Key Takeaways from the Autumn Budget 2025 for Your Financial Plan

A Squeeze on Income and Investment Returns

How your earnings and investment returns are taxed is fundamental to long-term wealth accumulation. The government has announced several adjustments that signal a clear strategic direction: tightening the tax treatment of investment income while simultaneously capturing more individuals in higher tax brackets on their earnings through threshold freezes.

The income tax Personal Allowance (£12,570) and the higher rate threshold (£50,270) will be maintained at their current levels for an additional three years, from April 2028 to April 2031. This extension of the freeze will lead to "fiscal drag," where inflation and wage growth push more individuals into higher tax brackets. The Office for Budget Responsibility estimates this will result in an additional 920,000 people paying the higher rate of tax by the 2029-30 tax year.

Additionally, the following changes to taxes on investment income were announced:

• Dividend Income: From 6 April 2026, the ordinary and upper rates of tax on dividend income will increase by 2 percentage points. The additional rate remains unchanged.

• Savings Income: From 6 April 2027, the tax rate on savings income will increase by 2 percentage points across all bands (basic, higher, and additional).

These adjustments underscore the importance of tax-efficient investment wrappers and careful income planning, a theme that continues in the government's approach to property.

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New Levies on Property Wealth

Property remains a significant component of wealth in the UK, and the budget introduces new measures targeting this asset class directly.

A new High Value Council Tax Surcharge (HVCTS) will be introduced in England from April 2028. Key features include:

• Threshold: It applies to residential properties valued at £2 million or more.

• Charges: An annual charge of £2,500 will apply to properties valued over £2 million, rising to £7,500 for properties valued over £5 million.

• Payer: The charge will be levied on the property owner, not the occupier.

Furthermore, effective from April 2027, a separate and higher set of tax rates will be created specifically for property income:

• Property Basic Rate: 22%

• Property Higher Rate: 42%

• Property Additional Rate: 47%

This focus on raising revenue from tangible assets extends to the mechanisms for long-term savings, with notable adjustments in the area of pensions.

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Shifts in Retirement Funding Strategy

Pension planning is a cornerstone of long-term financial strategy. The budget has introduced a significant change that affects a popular method for making tax-efficient contributions.

From 6 April 2029, a new cap will be placed on salary sacrifice arrangements for pension contributions. The amount that can be sacrificed without paying National Insurance Contributions (NICs) will be limited to £2,000 per employee per year. It is important to note that tax relief on personal and employer pension contributions remains fully in place. This change will primarily impact higher earners who have used salary sacrifice to make substantial NIC-free contributions, requiring a potential re-evaluation of retirement funding strategies.

On a positive note for some, from April 2027, well-funded Defined Benefit (DB) pension schemes will have new flexibility to pay surplus funds directly to scheme members.

From the treatment of retirement assets, we now turn our attention to other forms of investment and the taxation of their gains.

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Navigating the Estate and Business Succession Landscape

Capital Gains Tax (CGT) and Inheritance Tax (IHT) are key considerations in wealth transfer and business succession planning. This budget introduces a notable change for business owners while continuing the trend of freezing IHT thresholds.

The CGT relief available on qualifying disposals to an Employee Ownership Trust (EOT) will be significantly reduced. Effective from 26 November 2025, the relief will be cut from 100% to 50%. This change substantially alters the tax implications for business owners considering an EOT as an exit strategy, making it essential to review any succession plans that involved this route.

Regarding Inheritance Tax, the nil-rate band (£325,000) and the residence nil-rate band (£175,000) will remain fixed at their current levels for an additional year, until April 2031. The continuation of this long-term freeze means that as asset values grow with inflation, a greater portion of many estates will fall subject to IHT, reinforcing the need for proactive and structured estate planning.

Finally, we will look at tax-advantaged vehicles for investing in early-stage companies.

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Adjustments to Venture Capital Investing

Venture Capital Trusts (VCT) and the Enterprise Investment Scheme (EIS) are valuable vehicles for securing tax relief while investing in higher-risk, early-stage UK companies. The budget introduces a mixed package of changes to these schemes, effective from April 2026.

• Reduced Upfront Relief: The rate of income tax relief for new VCT investments will be reduced from 30% to 20%.

• Increased Investment Limits: The amount that qualifying companies can raise from investors under these schemes will increase significantly. For example, the annual investment limit for a company will rise to £10 million.

Despite the reduction in the upfront income tax relief, the overall attractiveness of these schemes may be enhanced for certain investors. The core benefits—exemption from capital gains tax on future sales and tax-free dividends (for VCTs)—remain. The increased investment limits may signal a stronger pipeline of opportunities, making the schemes potentially more appealing for investors focused on long-term, tax-free growth.

Taken together, these measures paint a clear picture: a long-term squeeze on estates and investment income, combined with new, targeted taxes on property wealth, makes proactive and sophisticated financial planning more critical than ever.