Following the Autumn Budget and the announcements made, there were a number of changes and freezes, which will have a real impact on individuals’ financial planning.

We have placed detail of this within our Budget summary, and outlined some key considerations below. Notably, suggestions that pension commencement lump sum (commonly known as tax-free cash) would be reduced or the main rates of income tax increased did not make it into the final Budget.

Income Tax and National Insurance

Whist no direct increase to income tax rates, the personal tax thresholds will remain frozen until 5 April 2031 for most of the UK (with Scotland setting their bands and rates separately). This continues the fiscal drag, which means that, as incomes rise, more people will be pulled into higher tax bands, increasing overall tax bills.  

From April 2026, there will be a 2% increase to the basic and higher rates of tax on dividends, and from April 2027, there will be a 2% increase to the tax on basic, higher and additional rates of savings and property income.

These changes highlight the importance of reviewing your tax position and considering strategies such as pension contributions, which continue to receive tax relief at marginal rates. Also, for married couples where one spouse is in a lower tax band, there could be benefit in considering whether to transfer income-producing assets between them to make the best use of the allowances between them.

Pensions

From April 2029, the first £2,000 of salary-sacrificed contributions will remain exempt from National Insurance, but any amount above that will attract both employer and employee National Insurance Contributions. With a long time before this change is put into place, reviewing such contribution strategies early is important.

This does mean that, from April 2029, there could be an impact on those utilising salary sacrifice to manage the £100,000 - £125,140 tax trap, which can result in an effective marginal tax rate of up to 60%, or those doing utilising it to maintain access to childcare benefits.

It was a relief to many that there are no additional pension reforms in this Budget. This stability will be welcome for many who had concerns over changes to tax-free cash, and it gives individuals the chance to review long-term plans and ensure contributions are optimised under current rules.

Investments

From April 2027, the cash ISA allowance will be limited to £12,000 for those under 65, but they will be able to use the balance of £8,000 toward stocks and shares ISAs. People over 65 can still pay £20,000 into cash ISAs. All subscriptions will remain as they are until 2031.

From April 2026, VCT tax relief will be reduced from 30% to 20%, meaning this is the last year that 30% relief is available from these schemes. Details on potential changes to EIS are not yet clear, so we will follow this separately.

Other brief points

• The inheritance tax (IHT) nil-rate bands are frozen until 6 April 2031 (they have been frozen since April 2012); the agricultural and business relief allowances are frozen at £1million until 2030/31, but there was a welcome amendment that the spousal exemption will now apply for unused allowances.
• Introduction of a “mansion tax” for properties over £2m from April 2028, based on 2026 valuation, will be implemented on a tiered basis. *Proposed for England only at this point.
• Introduction of an electric car milage based charge from 2028/29, at 3p per mile for electric and 1.5p for plug-in hybrids.

Planning ahead is key

There were a number of changes from the Budget that will have an impact on individuals. What is key from the announcements, the freezing of thresholds and the upcoming changes in the years to come is that having the right plan in place can help you preserve your wealth and grow it as efficiently as possible.

Get in touch

If you would like to discuss this further, please don't hesitate to reach out to a member of our Wealth team.

Disclaimer

Johnston Carmichael Wealth Limited is authorised and regulated by the Financial Conduct Authority.

Please note: This communication should not be read as financial advice. While all possible care is taken in the completion of this article, no responsibility for loss occasioned by any person acting or refraining from action as a result of the information contained herein can be accepted by this firm.

All statements concerning the tax treatment of products and their benefits are based upon our understanding of current tax law and HMRC practices. Legislation and the levels and bases of reliefs from taxation are subject to change and are dependent on your individual circumstances.

The Financial Conduct Authority does not regulate tax and estate planning.