Pictured above: Helen Draper MMath(Hons) FCA
Chancellor of the Exchequer Rachel Reeves set out tax-raising measures worth up to £26 billion in the Autumn Budget on 26 November 2025. The increases will be achieved through a range of measures, including extending the freeze on Income Tax thresholds for a further three years. We have set out below a brief summary of some of the key measures announced.
Income Tax
The Income Tax personal allowance will remain frozen at £12,570 until April 2031, as will the basic rate band and additional rate threshold.
The government is introducing a 2% increase in the tax rates for property income and savings income (bank and building society interest etc.). With effect from 6 April 2027 these rates will be as follows:
• 22% for basic rate taxpayers (currently 20%)
• 42% for higher rate taxpayers (currently 40%)
• 47% for additional rate taxpayers (currently 45%)
Furthermore, from 6 April 2026, there will be a 2% increase in the ordinary and upper rates of Income Tax applicable to dividends. The additional rate will remain unchanged at 39.35%. The rates will be as follows:
• 10.75% for basic rate taxpayers (currently 8.75%)
• 35.75% for higher rate taxpayers (currently 33.75%)
• 39.35% for additional rate taxpayers (rate unchanged)
The personal savings allowance and dividend allowance remain unchanged.
ISAs
From 6 April 2027, for those under 65, the annual cash ISA limit will be reduced from £20,000 to £12,000. A further £8,000 per year can still be invested in an ISA but only in respect of stocks and shares investments.
For those over the age of 65, the cash ISA limit will remain at £20,000.
Employment
The National Living Wage (which applies to those aged 21 and over) will increase to £12.71 from 1 April 2026, with the National Minimum Wage increasing to £10.85 per hour for 18-20 year olds and to £8.00 for those aged 16-17 (and apprentices).
From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from NICs. Contributions through salary sacrifice, like all pension contributions, will still be exempt from Income Tax (subject to the usual limits).
Inheritance Tax (IHT)
Frozen since 2009, the IHT nil rate band will remain at £325,000 until 5 April 2031. The ‘residence nil rate band’ is also frozen until 5 April 2031 at the current £175,000 level, as is the residence nil rate band taper starting at £2m.
Significant changes to Business and Agricultural Property Relief were announced in the 2024 Budget such that, from 6 April 2026, the first £1m of combined business and agricultural assets will continue to attract IHT relief at 100% but for assets over £1m, the relief will be halved to 50%.
The £1m limit is per individual but in one important change announced on 26 November, the Chancellor confirmed that this £1m allowance will be transferable between married couples or civil partners. This will include where the first death was before 6 April 2026.
Further details of the announcements made in the Budget can be found in our Autumn Budget 2025 publication, available on our website or from any of our offices.
The above is for general guidance only and no action should be taken without obtaining specific advice.
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