Autumn Budget 2025: What does it Mean for Your Money?

The lead-up to the 26 November Budget was dominated by speculation, leaks, political manoeuvring and warnings from Chancellor Rachel Reeves’ emergency press conference on 4^th November, that repairing the UK’s public finances would require “contribution” from everyone. 
 

Yet by the time the speech arrived, much of the detail had already been released, and the Office for Budget Responsibility (OBR) painted a more nuanced picture than her pre-Budget rhetoric suggested.
 

The Chancellor faced two critical tests:
 

1. Meeting her fiscal rules by balancing the current budget in the 2029/30 tax year
   
    
2. Delivering tax rises now to avoid repeated fiscal tightening later in the parliament

A logical political move – better to front-load the pain rather than keep returning to the electorate to ask for more.
 

Reeves largely met both objectives through a £26bn package of tax increases. A broad, sometimes patchwork set of measures designed primarily to stabilise the Treasury’s position. Markets responded calmly, with sterling steady and gilt yields contained, offering the government a crucial early win.
 

However, within the financial sector and business community, the reaction was less positive. The combination of frozen thresholds, reduced pension incentives, higher taxes on unearned income, and the introduction of a new wealth-based charges mark a noticeable shift in the UK’s tax landscape. 
 

These decisions appear more focused toward closing the fiscal gap than on addressing deeper underlying structural challenges of the UK economy, like low productivity growth, demographic pressures, and chronic infrastructure underinvestment.
 

The key question now is whether this Budget goes far enough to prevent further tax rises over the next few years. The Institute for Fiscal Studies has already noted that the Chancellor's fiscal headroom, while improved from the £4.2 billion originally forecast, remains relatively modest by historical standards.
 

Politically, the fortunes of both the Chancellor and Prime Minister are now tightly tied to the success of these decisions. 
 

As one Labour MP noted, "If she goes, he goes”, creating a strong incentive for the government to avoid returning to voters for additional tax rises - but whether economic reality will permit such political manoeuvring remains to be seen.
 

1. Fiscal Drag Accelerates
 

Announcement
 

Personal tax thresholds will remain frozen until April 2031, extended from previous deadline of 2028.
 

Impact
 

This is one of the most significant, yet least visible tax rises in this Budget. As wages increase, more people are pushed into higher tax bands despite no change in headline rates.

The impact is particularly acute for those crossing key thresholds. Individuals earning around £100,000 face an eye-watering marginal tax rate as their personal allowance tapers away between £100,000 and £125,140 - even higher for those repaying student loans. 

This threshold freeze means more households will be pulled into this trap with each pay rise or promotion.
 

Additionally, the £100,000 threshold for losing 30 hours of free childcare remains unchanged, creating a substantial financial penalty for families with young children where one parent's income approaches this level.
 

Planning

Those nearing the £100,000–£125,140 band should consider strategies that reduce adjusted net income, including pension contributions and salary sacrifice, while these remain attractive and before April 2029.
 

2. A Targeted Tax Rise on Unearned Income

Savings Interest

Announcement

From April 2026, tax on cash interest rises by 2 percentage points across all bands.

1. Basic rate from 20% to 22%
   
    
2. Higher rate from 40% to 42%
   
    
3. Additional rate from 45% to 47%
    

Impact
 

Savers with large cash balances, a higher-rate taxpayer with £100,000 earning 4% interest will see their annual tax bill rise from £1,600 to £1,680 – a 5% increase in effective taxation. The impact compounds over time and across larger balances.

Planning
 

Individuals should consider repositioning cash holdings into tax-efficient structures:
 

• Maximising ISA allowances before April 2027, allocating the full £20,000 annual allowance to cash
  
   
• Premium Bonds are another attractive option, with the ability to hold up to £50,000, given the tax-free treatment of the prizes
  
   
• UK government bonds (GILTs) provide secure returns along with the advantage of tax-free capital gains
  
   
• Investment bonds are designed to allow tax-deferred growth, helping to manage the tax liabilities on returns 
   

Dividend Income
 

Announcement
 

Dividend tax will also increase by 2% for Basic and Higher rates from April 2026, with the additional rate and £500 dividend allowance remaining unchanged.
 

Impact

This change significantly affects business owners extracting profits via dividends, and investors holding shares outside tax-sheltered accounts. 

Pensions and ISAs remain unchanged, but those relying on dividend income from personal portfolios or extracting profits from owner-managed businesses will see increased tax costs. For business owners, the traditional low salary / high dividend split becomes less advantageous. 

Planning

• Review salary vs. dividend mix
  
   
• Where income currently being paid as dividends isn’t required for day-to-day living costs, pension contributions represent a great method for profit extraction
  
   
• Move taxable investments into tax shelters where possible, such as pensions, ISAs and bond
   

3. ISA Restrictions and Reduced Tax Efficiency
 

Announcement
 

From April 2027, the Cash ISA allowance for under-65s falls to £12,000 from the current £20,000. A review of Lifetime ISAs (LISAs) is due in 2026, possibly to be replaced by a first-time buyer focused product.
 

