The Chancellor’s Autumn Budget, announced on 26 November 2025, focused on long-term financial discipline, with changes that will be felt by higher earners, investors and homeowners over the coming years.
While the main income tax thresholds are frozen rather than rising, and several investment tax rates are going up, many people could end up paying more, simply due to frozen thresholds and reduced allowances.
Here’s what stood out and what it might mean for your financial plans.
Income and Tax: Subtle Shifts, Bigger Bills
Income tax thresholds will stay frozen until April 2031. This means more of your income could gradually fall into higher tax bands, even if your salary increases modestly.
From April 2026 (and from April 2027 for property and savings income), tax on dividends, savings and property income will rise. For example, dividend tax will increase to 10.75% for basic-rate taxpayers and to 35.75% for higher-rate taxpayers. These changes could reduce the income you keep from investments held outside pensions or ISAs.
What to think about: You might not notice it at first, but the amount of tax you pay could steadily rise. Making full use of available allowances and reviewing how your income is structured will help keep things efficient.
Inheritance and Retirement Planning: Quiet but Significant Shifts
Alongside the headline Budget changes, a few quieter updates are worth knowing, especially if you’re planning to pass on property or pensions.
- IHT thresholds frozen until 2031 – The £325,000 nil-rate band and £175,000 residence nil-rate band will now stay frozen for another six years. As asset values rise, more estates may be pulled into the inheritance tax net.
- Unspent pensions and IHT from 2027 – From April 2027, most unused defined contribution pensions will usually be included in your estate for inheritance tax purposes. That could mean a double tax hit, income tax plus IHT, depending on how pensions are structured and passed on.
- State pension ‘tax fix’ – With thresholds frozen, more pensioners were expected to breach their personal allowance. The government now says it won’t collect small tax debts where the state pension is the only income source, a practical workaround, but one that highlights the broader impact of fiscal drag.
If you’re thinking about passing on pensions or property, it’s worth revisiting your Will, gifting strategy and use of trusts. A small adjustment now can prevent a large tax bill later.
Pensions and ISAs: Smaller Relief, More Direction
From April 2029, salary-sacrificed pension contributions above £2,000 a year will start to incur National Insurance charges. This affects both employees and employers and may reduce the appeal of salary exchange for higher earners.
Changes to ISAs are also coming. From April 2027, if you’re under 65, only £12,000 of your annual £20,000 allowance can be held in cash. The rest must be invested. If you’re 65 or over, you’ll still be able to keep the full allowance in cash if you prefer.
From April 2027, new rules will also limit how much cash you can hold inside investment ISAs and will restrict transfers from stocks and shares back into cash, so it will be harder to ‘park’ large sums in cash within the ISA system.
What to think about: If you rely on salary sacrifice or use cash ISAs for flexibility, you may need to adjust how you save. It’s a good moment to review your pension strategy and ensure your ISA usage still suits your goals.
A Quick Note on VCTs: One Relief That Remains
In a year when many allowances are being frozen or trimmed, Venture Capital Trusts (VCTs) are one of the few tax reliefs left standing. They continue to offer:
- 30% income tax relief on up to £200,000 invested per year (if shares are held for at least five years)
- Tax-free dividends
- No Capital Gains Tax on disposal
These schemes are designed to support small UK growth businesses, and in return, offer attractive incentives for higher earners seeking efficient ways to reduce income tax.
Worth knowing: VCTs aren’t for everyone, they carry higher risk and require a longer-term view. But for the right investor, they can be a powerful piece of a smart, diversified tax strategy.
Property: Council Tax Surcharge for £2m+ Homes
From April 2028, homes valued over £2 million will face a new annual High Value Council Tax Surcharge. The charge starts at £2,500 a year and rises to £7,500 for properties over £5 million, affecting fewer than 1% of properties in England.
This new charge is likely to affect more properties in areas like London and the South East, where rising prices have pushed many family homes over the £2 million mark.
What to think about: If your home or investment property falls into this range, or is likely to in future, this new cost could change how you think about ownership, gifting or inheritance.
Other Updates: EV Tax and Economic Outlook
From April 2028, electric car drivers will pay a new mileage-based Electric Vehicle Excise Duty (eVED), set so that an average EV driver pays around £240 a year in tax – roughly half the fuel duty paid by the average petrol or diesel driver. While still cheaper than fuel duty, it ends the tax-free status EVs have enjoyed in recent years.
The economic picture remains mixed. Growth is forecast at about 1.5% in 2025 and around 1.4% in 2026, with the OBR expecting it to average roughly 1.5% a year over the next five years. Inflation is expected to be a little higher than previously forecast next year, before gradually moving back towards the Bank of England’s 2% target. Public debt is projected to rise to over 96% of GDP by 2030.
What to think about: While none of these changes require urgent action, they’re a clear reminder that financial plans should be flexible enough to adjust with policy and economic shifts.
Staying in Control Amid Changing Rules
The Autumn Budget didn’t bring dramatic shocks, but it did confirm a clear direction: more subtle tax pressure, fewer reliefs, and rising costs in key areas like pensions and property. These changes may not feel urgent today, but they will add up over time.
Whether you’re building wealth, planning for retirement, or thinking about how to pass assets to family, now’s a good time to check your strategy. Small adjustments made early can help keep your plans on track, even as the rules evolve.
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