Autumn Budget summary
This is a developing story, and we will update this article if more information becomes available that we feel would benefit your understanding of the announcements.
The Chancellor has announced the 2025 Budget, introducing measures that could influence your financial plans and future decisions. We understand that tax and policy changes can create uncertainty, so our aim is to help you make sense of what is happening and what it means for you.
Below, we outline the key updates, who they affect, and practical steps you might consider. As always, our team is here to provide advice tailored to your circumstances.
What’s changed?
Income tax thresholds frozen
What was announced?
The Government has extended the freeze on Income Tax thresholds for England and Wales until 2031.
| Band | Taxable income | Tax rate |
|---|---|---|
Personal Allowance | Up to £12,570 | 0% |
Basic rate | £12,571 to £50,270 | 20% |
Higher rate | £50,271 to £125,140 | 40% |
Additional rate | Over £125,140 | 45% |
What does it mean?
Because tax thresholds aren’t rising in line with earnings, more of your income may fall into higher tax bands over time, even though tax rates themselves have not changed.
Who is most likely to be impacted?
- Employees and self-employed individuals whose earnings increase over the coming years.
- Those currently close to the higher-rate or additional-rate thresholds.
- Individuals in England, Wales and Northern Ireland (Scotland has separate Income Tax bands).
Sensible actions to consider:
- Review your current tax position to understand whether you may move into a higher band in the coming years.
- Check that your financial plans remain tax-efficient by maximising use of tax efficient investments, including Pensions and ISAs.
- If you are unsure how the freeze may affect you, speak with an adviser for personalised advice.
Increase in property income, dividends and savings taxes
What was announced?
From April 2026, tax on dividend income will increase by 2 percentage points. The additional rate will remain unchanged at 39.35% and the £500 dividend allowance remains in place.
From April 2027, tax on savings income will increase by 2 percentage points across all bands. The starting rate band and personal savings allowance remain unchanged. The government is also creating separate tax rates for property income (any income from letting land and buildings) from April 2027.
What does this mean?
The below changes will take place:
- Property income: 22% (basic rate), 42% (higher rate), 47% (additional rate)
- Dividend tax rates: basic and higher rates increase by 2 percentage points
- Savings income: tax rate rises by 2 percentage points
| Tax band | Dividend income (over the £500 allowance) | |
|---|---|---|
2025/26 | From April 2026 | |
Basic rate | 8.75% | 10.75% |
Higher rate | 33.75% | 35.75% |
Additional rate | 39.35% | 39.35% |
A new property income tax is also being introduced, and savings income tax is increasing by 2 percentage points at the same time. From April 2027 these will be:
| Tax band | Property income | Savings income |
|---|---|---|
Basic rate | 22% | 22% |
Higher rate | 42% | 42% |
Additional rate | 47% | 47% |
Who is most likely to be impacted?
- Landlords and individuals receiving rental income.
- Investors and company owners who hold dividend-paying shares.
- Savers with taxable interest income above the savings allowances (where applicable).
Sensible actions to consider:
- Review how and where your savings and investments are held to ensure you are making the most of available tax-efficient investments
- Check whether these changes may alter your expected tax position from 2026–2027 onwards.
Salary sacrifice changes
What was announced?
From April 2029, the Government will introduce a £2,000 annual cap on pension contributions made through salary sacrifice.
Salary sacrifice is when you agree to reduce your gross salary or sacrifice a bonus and, in return, your employer pays the same amount into your pension
Any salary-sacrificed pension contributions above £2,000 per year won't save National Insurance on the excess and will be treated as standard employee pension contributions for tax purposes.
What does this mean?
Not all pension contributions are made through salary sacrifice, but those that are, are exempt from National Insurance Contributions. Under the new rules, only the first £2,000 of salary-sacrificed contributions will keep this exemption, increasing the total cost for individuals and employers that make larger contributions this way.
Who is most likely to be impacted?
- Individuals who contribute more than £2,000 per year into pensions via salary sacrifice.
- Employees working for organisations where salary sacrifice is widely used as part of workplace pension arrangements, as these may be changed.
- Business owners who widely use salary sacrifice when providing pensions to their employees
Sensible actions to consider:
- Review your current pension contribution method to understand whether the cap may affect you from 2029.
- Despite the changes, Pensions remain one of the most tax-efficient Investments on offer to UK taxpayers, so you should continue to maximise these where appropriate.
- For some individuals, they may be able to make larger contributions between now and April 2029
Personalised advice is crucial if you are interested in making the most of your allowances.
Changes to ISA allowances
What was announced?
An ISA (Individual Savings Account) allows you to save or invest money each year without paying tax on the interest, dividends or investment gains. Every adult has an annual ISA allowance, which is the maximum amount they can save or invest into ISAs each tax year. The total allowance remains £20,000 per year – but the rules are changing.
What does this mean?
From April 2027, the government will change how this £20,000 allowance can be used:
- Under 65s 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.
- Over-65s will be exempt from this rule and may continue to place their full allowance into a cash ISA if they choose.
Please note all individuals retain the ability to pay £20,000 into a Stocks and Shares ISA should they wish to.
Who is most likely to be impacted?
- Adults under 65:
- who currently use all or mostly cash ISAs.
- Cash-focused savers who have not previously invested in markets.
Sensible actions to consider:
- Review your savings goals to understand how best to use the new ISA allowance mix.
- Consider becoming familiar with investment ISAs if you have not used them before.
High Value Council Tax Surcharge
What was announced?
The Government has announced a new tax on residential properties in England worth more than £2 million, coined by the media as a “mansion tax”
What does this mean?
From April 2028, owners of higher-value homes will pay an additional yearly charge on top of their existing council tax:
- £2,500 per year for properties valued over £2 million
- £7,500 per year for properties valued over £5 million
This charge will be collected through the council tax system.
Who is most likely to be impacted?
- People who own residential property in England valued above £2 million.
Sensible actions to consider:
- Consider your property’s estimated market value to understand whether the charge may apply.
- Factor any potential annual cost into future budgeting and long-term financial planning.
Broader implications of the budget
This Budget signals a shift towards revenue-raising measures. While headline income tax rates remain unchanged, smaller changes across savings, investments and property could add up.
For many people, the impact of these measures will depend on their personal circumstances including income level, how their assets are structured, and where their savings are held. As a result, it may be helpful to review your financial plans over the coming months to ensure they remain aligned with your goals.
The personal impact to you will depend on your income, assets and goals. Reviewing your plans now could help ensure they remain aligned with what matters to you.
What next?
- If you’d like to talk through any of the topics covered in this summary, we can connect you with an adviser at our sister company, Schroders Personal Wealth (SPW). There’s no financial commitment required upfront; you’ll only pay if you decide to proceed with the recommendations outlined in your personalised financial plan.
Simply click the button below to book your initial consultation.
Important information
This article is for information purposes only. It is not intended as investment advice.
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Also, in this article we refer to the tax rate and thresholds set for England and Northern Ireland, these may differ for the devolved nations of Scotland and Wales.
The retirement benefits you receive from your pension plan depend on a number of factors including the value of your plan when you decide to take your benefits which isn’t guaranteed and can do down as well as up. The benefits of your plan could fall below the amount(s) paid in.
