Autumn Budget 2025

On 26th November 2025 Rachel Reeves delivered the Autumn Budget. This sets out how the government plans to raise revenue and allocate public spending on things like healthcare, state pensions, etc.

Key points

Here are a few of the key points from the Autumn Budget:

ISA allowances - cash ISA allowance to be cut from £20,000 to £12,000 from April 2027. The rest of the £20,000 annual allowance can be used for investments.
Income tax bands - frozen for a further three years beyond the planned 2028 date. Now frozen until 2031. As salaries rise over time, more people will be dragged into higher tax brackets.
Dividends and savings - tax on any income from dividends or savings to increase.
Salary sacrifice - to be capped at £2,000 per year from 2029. Any pension contributions above this will incur National Insurance, but still receive income tax relief.
Mansion tax - an additional charge of between £2,500 and £7,500 applied to properties worth over £2m.

1. ISA allowances

The reduction in annual cash ISA allowance only applies to people under the age of 65. The full £20,000 ISA allowance still exists, but the portion of that which can be paid into a cash ISA is to be lowered to £12,000. The remaining £8,000 can be used for investments via a Stocks and Shares ISA.

Thoughts: the intention behind this appears to be to get people investing rather than just saving and earning low interest rates. This change alone doesn't feel like it will be enough - it needs to be coupled with a plan to educate people around investing and help them understand the risks. Without this, it seems likely that people will simply save less.

2. Income tax bands

Freezing the income tax bands for a further three years means that over time, as wages increase, more people will be dragged into higher tax brackets. This will result in a larger portion of peoples incomes being used to pay tax.

Thoughts: it's a stealth tax. The £ value paid in tax might not be increasing right now, but over time as wages increase, people will be dragged into higher tax brackets. In real terms, they will have less take home pay each month to spend on goods and services.

3. Dividends and savings

Tax on dividend and savings income (interest) is to increase by 2 percentage points. The increase in tax on dividend income will take effect from April 2026, whilst the increase in tax on savings income will take place from April 2027.

Thoughts: apparently intended to bring the tax paid on income from assets more in line with income from work. Coupled with the reduction in cash ISA allowances, this is an added incentive for people to make use of their Stocks and Shares ISAs to invest in a tax-free wrapper.

4. Salary sacrifice

The amount that can be salary sacrificed each year will reduce to just £2,000. This means that any contributions into a pension over £2,000 will incur National Insurance. For higher earners who use salary sacrifice to pay into a pension, it likely means a slight reduction in take home pay. This will take effect from April 2029.

Thoughts: on the face of it this seems counter-intuitive as it may not encourage people to save as much for their retirements. It also has an impact on employer National Insurance contributions, which will result in a higher bill for employers. Due to the increased cost for employers, it may mean that we see some employers lower the pension match that they offer.

5. Mansion tax

Properties valued at more than £2m will be subject to additional tax of between £2,500 and £7,500 per year, with properties valued at £5m or more paying the full £7,500. The charge will be applied on top of existing council tax. It will take effect from April 2028.

Thoughts: a step in the right direction, but it still feels like a proper overhaul of council tax and stamp duty is needed.

Summary

There's a host of other changes included in the Budget, but these are some of the key points that stood out to us around income and savings.

This does not constitute financial advice. Always do your own research.