Autumn Budget 2025

INCOME TAX AND PERSONAL ALLOWANCES

Here are links to the Government website for tax rates and allowances, tax on saving interest and tax on dividends for your guidance:

• UK Current rates and allowances
• Tax on Interest from savings
• Tax on dividends
• 2026 to 2027 – Scottish Income Tax: rates and bands

AUTUMN BUDGET 2025

Announced on 26 November 2025

Rachel Reeves’ second budget last year introduced £26 billion in revenue raising measures, including an extended freeze on tax thresholds, tax increases for dividends, savings and rental income and changes to salary sacrifice.

Notably, there were no reforms to tax-free cash on pensions, pension tax relief or IHT caps on gifting, despite months of rumour and speculation. The main rates of income tax and NI are also unaffected.

Pensions

• Tax relief on pensions – no change.
• Tax-free cash – no change.
• Salary sacrifice – limit on NI exemption

From April 2029, the National Insurance (NI) exemption for pension contributions made by salary sacrifice will be limited to £2,000 a year. This means that both employees and employers will have to pay NI on any salary sacrificed over this amount.

Basic State Pension
The triple lock on State Pensions will be retained for the remainder of this parliament, guaranteeing a 4.8% earnings-based increase from April 2026.

This means that the full New State Pension will increase to £241.30 a week and the full Basic State Pension will increase to £184.90 a week (single person) or £295.70 a week (married couples and civil partners).

Income Tax and National Insurance

As widely predicted, the Chancellor confirmed that the personal allowance, higher rate threshold and additional rate threshold will now be frozen until 2030-31. The thresholds for Scotland were confirmed in the Scottish Budget in January 2026 and are covered in the link above.

The secondary threshold for NICs will also be frozen at £5,000 until 2030-31. This is the threshold above which employers must collect and pay NI on an employee’s earnings. There were no increases to NI rates.

The rate of tax on dividends and savings income will rise by two percentage points. The same increase will also apply to rental income from property. This means:

• From April 2026 dividends taxed at the ordinary rate and upper rate will increase to 10.75% (currently 8.75%) and 35.75% (currently 33.75%) respectively. There will be no change to the additional rate which remains at 39.35%. The dividend allowance also remains unchanged at £500 pa.
• From April 2027 tax on savings income (e.g. deposit interest) will increase by two percentage points in each tax band. Savings income falling in the basic, higher and additional rate bands will therefore be taxed at 22%, 42% and 47% respectively. The increases will also apply to chargeable event gains on investment bonds which are taxed as savings income.
• From April 2027, the rates of tax on property income will be 22%, 42% and 47%, depending on whether such income falls in the basic, higher or additional rate bands.

These rises emphasise the importance of sheltering tax on dividends and savings in ISA where possible (or a pension for longer term savings).

Other announcements affecting a smaller number of taxpayers include:

• Investors in VCT schemes will see upfront Income Tax relief reduce from 30% to 20% from April 2026.
• From April 2027 the income tax ordering rules will change meaning that the personal allowance must be set against earned income and pensions before dividend income, savings income and property income.

ISAs

Although the Chancellor maintained the overall annual ISA limit at £20,000, from April 2027, only individuals aged 65 and over will be able to save the full £20,000 into a Cash ISA.

For those under 65, the Cash ISA limit will be capped at £12,000, with the remaining £8,000 allowance available only for investment into a Stocks and Shares ISA.

There will also be a consultation on reforming Lifetime ISAs. The proposal will be to replace Lifetime ISAs with another ISA product aimed at first time buyers.

Mansion Tax

The chancellor stopped short of introducing a full-blown wealth tax. Instead, she announced the introduction of new High Value Council Tax Surcharge on properties worth £2 million or more.

The surcharge, which will be introduced from April 2028, is payable by the homeowner and is in addition to any existing council tax. Properties will be valued by the Valuation Office and the surcharge applied as follows:

A consultation will be issued on the application of the charge for properties with complex ownership structures such as trusts and businesses.

Transferable IHT BR and AR allowance

In a change to the previous £1 million cap announced in the Autumn Budget, the chancellor confirmed in December 2025 a new cap of £2.5 million for the allowance for business relief and agricultural relief and that it will be transferable between spouse and civil partners.

From 6 April 2026, individuals can claim up to £2.5 million in combined Agricultural Property Relief (APR) and Business Property Relief (BPR) at 100%, with any excess receiving 50% relief. This will be effective for deaths after 6 April 2026.

Every care has been taken to ensure that this information is correct and in accordance with our understanding of the law and HM Revenue & Customs practice, which may change. However, independent confirmation should be obtained before acting or refraining from acting in reliance upon the information given. This information is based on Autumn Budget Statement 26th November 2025 and the update in December 2025.

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