What was expected prior to the Budget?
Chancellor Rachel Reeves delivered her Autumn Budget on 26th November 2025, and analysts expected it to be shaped by the country’s weak economic growth, a £20 billion + fiscal shortfall, and a rise in borrowing costs. The Chancellor had previously pledged not to increase Income Tax, National Insurance or VAT on working people, as was promised in the Labour Government’s election manifesto. The Budget was largely expected to focus on taxing wealth over income, tightening reliefs, and maintaining fiscal discipline amid slow growth and high debt. While the main taxes were likely to remain unchanged, the expectation was that wealthier households, property owners, and pension savers were set to face higher taxation following the Budget.
What changes did the Budget actually bring?
Well, as the Chancellor was guided by the fiscal rules requiring debt to fall as a share of GDP and for day-to-day spending to be funded by revenue by 2029-30, this constraint meant that she had to either cut spending or find new revenue sources. So, the way she has proposed to do this is as follows –
Income and Related Taxes
• Personal Allowances for Income Tax frozen for a further three years until 2031.
• National Insurance will be payable on salary sacrifice pension contributions over £2,000 per year, from April 2029.
• Income Tax on property income, savings income and dividend income will increase by 2% from April 2026.
• Voluntary Class 2 National Insurance Contributions for people living abroad abolished so they can’t build up a UK State Pension entitlement.
Pensions
• Introduced a new threshold of £2,000 that can be saved into a pension via salary sacrifice without National Insurance being payable. Any amount saved over this threshold via salary sacrifice will have the usual 8% rate applied for salaries under £50,270 and 2% on income above that. Comes into effect from April 2029.
• State Pension to increase by 4.1% in 2026 under the Triple Lock.
Property and Wealth
• The amount that can be saved into a Cash ISA has been reduced to £12,000 from £20,000 for people under the age of 65 (although the £8,000 difference can still be saved into a Stocks & Shares ISA), with over 65s retaining the full allowance from April 2026.
• Introduction of new High Value Council Tax Surcharge of £2,500 p.a. for properties worth over £2 million, rising to £7,500 p.a. for properties worth over £5 million.
• Introduced the ‘milkshake tax’. This is basically an end to the exemption that milk-based drinks have from the levy on sugary soft drinks. Thereby this will increase the cost of milkshakes through the levy now being applied.
• The investment limit for Venture Capital Trusts (VCTs) and Enterprise Investment Scheme (EIS) companies will be increased to £10 million (£20 million for Knowledge Intensive Companies (KICs)) and the lifetime company investment limit will be increased to £24 million (£40 million for KICs). The gross assets test will increase to £30 million before share issue, and £35 million after, from April 2026. Alongside this, the VCT income tax relief will decrease to 20%.
• UK Listing Relief – transfers of a company’s securities will be subject to relief from the 0.5% Stamp Duty Reserve Tax charge for three years from the point the company lists on a UK regulated market.
• The £1 million allowance for the 100% rate of Inheritance Tax Agricultural Property Relief and Business Property Relief will now be transferrable between spouses.
• Electric cars will be charged a ‘mileage tax’ at 3p per mile, Plug-in Hybrid Electric Vehicles (PHEVs) will also be charged the tax at 1.5p per mile, both from 2028.
• The 5p Fuel Duty freeze will be extended until September 2026.
• Remote Gaming Duty paid on online casino betting will be increased from 21% to 40% from 2026. General Betting Duty will remain at 15% for other forms of sports betting, increasing to 25% from April 2027. Horse racing will not be subject to the increase.
• Regulated Rail Fares e.g. commuter season tickets will be frozen for 12 months.
• Average UK energy bill to be cut by £150 p.a. by reducing levies.
• Business rates will be reduced for 750,000 retail, hospitality and leisure businesses.
• The two-child benefit cap will be scrapped from April 2026.
Although these proposals have been officially laid out in the Autumn Budget by the Government and analysed and approved by the Office for Budget Responsibility (OBR), it is worth noting that some of these proposals may not happen within the remainder of the term of the current Labour Government, or may be scrapped and ultimately not happen at all.
If you are worried about any of the above changes that are due to come in and if they will affect you in any way, then please seek financial advice. Here at Fogwill & Jones, our advisers are more than happy to talk you through the changes in more detail and offer you solutions to mitigate the effects of these changes on your personal finances.
