The UK Budget lowdown – the topline announcements

After months of waiting and a seemingly constant stream of speculation and leaks – including the calamitous publication of the OBR forecast 30 minutes before the Chancellor stood up – the UK Autumn Budget has finally taken place. 

As expected, Rachel Reeves announced a series of tax-raising measures – from extending the freeze on income tax thresholds to cutting the benefits of pension salary sacrifice schemes to annual levies for high-value properties. However, the two-child benefit cap was lifted and there were also announcements around freezes on fuel duty and rail fares, and the removal of some green levies from domestic energy bills.

The UK Budget has been described as once in a generation in terms of its scale and likely impact on individuals and businesses. It has also been described as a classic ‘tax and spend’ budget which could make individuals’ tax affairs even more complicated.

Mark FitzPatrick, CEO of St. James’s Place, says: “This has been another challenging Budget, including for those looking to build financial resilience. However, today’s announcements have brought some clarity following many weeks of speculation.

“We were pleased to see that the Chancellor is taking action to encourage more people to invest by rebalancing the incentives in the ISA regime. Coupled with other measures underway to encourage retail investing, these are clear steps towards shifting from an established environment of over-saving and under-investing, and we should continue to work towards the normalisation of an investing culture in the country. St. James’s Place remains ready to continue working closely with the Government to help deliver these changes.

“Given the scale and breadth of changes announced today, people will want to know what it means for them. It is in times like this that financial advice can really help people stay on track with their goals.”

While there will be both winners and losers once the dust has settled more fully, equally, there is no doubt that many will be facing significantly higher taxes in different areas. 

Over the coming days we will be producing more detailed analysis but here we cover the major changes announced yesterday in the UK, and what they could mean for you.

Income tax thresholds

The decision to freeze income tax thresholds for a further three years is expected to raise £8 billion for the government, according to the Office for Budget Responsibility (OBR) forecast. It will also pull far greater numbers of people into higher rate tax bands.

In her speech, Reeves acknowledged the move would affect working people but said she was ‘asking everyone to make a contribution’…to ensure the wealthiest contribution the most.’

Pensions and salary sacrifice

The use of salary sacrifice allows people to exchange salary for pension contributions up to certain limits. This helps individuals boost their pension pots with personal national insurance savings, and also often with contributions from their employer too.

However, from April 2029 pension contributions made through salary sacrifice and above an annual threshold of £2,000 will be subject to national insurance. The move is expected to bring in £4.7 billion for the Treasury. However, it has been widely criticised by industry and pension experts concerned it will deter people from saving as much into their pension, due to the additional complexity. It may also substantially reduce the amount savers can expect to make in their pension over their lifetime. 

From 6 April next year, the UK government will abolish access to voluntary Class 2 National Insurance Contributions (NICs) for UK expats and raise the minimum residency or contributions requirement to 10 years. Currently, eligible UK expats can pay a Class 2 rate to fill gaps in their state pension record, but after the change they will generally only be able to pay Class 3 NICs if they meet the new 10-year rule.

Mansion tax

In the Budget, it was confirmed that owners of high-value properties worth £2 million upwards would face an annual charge of between £2,500 to £7,500. This will be on a sliding scale with those owning properties costing between £2 million to £2.5 million paying £2,500, rising to £7,500 for those valued at £5 million or more.

This will be added to council tax bills and will come into force in April 2028. However, the move will require extensive revaluations of expensive properties by the Valuation Office, with the new levies based on 2026 values. It is expected to raise a relatively insubstantial £0.4 billion.

Cash ISAs

As had been widely expected, Reeves has reduced the amount that can be invested into a cash ISA from £20,000 to £12,000 a year for the under-65s. It will still be possible to invest £20,000 in a stocks and shares ISA or a combination of cash and equities.

Announcing the change, the Chancellor said that someone who had invested £1,000 a year into a stocks and shares ISA since they were first launched in 1999 would be some £50,000 better off than someone who had put their savings into cash ISAs. Reeves also pointed to the UK as having one of the lowest retail investment levels in the G7 and the move was aimed at addressing this. She said: “Low investment is the cause of our productivity problem.”

Those over 65, though, will be exempt and can invest the full amount in cash ISA's if they so choose.

Savings income tax

In another move set to hit those who save more, from April 2027 savings income tax will rise by two percentage points for each band of taxpayers. This will see the rate rise to 22% for basic rate taxpayers, 42% for higher rate taxpayers and 47% for additional rate taxpayers.

The number of people who save enough to pay income tax on their returns is believed to be relatively small. However, the move will add a layer of complexity to savings and could be seen as a deterrent to saving more.

There will also be a similar increase in the rates of tax levied on dividends and property income from April 2027.

Other measures:

In the 2024 UK Budget, a limit of £1million was introduced for agricultural property relief and business property relief, causing anger among farmers and businesses. However, in the 2025 UK Budget Reeves confirmed this £1 million relief could now be transferred between spouses and civil partners. This means one half of a couple could now benefit from relief of £2 million.

The Chancellor has extended the freeze on IHT thresholds until 2030-31. This could bring in as much as £14 billion or more for the Treasury over the period.

The two-child benefit cap will be scrapped from April of next year, in a move that is widely seen as a sop to Labour backbenchers. The decision is likely to cost the Treasury an estimated £3 billion by 2029-30 and could benefit some 450,000 people, according to the OBR.

The full basic state pension will rise by £440 per year, while the full new state pension will go up by £575 per year.

A freeze on fuel duty until September 2026. Rail fares will also be frozen for the first time in 30 years. Meanwhile, some green levies will be removed from consumers’ energy bills, with the aim of bringing domestic bills down.

The national minimum wage will rise from £10 to £10.85 for those aged 18–20. It will go up by 4.5% to £12.71 for those aged 21 and over.

On Friday 28 November, SJP will be holding a post-UK Budget webinar – the details are below.

UK Budget rundown — From speculation to clarity: what you need to know
🗓 Friday 28 November
💻 Zoom Webinar
🎯 Open to everyone
Click here to register

Please note that past performance is not an indicative of future performance, and the value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

Please note that past performance is not an indicative of future performance, and the value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

This article is a general communication that is provided for informational purposes only. It should not be relied upon as financial advice, and it does not constitute a recommendation, an offer or solicitation. No responsibility can be accepted for any loss arising from action taken or refrained from based on this publication. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.