Budget 2025 Key Financial Planning Takeaways

The Chancellor’s 2025 Autumn Budget introduced several tax and financial planning measures that will affect earnings, savings, pensions, property and investments over the coming years. Below is a straightforward summary of what changed, what didn’t, and how it may affect personal finances.

1. Income Tax: Threshold Freeze Extended (the “Fiscal Drag”)

The government has frozen income tax bands until April 2031, three years longer than previously planned. This means tax rates have not gone up, but more of your income will gradually fall into higher tax bands as earnings rise over time.

What it means for you:

You may pay more tax even if your real income hasn’t increased significantly.

More people will move into higher tax brackets over time.

Using tax-efficient wrappers (pensions, ISAs, joint allowances for couples) becomes increasingly important.

2. ISAs: Cash ISA Allowance Reduced from 2027

From April 2027, the overall ISA limit stays at £20,000, but the cash ISA portion will be capped at £12,000 for those under age 65. The intention is to encourage more long-term investing rather than holding large sums in cash.

What it means for you:

You can still save £20,000 a year tax-free, but only £12,000 can go into cash (if under 65).

Stocks & Shares ISAs become more central to long-term planning.

Using current full cash ISA allowances before 2027 may be beneficial if appropriate.

3. Pensions & Salary Sacrifice: NI Relief Capped from 2029

From April 2029, National Insurance exemptions on pension contributions made via salary sacrifice will be restricted to the first £2,000 per year. NI will be due on contributions above that level for both employers and employees.

What it means for you:

Higher earners using salary sacrifice may see reduced tax/NIC efficiencies.

Pension contributions remain attractive due to income tax relief.

A review of retirement planning and contribution levels ahead of 2029 is advisable.

4. Dividend & Savings Income: Tax Rates Increasing

Tax on dividends, savings interest and property income will rise by 2 percentage points across most bands (timings vary by income type).

What it means for you:

Investment income held outside tax-efficient wrappers will become more heavily taxed. ISAs and pensions become even more valuable for sheltering income and gains.

5. Property Tax Changes

High-Value Home Surcharge (“Mansion Tax”)

From April 2028, homes worth over £2 million will face a new annual council tax surcharge, ranging from £2,500 to £7,500 depending on the property value.

Landlords

Landlords will face increased income tax on rental profits as part of the broader rise in investment income tax.

What it means for you:

Higher-value property owners will face additional annual costs.

Rental profitability and yield projections may need revisiting.

6. No Changes to Key Rumoured Taxes

Several widely discussed tax changes did NOT happen, providing stability for planning:

• No reduction in pension tax relief

• No changes to tax-free pension lump sums (PCLS)

• No increase in income tax rates

• No changes to Capital Gains Tax rates

• No new National Insurance charges on rental income

• No additional inheritance tax reforms (other than existing freezes)

7. Additional Notable Measures

Electric Vehicle Charging Duty

A new “pay-per-mile” duty for EVs (expected around 3p per mile) will be introduced from 2028.

Enterprise & Business Measures

Tax relief on sales to Employee Ownership Trusts reduced from 100% to 50%.

New £1m Business/Agricultural Relief allowances confirmed, transferable between spouses.

Budget 2025 Key Financial Planning Takeaways

Across the Budget documents, several themes are clear:

• Tax efficiency is becoming more important than ever

• With tax thresholds frozen and taxes rising on investment income, using pensions, ISAs and allowances effectively will make a material difference.

• Pensions remain a cornerstone

• Despite changes to salary sacrifice, income tax relief stays generous and tax free cash remains at previous levels.

• Property and landlords face increasing pressure

• Higher charges and rising income taxes mean property-based planning may need revisiting.

• Investment wrappers and diversification matter

• More growth is expected to come from long-term investing rather than holding cash, especially as incentives shift.

Your Next Steps

Many of these measures could influence different areas of your personal finances, including your income, savings, investments and long-term plans. If you would like to discuss how any of the announcements may affect you, or simply wish to review your current arrangements in light of the changes, please feel free to get in touch. We are here to provide clarity and help you make informed decisions.