Autumn Budget 2025: What changed and what to plan for

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).  

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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 below, along with a reminder of various changes from April 2026 that we were already aware of. Further guidance will be published as necessary and as more detail becomes available.  

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.

Such contributions still receive income tax relief as they would if made via a different method such as relief at source.

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.

Restrictions will be introduced on the making of 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).  

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 would apply to those members whose original schemes provided for indexation on pre-97 pensions. The move would broadly align pre-97 indexation rules with those already in place for post-97 pensions for PPF and FAS members.

Investments

Individual Savings Accounts (ISAs)

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 in 2026/27, 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 Scheme and Venture Capital Trust 

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 Venture Capital Trust (VCT) to reduce to 20% from the current rate of 30%
• The gross assets requirement that a company must not exceed for the Enterprise Investment Scheme (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)

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.

EIS and VCTs are higher risk investments and they are not suitable for all investors. There is a chance that all of your capital could be at risk and you should not invest into these types of plans without seeking advice.

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).

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%. The £500 dividend allowance remains in place.  
• 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.
• 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 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.

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.

Tax and NI thresholds

• No increases to the headline rates of income tax (see above regarding future rates for savings/dividend/property income), National Insurance contributions (NICs) or VAT
• Income tax thresholds and the equivalent NICs thresholds for employees and self-employed frozen at current levels for a further three years from April 2028 to April 2031
• NI Secondary Threshold frozen at its current level from April 2028 to April 2031
• Plan 2 student loan repayment threshold will be frozen at its 2026/27 level for three years from April 2027

National Living Wage

National Living Wage will increase by 4.1% to £12.71 per hour for eligible workers aged 21 and over.  

Capital gains tax

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 rates (24%)

Inheritance tax  

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 at 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.

IHT thresholds to be fixed at their current levels for one further tax year to April 2031, as shown below:  

• Nil-Rate Band (NRB) at £325,000
• Residence Nil-Rate Band (RNRB) at £175,000
• RNRB taper, starting at £2 million
• combined £1 million allowance for 100% APR and Business Property Relief (BPR) 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

A new 3p charge per mile on electric cars.

Universal credit

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

Employee ownership trusts (EOT)

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.

If you’d like to know how the budget may impact your financial plans, why not get in touch and speak to one of our advisers today for a free initial consultation. 

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The Financial Conduct Authority (FCA) does not regulate estate planning or tax advice.

This article is intended as information only and does not constitute financial advice.  

The information contained in this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.