Impact

Higher tax on cash arrives in 2026, followed by reduced tax sheltering in 2027, indicating a clear policy push towards investment over cash savings. This will also create a challenging environment for risk-averse savers and those with large cash reserves.
 

Planning
 

• Use the full £20,000 ISA allowances in both 2025/26 and 2026/27
  
   
• Position known short-term spending (e.g., house moves) into ISAs before restrictions come into effect
  
   
• Review emergency fund structure (Cash ISA vs Premium Bonds) 
  
   
• Under-40s should consider opening a LISA now, even with minimal funding
   

4. Salary Sacrifice Restrictions (But a Window of Opportunity)
 

Announcement
 

From April 2029, salary sacrifice pension contributions above £2,000 per year will incur NI charges. Employees will pay NI at 8% on earnings below £50,270 and 2% above. Employers will also lose their NI exemption on these contributions.
 

Impact
 

This fundamentally affects key planning strategies for high earners — especially those between £100,000 and £125,140 who currently benefit from large effective tax relief. 

Employers may also be less willing to offer enhanced pension arrangements after the rule change.
 

Planning (Before April 2029)
 

• Maximise pension contributions (up to £60,000 annually)
  
   
• Use ‘carry-forward’ allowances from the last 3 years
  
   
• Sacrifice bonuses where possible and especially tax-efficient for those in the £100,000-£125,140 band, effectively providing 62% tax relief (or higher with student loan repayments)
  
   
• Parents can use sacrifice to stay below the £100,000 government childcare support cut-off
   

Even post-2029, salary sacrifice still provides valuable tax relief, just at a reduced level
 

5. Venture Capital Trust (VCT) Relief Reduced
 

Announcement
 

Income tax relief on VCTs will drop from 30% to 20% in April 2026, reducing these below Enterprise Investment Scheme (EIS) relief levels.
 

Impact
 

VCTs become less attractive from a pure tax relief perspective. It is important to note the remaining (and significant!) benefits:
 

• Tax-free dividends (particularly valuable given the dividend tax increase)
  
   
• Tax-free capital gains
  
   
• Diversified exposure to early-stage UK companies
   

Planning
 

• Before change: Consider investing in VCTs before April 2026 to secure the higher relief
  
   
• After change: VCTs against EIS opportunities on a risk-adjusted basis with both offering 20% upfront relief but different risk/return profiles 
  
   
• Reminder: both remain higher-risk investments and should only form a small portion of a diversified portfolio
  
   

6. The New Mansion Tax
 

Announcement
 

From April 2026 an annual wealth charge will apply to residential properties valued:
 

• £2–5m: £2,500/year
  
   
• Over £5m: £7,500/year
   

Impact
 

Though relatively small in percentage terms, this marks the UK’s first explicit modern wealth tax.
 

Asset-rich but cash-poor households may feel cashflow pressure, and houses near the £2m and £5m thresholds may see price pressures as buyers seek to avoid crossing these thresholds.
 

Planning
 

• Review ownership structures
  
   
• Plan liquidity for ongoing charges
  
   
• Factor the tax into future property purchase decisions
  
   
• Buy-to-let investors should revisit the viability of high-value holdings
  
   

7. Inheritance Tax (IHT) Freeze Continues
 

Announcement
 

The IHT nil-rate band remains frozen at £325,000 until April 2031. Combined previously announced plans to include pension assets in estates from April 2027, this represents a continuation of fiscal drag in estate taxation.
 

Impact
 

More estates will fall into the IHT net due to asset growth. Positively, it was confirmed that business relief allowances can now transfer between spouses upon death, creating up to £2m of combined relief.
 

Planning
 

Begin IHT planning earlier and more proactively by:
 

• Reviewing projected IHT liabilities, including pensions, from 2027
  
   
• Considering lifetime gifting strategies to take advantage of annual exemptions
  
   
• Ensuring business relief eligibility is properly structured and documented for business owners
  
   
• Considering trust structures for asset protection and IHT mitigation
  
   
• Remembering whole-of-life insurance in trust remain reliable tools
   

What Happens Next?
 

These changes provide advance warning to the future. Those who act strategically over the next 12-48 months can extract substantially more value than those who wait until implementation dates arrive.
 

As more technical details emerge, additional guidance will likely follow. If you want to understand how these changes may impact your personal finances, particularly around pensions, property, or investment structures, our advisers can help you model your options.
 

* This article is for informational guidance only and does not constitute personalised tax advice, legal advice, or a recommendation to act. It is based on Aventur Wealth’s interpretation of current UK legislation and HM Revenue & Customs practice, which is subject to change.

The value of any tax relief depends on your individual circumstances. We strongly recommend seeking professional tax consultation before making any decisions. Note that the value of investments can go down as well as up and you are not guaranteed to get all your capital back. Information is correct at time of publishing. Aventur is not responsible for the content of 3rd party websites.