The Autumn Budget 2025 was delivered against a backdrop of economic uncertainty and early publication of the Office for Budget Responsibility’s forecasts. The Chancellor’s second Budget focused on restoring stability, reducing borrowing, easing pressure on the NHS, and helping households manage ongoing cost-of-living challenges.

 

Below is a summary of the key measures :

 

Income Tax: 2% Increase on Savings, Dividends and Rental Income (from April 2027)

 

  1. Rental Income

Landlords will see income tax on property profits rise by 2%:

  • Basic rate: 22%
  • Higher rate: 42%
  • Additional rate: 47%

This applies to individuals who own property personally and will increase ongoing costs for many landlords.

 

  1. Savings Interest

Tax on savings interest also rises by 2%:

  • Basic rate: 22%
  • Higher rate: 42%
  • Additional rate: 47%

The starting rate for savings remains at £5,000 until 2030/31, meaning individuals with under £17,570 of earned income may still receive up to £5,000 of savings interest tax-free.

 

  1. Dividends

Dividend tax rates will rise by 2%:

  • Basic rate: 10.75%
  • Higher rate: 35.75%
  • Additional rate: unchanged

 

Frozen Tax Thresholds Extended to 2031

Personal allowances and tax thresholds will remain frozen until April 2031.

This is a significant “stealth tax”, gradually pulling more people into higher tax brackets (fiscal drag).

A key implication is that more pensioners will begin paying tax, particularly from 2027–28, when the State Pension is expected to exceed the personal allowance.

 

Salary Sacrifice for Pensions Capped at £2,000 per Year (from April 2029)

Salary sacrifice currently enables both employees and employers to save National Insurance (NI) on pension contributions. From April 2029:

  • The first £2,000 of salary sacrifice each year remains NI-free.
  • Any contributions above this amount will incur both employer and employee NI.

This reduces the NI efficiency of salary sacrifice for higher contributions and may increase employer costs if they previously reinvested NI savings into staff benefits.

 

A worked example – see below (via AJ Bell) illustrates how take-home pay could change for employees exchanging 6% of salary for pension contributions with a 6% employer match (assuming no employer NI sharing).

 

Employees being automatically enrolled into workplace pensions are not affected and will continue to receive full tax relief and the 25% tax-free lump sum on retirement.

 

Child Benefit and Tax-Free Childcare

Salary sacrifice can still be used to reduce income for the purposes of the High-Income Child Benefit Charge (HICBC) and eligibility for Tax-Free Childcare. These rules are unchanged.

 

ISA Reform

 

Cash ISA Allowance Cut

From April 2027, the cash ISA allowance for those under age 65 reduces from £20,000 to £12,000.

The Stocks & Shares ISA remains unchanged at £20,000.

The change is designed to encourage more investment into UK markets rather than holding cash.

 

New ‘First Time Buyer ISA’

In early 2026, the government will consult on a new, simplified ISA aimed at supporting first-time buyers. Further details will follow.

 

Other Key Measures

 

National Minimum Wage

From April 2026:

  • Age 21+: £12.71/hour
  • Ages 18–20: £10.85/hour

 

Two-Child Benefit Cap Removed

From 6 April 2026, the two-child limit on the child element of Universal Credit will be abolished. Child Benefit itself is unchanged.

 

State Pension

The government has confirmed the triple lock remains.

From April 2026:

  • The new State Pension will rise by 4.8%, increasing the annual amount to £12,547.60.

 

Agricultural & Business Property Relief

The combined £1 million allowance for 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) will be frozen until 5 April 2031.

Unused allowances will remain transferable between spouses/civil partners, including if the first death occurred before 6 April 2026.

 

Mansion Tax (from April 2028)

A new annual surcharge applies to properties valued above £2 million:

  • £2m–£2.5m: £2,500
  • £2.5m–£3.5m: £3,500
  • £3.5m–£5m: £5,000
  • £5m+: £7,500

 

This applies in addition to Council Tax and is expected to affect fewer than 1% of UK homes, mainly in London and the South East.