Autumn Budget 2025: Summary of Key Points

Autumn Budget 2025: Summary of Key Points

The long-awaited Budget 2025 was finally presented by Chancellor Rachel Reeves to Parliament on 26 November.

It comes after weeks of intense speculation, throughout which the government has remained tight-lipped. Despite this, the Chancellor’s thunder was somewhat stolen on the day as a result of an error by the Office for Budget Responsibility, the official forecaster, which ended up giving commentators a sneak preview by publishing its analysis prematurely.

When the budget was fully unveiled at the despatch box in the House of Commons, the budget was framed as a series of “fair and necessary choices” by the Chancellor, who said it was designed to “strengthen Britain’s economic foundations and set the course for a secure future for the country”.

From taxation and housing to savings and inheritance, the rule changes affect many areas of fiscal policy. More pertinently, they are likely to have a complex knock-on effect for the personal finances of millions. Here we provide a summary of some of the key measures.

TAXATION

As previously indicated, the government did not renege on its election promises not to increase income tax rates. The Chancellor did, however, announce that income tax thresholds will remain frozen for a further three years until 2031.

This is expected to pull millions more workers into higher tax brackets as their wages increase – known as fiscal drag. Indeed, the OBR suggested that nearly one in four taxpayers will pay some tax at the higher rate by 2031.

Meanwhile, rates of income tax on savings interest and property income are set to increase by 2% from April 2027. After allowances, this means a charge of 22% for basic-rate taxpayers, 42% for higher-rate taxpayers and 47% for additional-rate taxpayers.

PROPERTY

Homes with a market value of £2 million are set to pay a new annual council tax surcharge – often referred to as a ‘mansion tax’ – from April 2028.

It is expected to apply to around 100,000 homes in the highest council tax bands – F, G and H. Properties are divided into four payment bands based on property value, with the charge starting at £2,500 for properties between £2 million and £2.5 million and rising to £7,500 for those worth £5 million or more. The charge will increase by the Consumer Price Index (CPI) measure of inflation each year.

SAVINGS AND INVESTMENTS

Much speculation had surrounded the possibility of the Chancellor making changes to the cash ISA allowance. This did indeed come to fruition in the budget, but earlier predictions of it being cut from the current £20,000 to £4,000 proved off the mark.

Rather, from April 2027, savers will be limited to an annual cash ISA allowance of £12,000 – but this will only apply to those under the age of 65. Separately, the government said it will consult on reform of the lifetime ISA in early 2026, with a view to implementing a “new, simpler ISA product” to support first-time buyers.

Those holding shares outside of the tax-free wrapper of an ISA face paying more after hikes in dividend tax. From April 2026, this will increase from 8.75% to 10.75% at the ordinary rate and from 33.75% to 35.75% at the upper rate. The additional rate remains unchanged at 39.35%, as do the tax-free allowances.

PENSIONS

Salary sacrifice has grown in popularity as a tax-efficient means of encouraging retirement saving, with employees ‘sacrificing’ a proportion of their pre-tax salary in exchange for the benefit of pension contributions. Employers also benefit through a reduction in National Insurance contributions.

In the budget the Chancellor announced that, from April 2029, the amount of earnings eligible for salary sacrifice will be capped at £2,000. Beyond this threshold, contributions will be subject to both employer and employee NICs.

Separately, Rachel Reeves confirmed that the state pension will rise by 4.8% from April 2026 as a result of the triple lock. This equates to an increase of £574.60 per annum for the new state pension and £439.40 for the old basic state pension.

INHERITANCE

Further to extending the freeze on income tax bands, the Chancellor also announced that inheritance tax (IHT) thresholds would also remain fixed for an additional year.

This means there will be no change in the nil-rate band (£325,000) and the resident nil-rate band (£175,000) until at least April 2031. With fiscal drag and pension changes pulling more estates into scope, IHT receipts are forecast to increase to £9.1 billion for the 2025/26 tax year before rising to a projected £14.5 billion by 2030/31.

Meanwhile, amid tractor protests in Westminster, the government said the £1 million allowance for the 100% rate of agricultural property relief and business property relief will be transferable between spouses and civil partners.

BUSINESS

Businesses will be impacted by a variety of measures announced in the budget. From April 2026, there will be increases in the national living wage for over-21s (to £12.71 an hour), the national minimum wage for 18-20 year-olds (to £10.85 an hour), and the national minimum wage for those on apprenticeships aged 16-17 (to £8 an hour).

Meanwhile, around 750,000 retail, leisure and hospitality businesses will benefit from a reduction in business rates, paid for by increased taxation on business premises with a rateable value of more than £500,000.

Furthermore, business sales made to employee ownership trusts will no longer benefit from 100% capital gains tax relief, with the rate falling to 50%.

In summary, it might not have ushered in a major headline-grabbing measure along the lines of an income tax rise, but this was nonetheless a wide-ranging budget full of notable policy changes and updates.

In a bid to meet deficit-reduction targets and increase headroom, the Chancellor has engineered £26.1 billion in tax rises in 2029/30 – pushing the tax-to-GDP ratio to a post-war high of 38% in 2030/31, according to the OBR.

For individual savers and investors, these measures and their implications must be understood in the context of existing financial plans and forward-looking strategies. This can trigger complex questions and prompt challenging decisions, underlining the value of seeking expert, tailored guidance to ease the task of navigating the right path ahead.

This is our understanding of the proposals so far and these may be liable to change as further regulations are introduced. The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.