Autumn Budget 2025: What We Noticed and What Stood Out

In the days leading up to the Budget, the headlines were dominated by speculation. Possible cuts to tax free cash on pensions, sweeping ISA rule changes, major shifts in inheritance tax, the rumour mill was in full swing.

The reality was far calmer.

Many of the most dramatic predictions never materialised, and the final Budget was far more measured than expected. Even so, there were several confirmed changes that will reshape the landscape for savers, investors and households over the next few years.

Below is a clear summary of what was announced, what remains unchanged, and what is still only in consultation.

Cash ISAs and Savings

One of the most significant changes was the adjustment to the cash ISA allowance.

From April 2027, savers under 65 will have a reduced annual cash ISA limit of £12,000.
Savers aged 65 and over will continue to receive the full £20,000 cash ISA allowance.

The overall ISA limit remains £20,000, meaning the shift affects only the cash component rather than Stocks and Shares ISAs.

Alongside this, the tax on savings interest will rise by 2 percentage points, meaning more interest from unwrapped cash will fall within taxable income.

Lifetime ISA Replacement

The Government confirmed plans to consult on a replacement product for the current Lifetime ISA, aimed primarily at supporting first time buyers.

• The consultation is scheduled to begin in early 2026.
• The design, limits, bonuses and penalties have not yet been finalised.
• Until the consultation concludes, the Lifetime ISA continues unchanged.

Pensions

A widely discussed rumour ahead of the Budget was the possibility of a £100,000 cap on pension commencement lump sums (PCLS). This did not happen.

The only confirmed pension change was focused on salary sacrifice arrangements:

From 2029, only the first £2,000 of employer salary sacrifice pension contributions each year will remain exempt from National Insurance.

Contributions above this threshold will still receive income tax relief but will no longer attract the NI advantage.

Other pension rules, including PCLS, remain unchanged.

Dividend, Savings and Rental Income

A series of tax rate increases were confirmed:

Dividend tax will rise by 2 percentage points for basic and higher rate taxpayers from April 2026.

Tax on savings interest and rental income will rise by two percentage points from April 2027.

It is important to note that there is no change to the main income tax rates. The basic, higher and additional rates remain at 20%, 40% and 45%.
The increase applies specifically to the tax paid on savings interest, which will move to 22%, 42% and 47% depending on the individual’s band.

This makes the reduction in the cash ISA allowance particularly significant. With a smaller amount of cash able to sit within an ISA for those under 65, and a higher tax rate applying to interest earned outside the wrapper, more savers will see a greater share of their cash interest taxed.

Income Tax Thresholds

The Government confirmed that income tax thresholds will remain frozen.

This means taxpayers may move into higher bands as earnings rise, even though the headline tax rates are unchanged.

High Value Property Surcharge

A new annual charge will apply to certain high value residential properties from April 2028:

Properties valued at £2 million or more will face a £2,500 annual charge.

Properties valued at £5 million or more will face a £7,500 annual charge.

A consultation is expected on support or deferral options for affected homeowners.

This last measure is likely to affect some clients of advisers, particularly those working in wealth management or mortgage advice. It also raises an interesting behavioural question for property buyers and sellers. We may see a trend where homes are listed or valued at £1,999,999 to avoid crossing the threshold, creating potential complications for advisers involved in protection, mortgage or tax planning conversations.

Child Benefit

The long standing two child cap will be removed, restoring eligibility for all children regardless of family size.

Inheritance Tax and Reliefs

The 2025 Budget introduced changes to Agricultural Property Relief (APR) and Business Property Relief (BPR):

• Following on from 6 April 2026, 100% relief will only apply to up to £1 million of qualifying business or agricultural property per person. Any value above £1 million will receive only 50% relief.
• Unused portions of the £1 million allowance can now be transferred between spouses or civil partners, providing some flexibility for jointly owned assets.

Other aspects remain unchanged:

• Inheritance Tax (IHT) thresholds and rates are unchanged.
• There have been no wider reforms to lifetime gifting rules, including the 7‑year rule or general gifting limits.
• General spousal transfers outside of APR/BPR relief remain as previously.

Venture Capital Trusts (VCTs)

Two changes were confirmed:

Income tax relief on VCT investments will reduce from 30 percent to 20 percent from April 2026.

Some thresholds determining which company shares qualify for VCT investment have been increased.

The idea of allowing VCTs to invest more broadly remains unconfirmed and was not addressed in this Budget.

Employee Ownership Trusts (EOTs)

The 2025 Budget introduced a major change to the tax treatment of Employee Ownership Trusts (EOTs): sales to EOTs are no longer fully tax-free.

Before 26 November 2025: Business owners selling shares to an EOT qualified for 100% Capital Gains Tax (CGT) relief, making EOTs an extremely tax-efficient succession route.

After 26 November 2025: Only 50% of the gain qualifies for CGT relief, with the remaining 50% subject to normal CGT rates. EOT sales are therefore no longer fully tax-free. Any future disposal of the shares by the EOT may trigger further CGT on held-over gains.

Tourist and Overnight Stay Levies

There is no national levy.
However, local Mayors will have discretionary powers to introduce an overnight visitor charge if they choose to.

What This Means for Advice Firms

The 2025 Budget did not bring the sweeping reforms many were expecting, but it does introduce several changes that will shape the environment in which advice firms operate. Adjustments to cash ISAs, dividend and savings taxation, rental income, property charges and salary sacrifice will influence how clients experience tax over the coming years, even where the headline rules appear stable.

Some areas, including pensions and the future replacement for the Lifetime ISA, remain under consultation, which means further developments are entirely possible.

For now, the key takeaway is that the landscape is shifting, but not dramatically. A clear understanding of the confirmed measures, the timelines involved and the areas where policy is still evolving will support firms as they interpret the wider implications for their business and client communications.

Read the full Autumn Budget

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