Autumn Budget 2025: What It Means for Your Financial Plan

Chancellor Rachel Reeves delivered her second Autumn Budget on Wednesday 26th November, introducing significant changes that will affect your personal finances and investment planning. Here’s what you need to know.

Economic Outlook

The Office for Budget Responsibility (OBR) has upgraded GDP growth to 1.5% (up from 1%), with inflation expected to reach 3.5% before settling at the Bank of England’s 2% target by 2027. Fiscal headroom has doubled to £21.7bn, providing the government with greater flexibility.

However, it’s worth noting that the budget will raise £26bn in taxes overall, and this will have implications across several areas of your financial planning.

Income Tax: The Freeze Continues

The freeze on income tax and National Insurance thresholds has been extended for a further three years until April 2031. This means:

• Personal allowance remains at £12,570
• Higher rate threshold stays at £50,270
• Additional rate threshold fixed at £125,140
• The effective 60% tax rate between £100,000 and £125,140 continues due to the withdrawal of your personal allowance

With wages rising and thresholds frozen for a full decade, more of your income will be taxed at higher rates through ‘fiscal drag’. This makes tax-efficient planning more important than ever.

Pension Changes You Need to Know

The anticipated pension changes have arrived, though they won’t take effect immediately:

Salary Sacrifice Changes (from April 2029)

• A new £2,000 annual threshold will apply to salary-sacrifice pension contributions
• Contributions above this amount will be subject to both employee and employer National Insurance
• This affects a popular tax-efficiency strategy, so we recommend reviewing your pension contribution structure well ahead of 2029
• It’s worth noting that employer pension contributions are to remain exempt from National Insurance

State Pension

The state pension will rise by 4.8% from April 2026 as part of the triple lock commitment, providing some inflation protection for retirees.

ISA Reform from April 2027

There are important changes coming to ISAs that will affect your investment strategy:

• The overall £20,000 allowance remains unchanged
• However, £8,000 will be ring-fenced specifically for stocks and shares ISAs
• This reflects the superior long-term returns from equity investments
• If you’re over 65, your cash ISA allowance will remain at the full £20,000, if you’re under 65 then the Cash ISA allowance is £12,000 and a remaining £8,000 can be paid into a Stocks & Shares ISA

With inflation running at 3.5%, keeping too much in cash ISAs could erode your real wealth. We’ll be helping clients review their ISA strategies ahead of these changes.

Tax Increases on Investment and Property Income

From April 2026, tax rates on property, savings, and dividend income will increase by 2 percentage points:

• Basic rate taxpayers will pay 22% (up from 20%) on savings and property income, and 10.75% on dividend income (up from 8.75%)
• Higher rate taxpayers will pay 42% (up from 40%) on savings and property income, and 35.75% on dividend income (up from 33.75%)
• Additional rate taxpayers will pay 47% (up from 45%), there will be no increase to dividend rates for additional rate taxpayers.

The Chancellor noted that 90% of taxpayers will still pay no tax on their savings, but for those with investment income, this represents a meaningful increase in your tax liability.

What this means for you:

• ISA and pension wrappers become even more valuable for tax efficiency
• Dividend income planning should be reviewed
• Buy-to-let landlords will see reduced net returns

The ‘Mansion Tax’

A new High Value Council Tax Surcharge takes effect from April 2028 for properties valued over £2 million:

• Properties worth £2-2.5m: £2,500 per year
• Properties worth £5m or more: £7,500 per year

This only affects around 1% of properties, but if your home falls into this bracket, factor this ongoing cost into your financial planning.

Planning Ahead

These changes underscore the importance of:

1. Tax-efficient investing

ISAs and pensions remain crucial wealth-building tools

2. Regular financial reviews

Especially with the 2027 ISA changes and 2029 pension changes approaching

3. Income planning

Understanding how threshold freezes affect your take-home pay

4. Retirement strategy

Reviewing pension contributions before 2029

We’re here to help

If you’d like to discuss how these changes affect your personal situation, please get in touch. We’re here to help you navigate these updates and ensure your financial plan remains on track.