Autumn Budget 2025 – What the Chancellor Announced

Thursday 27 November, 2025

The Chancellor, Rachel Reeves, delivered her Autumn Budget on 26 November 2025, setting out a wide range of measures that will influence personal finances, pensions, investment planning and taxation over the coming years. 

Although concerns had been rising ahead of the speech, the government confirmed that there would be no adjustments to the current rules surrounding pension tax relief or the availability of tax-free cash through pension commencement lump sums.

Nevertheless, the Budget does introduce several significant changes elsewhere, including major revisions to the treatment of salary sacrifice for pension contributions from April 2029, increases to certain income tax rates, amendments to ISA allowances, and the extension of tax band freezes to April 2031.

This summary brings together the key points, alongside a reminder of changes already scheduled to take effect from April 2026.

Pensions

Salary sacrifice for pension contributions

From April 2029, a new limit will come into effect for anyone using salary sacrifice to fund employer pension contributions. Only the first £2,000 per tax year of salary that is sacrificed will remain exempt from both employer and employee National Insurance. 

Any sacrificed pay above this level will attract NI charges for both parties, although all contributions will continue to benefit from income tax relief in the same way as they would under other contribution methods, such as relief at source.

The State Pension

The government has confirmed that the triple lock will apply again in April 2026, resulting in a 4.8% increase to both the new State Pension and the basic State Pension. This uplift will bring the full new State Pension to £241.30 per week, while the full basic State Pension will rise to £184.90 per week. The government intends to maintain the triple lock for the remainder of this Parliament.

Restrictions will also be placed on access to Class 2 voluntary National Insurance contributions (VNICs) for individuals living overseas. A new requirement for a minimum 10-year residency or contribution history will be introduced in order to qualify, and a broader review of the VNICs system will begin with a call for evidence early next year.

In addition, from 2027, reforms will be introduced to help prevent individuals whose only income is the State Pension from being required to pay small amounts of income tax via Simple Assessment. Full details are yet to be released.

Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS)

The government will introduce inflation-linked increases of up to 2.5% on pre-1997 pension entitlements for PPF and FAS members whose original scheme rules provided for such indexation. This brings pre-97 indexation more closely into line with the arrangements already in place for post-97 pension rights under both schemes.

Investments

Individual Savings Accounts (ISAs)

From April 2027, the annual ISA allowance will be treated differently for Cash ISAs depending on age. Individuals over the age of 65 will continue to be able to place the full £20,000 allowance into a Cash ISA. 

Those under 65 will be restricted to a £12,000 Cash ISA limit, with any remaining allowance needing to be invested in other ISA products to make full use of the annual £20,000 cap.

For 2026/27, all subscription limits remain unchanged:

• £20,000 – ISA allowance
• £4,000 – Lifetime ISA
• £9,000 – Junior ISA and Child Trust Fund

Lifetime ISA

A formal consultation will begin early next year exploring plans to replace the existing Lifetime ISA with a new product aimed at first-time buyers.

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs)

The Finance Bill 2025–26 will introduce several adjustments taking effect from 6 April 2026:

• Income Tax relief for VCT investors will fall from 30% to 20%.
• The gross assets limit for EIS and VCT qualifying companies will rise to £30 million before the share issue (from £15 million), and £35 million after the share issue (from £16 million).
• Companies will be able to raise up to £10 million annually (up from £5 million), and up to £20 million if they meet the knowledge-intensive criteria (up from £10 million).
• Lifetime investment limits will increase to £24 million (from £12 million), and to £40 million for knowledge-intensive companies (from £20 million).

These higher limits will apply only to qualifying companies that are not registered in Northern Ireland and do not trade in areas connected to electricity generation, distribution or supply. Businesses in those categories will continue to operate under existing limits.

Enterprise Management Incentive (EMI) Scheme

For EMI share option contracts granted on or after 6 April 2026, several thresholds for eligible companies will increase:

• The limit on company options will rise from £3 million to £6 million.
• The gross assets threshold will increase from £30 million to £120 million.
• The employee limit will rise from 250 to 500 employees.

Taxation

Income tax

Income tax bands in England, Wales and Northern Ireland will remain frozen for an additional three years, taking the freeze through to April 2031. This is an extension of the previous freeze, which was due to run to April 2028.

Rates for dividend, savings and property income

A series of increases to tax rates are being implemented:

• Dividend income tax rates will rise by 2 percentage points from April 2026.
  • Ordinary rate: 8.75% → 10.75%
  • Upper rate: 33.75% → 35.75%
  • Additional rate remains at 39.35%, with the £500 dividend allowance unchanged.
• Savings income tax rates will rise by 2 percentage points from April 2027:
  • Basic rate: 20% → 22%
  • Higher rate: 40% → 42%
  • Additional rate: 45% → 47%
    The starting rate band and personal savings allowance remain unchanged.
• Property income will be taxed under a separate set of rates from April 2027:
  • Property basic rate: 22%
  • Property higher rate: 42%
  • Property additional rate: 47%
    Finance cost relief for landlords will be given at the 22% property basic rate. The £1,000 property allowance and Rent-a-Room Scheme continue unchanged.

