Autumn Budget 2025: What’s Changed and What It Means for You

The government has unveiled a far-reaching set of tax, pension, savings and property-related changes. In this piece, Michael Owens gives a breakdown of the main changes and how you might want to think about them in light of your financial planning. 

Frozen income tax thresholds  

Previously due to remain unchanged until April 2028, they are now scheduled to stay frozen until April 2031. 

Because incomes typically rise over time, freezing these thresholds means that more individuals are gradually pulled into higher tax bands than they otherwise would have been if allowances had increased in line with earnings. 

The thresholds at which people move into higher tax bands have once again been frozen.  

Frozen Nil Rate Bands  

Similarly, Inheritance Tax (IHT) Nil Rate Bands have been frozen for an additional year, extending the freeze through to April 2031. The bands are made up of the main Nil Rate Band (£325,000) and the Residence Nil Rate Band (£175,000), which is usually available to individuals leaving their main residence to descendants. Last year’s Budget announced that pensions will form part of an estate for IHT calculations from April 2027, increasing the likelihood that more estates will face an IHT liability. 

Additionally, the combined £1 million allowance for 100% Agricultural Property Relief and Business Property Relief has also been frozen until April 2031. 

Cash ISA allowance cut  

From April 2027 the annual cash ISA allowance will drop from £20,000 to £12,000. Importantly, the overall ISA allowance remains £20,000, meaning individuals can still split their allowance between cash and investments. You can subscribe to one cash ISA and one stocks and shares ISA in the same tax year, provided your combined subscriptions do not exceed the £20,000 ISA limit. 

The cash ISA allowance will remain £20,000 for those over 65, who may have a shorter investment time horizon depending on the structure of their retirement plans. 

Salary sacrifice pension contributions capped 

From 2029 there will be a cap of £2,000 applied to pension contributions made via salary sacrifice. Currently no cap exists. Employer and employee NICs will be due for pension contributions made through salary sacrifice schemes exceeding that cap. It’s important to note that pension contributions made through salary sacrifice will still receive tax relief, and pensions continue to be a core part of long-term financial planning for many individuals. 

Driving an EV will become more expensive 

In a setback for energy transition objectives, the government will introduce a pay-per-mile tax on electric and hybrid vehicles from April 2028. This will be 3p per mile for battery EVs and 1.5p for plug-in hybrids. This announcement is predicted to cost an average of £200–300 per year and see the take-up of EVs slow by 440,000 [1]. 

High-Value Council Tax Surcharge 

Anyone who lives in a home valued at £2 million or more in England will face a council tax surcharge from April 2028. Based on valuations in 2026, affected homeowners will pay an annual surcharge, starting at £2,500 for homes worth between £2–2.5 million, rising incrementally to £7,500 for properties over £5 million. 

Dividend tax rates increase 

The ‘ordinary’ (basic-rate) dividend tax rate will increase from 8.75% to 10.75% from April 2026. The ‘upper’ (higher-rate) dividend rate will also rise from 33.75% to 35.75%, whereas the ‘additional’ dividend rate remains unchanged at 39.35%. 

Interest tax rates increase 

From 6 April 2027, the income tax rates paid on the property and savings elements of someone’s income will rise by 2 percentage points. This means basic-rate taxpayers will see the rate on savings interest go from 20% to 22%, higher-rate taxpayers from 40% to 42%, and additional-rate taxpayers from 45% to 47%. 

Cut to upfront VCT tax relief 

From 6 April 2026, the income-tax relief on new Venture Capital Trust (VCT) investments will drop from the current 30% to 20%. Income-tax relief on the Enterprise Investment Scheme (EIS) remains untouched at 30%. 

Written by Michael Owens