (ISAs)

In what appears to be an attempt to encourage more participation into longer term stock market investment, the cash ISA limit falls to £12,000 for those under 65 from April 2026, the Stocks and shares ISA contribution limit stays at £20,000.

EIS & Venture capital trusts

The income tax relief on VCTs reduces from 30% to 20% from April 2026 EIS relief stays at 30%.

What didn’t change?

In the weeks leading up to the budget, there was much speculation and scaremongering around potential harmful changes that could negatively impact accumulated wealth. Ultimately, there were no changes to the following areas:

• Pension tax free cash rules and tax relief on pension contributions remain unchanged
• Capital gains tax rates – rates remain 18% (basic) and 24% (higher)
• Gifting rules
• The inheritance tax threshold with the current nil rate band of £325,000 frozen until 2031

As such, from a financial planning perspective individuals continue to have opportunities to utilise the UK’s existing rules to pursue their planning goals. From creating a tax-efficient investment portfolio to putting measures in place to reduce inheritance tax liabilities, there are still numerous planning opportunities available. The key is to begin planning early and ensure your financial plan is reviewed and updated regularly, so that it remains suitable and current for the everchanging economic landscape.

Where does that leave us?

With the announced changes combined with the 2024 Budget’s inclusion of pension assets in inheritance tax calculations from 2027 we believe now more than ever, the importance of engaging with a financial adviser to produce a bespoke, tax efficient financial plan.

Adopting a well-structured approach and utilising a variety of financial products and tax wrappers will be increasingly vital in minimising present and future tax liabilities.

Whether you are growing your asset base for the future, currently living off your assets or intend to pass on as much wealth as possible to your family, we at Davy UK can assist you on this journey.