UK Autumn Budget 2025: Key Changes for Wealth Management and Legal Planning

On 26th November 2025, Chancellor Rachel Reeves delivered the highly anticipated Autumn Budget, which outlined a range of fiscal measures with significant implications for individuals, businesses, and wealth management strategies. With the government raising £26 billion in additional tax revenue, the budget is set to shape financial and estate planning for years to come. Below are the key announcements that will impact both individuals and businesses.

The Chancellor confirmed that income tax thresholds will be frozen at their current levels until 2030/31. This means that the personal allowance (£12,570) and higher-rate tax threshold (£50,270) will not rise in line with inflation. For many taxpayers, this freeze will push them into higher tax brackets as their earnings increase over time.

While there are no immediate rate increases, this change effectively means individuals will pay more tax in real terms as their incomes rise with inflation.

Importantly, however, individuals receiving only the state pension will not pay tax if their income is below the personal allowance, providing some relief for retirees reliant on state pension income.

2. Inheritance Tax Nil Rate Bands Frozen Until 2031

The Inheritance Tax (IHT) Nil Rate Band thresholds have been frozen at £325,000 for a further year until 2031. These have been frozen since 2009, and this freeze is a significant factor in driving IHT receipts. The current Residence Nil Rate Band sits at £175,000, available to those owning their own homes, and leaving the home to direct descendants.

3. National Insurance Savings via Salary Sacrifice Capped

For those using salary sacrifice arrangements to contribute into their pensions, the Chancellor announced that the savings will now be capped at £2,000 per year, from April 2029. This change is designed to limit the amount of NI savings individuals can claim through pension contributions.

4. Increase in Income Tax on Dividends, Property, and Savings

The government will raise income tax on dividends, property, and savings by 2% for all basic, higher, and additional rate taxpayers. This increase will impact investors who rely on dividend income, property rental income, or interest from savings accounts. The increase on dividend income will be effective from April 2026 and the increase on property and savings income is said to be effective from April 2027.

5. Council Tax Surcharge (Mansion Tax) on High-Value Properties

A new council tax surcharge is set to be introduced from April 2028, often referred to as a ‘mansion tax’. The surcharge will be £2,500 per year for properties valued at over £2 million and £7,500 per year for properties valued over £5 million.

6. Reduction in Cash ISA Allowances

The annual allowance for cash ISAs has been reduced to £12,000 for individuals under the age of 65. However, the limit remains at £20,000 for those over 65, as well as for stocks and shares ISAs.

7. Transferable APR/BPR Allowances Between Spouses

A welcome change in inheritance tax planning is that HMRC has confirmed the combined Agricultural Property Relief (APR) and Business Property Relief (BPR) allowance (due to be introduced from April 2026) will now be transferable between spouses.

8. Capital Gains Tax Relief for Employee Ownership Trusts Reduced

The government has reduced the Capital Gains Tax (CGT) relief on companies sold to Employee Ownership Trusts (EOTs) by 50%. This move is designed to raise additional tax revenue from business sales.

9. Electric Car Road Charging from 2028

From April 2028, the government will introduce a 3 pence per mile road charge for electric vehicles and 1.5 pence per mile for hybrids. This is part of the broader strategy to address revenue shortfalls as petrol and diesel vehicle sales decline.

10. Increase in National Minimum/Living Wage

From April 2026, the National Living Wage will increase for all workers age 21 and over, by 4.1% taking it from £12.21 per hour to £12.71. The minimum wage for 18-20 year olds will increase to £10.85 and the rate for 16-17 year old apprentices will increase to £8.00.

What This Means for You

Whilst there have been no significant Inheritance Tax changes in this budget, those set out in the Autumn Budget 2024, have not yet come into effect. These include the limits on APR and BPR, due to take effect in April 2026 and, significantly, the taxing of unspent pension pots from April 2027. These measures, combined with ongoing rate freezes, will see a significant increase in the number of estates being liable to Inheritance Tax.

As always, the key to effective wealth management and tax mitigation lies in staying ahead of these changes and adjusting financial strategies accordingly. If you would like to discuss how the 2024 and 2025 Budget affects your personal, business or succession plans, or if you're looking to explore tax-efficient solutions, please contact our team of legal and financial experts.

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