The rules for reporting property, savings and dividend income will stay the same; only the rates of tax will differ. From April 2027, changes to income ordering rules will mean the Personal Allowance is applied first to employment, trading or pension income.

The property income rates apply to England, Wales and Northern Ireland. The government will work with Scotland and Wales to allow them to set property income rates in line with their devolved tax powers. Dividend and savings income rates apply across the UK. GOV.UK : Changes to tax rates for property, savings and dividend income.

Tax and National Insurance thresholds

Key freezes include:

• No changes to the main rates of income tax, NICs or VAT.
• Income tax thresholds and equivalent NIC thresholds for employees and the self-employed frozen to April 2031.
• The NI Secondary Threshold frozen from April 2028 to April 2031.
• The Plan 2 student loan repayment threshold will remain fixed at its 2026/27 level for three years from April 2027.

National Living Wage

The National Living Wage will rise by 4.1% to £12.71 per hour for eligible workers aged 21 and above.

Capital Gains Tax (CGT)

The annual CGT exemption remains at £3,000, with trust exemptions remaining at £1,500, shared between all trusts of the same settlor (minimum £300 per trust).

CGT rates stay unchanged:

• 18% for gains falling within the unused basic rate band.
• 24% for gains above the basic rate band.
• Trustees and personal representatives pay CGT at 24%.
• Personal Allowance cannot be offset against capital gains.

Inheritance Tax (IHT)

Key measures include:

• The £1 million limit for 100% Business and Agricultural Relief will become transferable between spouses if unused on first death, including where the first death occurred before 6 April 2026.
• For trusts holding excluded property on 30 October 2024, a cap of £5 million will apply to relevant property charges over each ten-year period.
• New anti-avoidance rules will treat UK agricultural land and buildings as UK-sited for IHT purposes, even if held indirectly through non-UK entities.
• Where a settlor ceases to be a long-term UK resident, an IHT charge will arise if the situs of trust assets changes thereafter.
• The IHT charity exemption will apply only to direct gifts to UK-registered charities or clubs, excluding gifts made to trusts not recognised as UK charities or clubs.
• The main IHT thresholds are fixed until April 2031:
  • Nil-rate band: £325,000
  • Residence nil-rate band: £175,000
  • RNRB taper begins at £2 million
  • Combined allowance for full BPR and APR: £1 million

Previously announced measures

From April 2026 onwards:

• CGT for Business Asset Disposal Relief and Investors’ Relief will rise to 18%, aligning with the main lower rate.
• Agricultural and business property relief will be reformed.
• A revised tax regime for carried interest will be introduced, fully within the Income Tax framework.
• From April 2027, unused pension funds will be included within the scope of IHT.

Other Measures

Internationally mobile individuals

Further changes will be made to the tax treatment of internationally mobile individuals, including the closing of certain loopholes and the introduction of capped relevant property trust charges. More detail will be published in due course.

Electric vehicle mileage tax

A new mileage charge of 3p per mile will apply to electric cars.

Universal Credit

The two-child limit will be abolished from April 2026.

Employee Ownership Trusts (EOTs)

The CGT relief available on business sales to EOTs will be reduced from 100% to 50%.

High Value Council Tax Surcharge (“Mansion Tax”)

From April 2028, a new annual surcharge will apply to properties that were valued at more than £2 million in 2026:

• £2,500 for homes worth £2m–£2.5m
• Rising in bands to a maximum of £7,500 for properties valued above £5m

The surcharge will rise annually in line with CPI from 2029, will be payable by homeowners (not occupiers), and will sit alongside existing council tax liabilities. GOV.UK : High Value Council Tax Surcharge.

Stamp Duty Reserve Tax (SDRT)

From 27 November 2025, newly listed companies on UK regulated markets will benefit from a temporary three-year exemption from the 0.5% SDRT charge on agreements to transfer shares.

Tax Support for Entrepreneurs

A government Call for Evidence has been launched to gather views on how the tax system can better support business founders and growing companies. Submissions close on 28 February.

Final Thoughts

The Autumn Budget 2025 introduces a broad set of reforms that will shape taxation, pensions and savings for years ahead. While some areas, such as pension tax relief, remain unchanged, the adjustments to salary sacrifice arrangements, ISA access, and future tax rates mean individuals may benefit from reviewing their long-term financial plans. 

Additional clarity is expected as further guidance and legislation emerge, particularly on forthcoming consultations and the implementation of changes scheduled for 2026 and 2027.

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