Following considerable anticipation, the 2025 Autumn Budget has set out a series of measures that will influence how UK individuals save, invest and plan over the coming years.
To make the new measures more digestible, we’ve co-authored the summary with Aventur, a financial wellbeing platform. Below, we outline the changes most likely to affect personal finances, explains their implications, and highlight the areas you may want to review to stay informed and make confident decisions.
1. Fiscal drag accelerates
Announcement
Personal tax thresholds will remain frozen until April 2031, extended from the previous deadline of 2028.
Impact
This freeze is one of the most significant but least visible tax rises in the Budget. As wages increase, more people move into higher tax bands even though headline rates have not changed.
The impact is particularly sharp for those approaching the £100,000–£125,140 income band, where the personal allowance tapers away, leading to very high marginal tax rates. More families will be pulled into this range as incomes rise.
The £100,000 threshold for losing 30 hours of free childcare also remains unchanged, creating a substantial penalty for households where one parent’s income sits near this level.
Planning
Those nearing the £100,000–£125,140 range may want to consider ways to reduce adjusted net income, such as pension contributions or salary sacrifice, while these strategies remain advantageous and before the changes arriving in April 2029.
2.Targeted tax increases on unearned income
Savings interest
Announcement
From April 2026, tax on cash interest will rise by 2 percentage points across all bands:
- Basic rate: 20% → 22%
- Higher rate: 40% → 42%
- Additional rate: 45% → 47%
Impact
A higher-rate taxpayer with £100,000 earning 4% interest will see their annual tax bill rise from £1,600 to £1,680. While this may seem modest, it compounds over time and is more pronounced for those with larger balances.
Planning
Individuals may want to consider repositioning cash into more tax-efficient structures such as:
- maximising ISA allowances before April 2027
- holding Premium Bonds (up to £50,000), with tax-free prizes
- using UK government bonds (gilts), which offer tax-free capital gains
- considering investment bonds for tax-deferred growth
Dividend income
Announcement
Dividend tax will increase by 2 percentage points for Basic and Higher rates from April 2026, with the Additional rate and the £500 dividend allowance unchanged.
Impact
This will increase tax costs for business owners extracting profits via dividends and for investors holding shares outside tax-sheltered accounts. The traditional low-salary/high-dividend model becomes less advantageous.
Planning
- review the mix between salary and dividends
- use pension contributions where appropriate to extract profits efficiently
- consider moving taxable investments into pensions, ISAs or bonds where possible
3. ISA restrictions and reduced tax efficiency
Announcement
From April 2027, the Cash ISA allowance for under-65s will fall from £20,000 to £12,000. A review of Lifetime ISAs (LISA) is due in 2026, potentially replacing them with a revised first-time-buyer product.
Impact
Higher tax on cash from April 2026 followed by reduced ISA capacity in 2027 signals a policy shift encouraging investment rather than cash savings. This creates challenges for risk-averse savers and those with large cash reserves.
Planning
- use the full £20,000 allowance in 2025/26 and 2026/27
- place planned short-term spending (e.g., home moves) into ISAs before restrictions apply
- review emergency fund arrangements
- under-40s may want to open a LISA, even with minimal funding
4. Salary sacrifice restrictions(with a planning window)
Announcement
From April 2029, salary sacrifice pension contributions above £2,000 per year will incur National Insurance charges. Employees will pay NI at 8% on earnings below £50,270 and 2% above. Employers also lose their NI exemption.
Impact
This fundamentally changes planning for high earners, especially those in the £100,000–£125,140 band who currently receive substantial effective tax relief. Employers may become less willing to offer enhanced arrangements.
Planning (before April 2029)
- maximise pension contributions (up to £60,000 a year)
- use carry-forward allowances from the previous three years
- consider sacrificing bonuses, particularly beneficial for those near the £100,000 threshold
5. Venture Capital Trust (VCT) relief reduced
Announcement
Income tax relief on VCTs will fall from 30% to 20% in April 2026.
Impact
VCTs become less attractive from an upfront tax-relief perspective. However, key benefits remain:
- tax-free dividends
- tax-free capital gains
- diversified exposure to early-stage UK businesses
Planning
- consider investing before April 2026 to secure the higher 30% relief
- after the change, compare VCT and EIS options on a risk-adjusted basis
Please keep in mind that VCTs and EISs are high-risk investment options that should form a small part of your broader portfolio.
6. A new mansion tax
Announcement
From April 2026, an annual banded charge will apply to residential properties valued at:
- £2 million to £2.5 million: £2,500 per year
- £2.5 million to £3.5 million: £5,000 per year
- £3.5 million to £5 million: £7,500 per year
- Above £5 million: £10,000 per year
Impact
This represents the UK’s first modern wealth tax. While small as a percentage of property value, it may create cashflow pressure for asset-rich but cash-poor owners. It may also influence pricing for homes close to the £2m and £5m thresholds.
Planning
- review ownership structures
- plan liquidity for ongoing charges
- factor the tax into future purchase decisions
- buy-to-let investors may want to reassess high-value holdings
7. Inheritance Tax (IHT) freeze continues
Announcement
The IHT nil-rate band remains frozen at £325,000 until April 2031. Pension assets will be included in estates from April 2027. Business relief can now transfer between spouses, creating up to £2m of combined relief.
Impact
More estates will fall into the IHT net due to asset growth. Including pensions in estates from 2027 is a significant change for many families.
Planning
- review projected IHT liabilities, including pensions
- consider lifetime gifting strategies using available exemptions
- ensure business relief eligibility is properly documented
- consider trust structures where appropriate
- whole-of-life insurance in trust remains a useful tool
What’s next?
The phased nature of these reforms gives individuals the opportunity to prepare well in advance. Over the coming months, it may be helpful to look at how your pension arrangements, property plans and investment approach interact with the new rules. Understanding these connections early can provide greater confidence and ensure you’re making informed choices as each change is introduced.
This article has been co-authored with Aventur. It is provided for general information only and should not be relied upon as financial, tax or investment advice. While the information is believed to be correct at the time of publication, accuracy cannot be guaranteed and tax treatment depends on your individual circumstances and may be subject to change in the future.
