A Simple Guide to the Budget Changes for 2025–26

Indeed, it is notable what things didn’t change this afternoon, with no alterations to the main personal tax rates, either for income, capital gains or inheritance tax, and no significant changes to pension taxes, as was widely feared, other than as noted below. Most of the larger changes will take effect over the next few years, giving plenty of time to plan calmly and in line with your long-term goals. Markets reacted by rising immediately following the Budget announcements, with gains in shares and bonds, and the pound rising in value.

The main Budget theme this year is delayed implementation. Several measures don’t take effect until 2027–2029, which means we can work through any implications thoughtfully and as part of a structured plan. There are no immediate changes — but there are some things to be aware of. Here’s a summary of the announcements and what they might mean for you:

ISA changes: the allowance is changing

The overall ISA allowance remains £20,000, but the amount that can be placed into cash ISAs will be reduced for under-65s from £20,000 to £12,000. For those over 65, the full £20,000 allowance remains.

This means clients who have previously used their Cash ISA Allowance may want to review how they use their allowance in future, particularly the balance between cash and Stocks & Shares ISAs. There’s no need for immediate action, but it’s worth keeping in mind during your next planning review.

Frozen income tax thresholds

Income tax thresholds will stay frozen until 2031. On the surface, nothing changes immediately, but as wages, pensions, or investment income rise, more people will gradually move into higher tax bands.

This reinforces the value of making full use of allowances and planning withdrawals tax-efficiently.

Again, it’s not urgent, but something to consider as part of your regular review.

Property, interest and dividend tax rates

Tax on property income, dividends, and interest will increase by 2% at basic, higher, and additional rates. The change will come into effect for dividends in April 2026 and the property and savings income in April 2027.

For clients with rental properties, dividend income, or large savings, this makes careful planning across investments and tax wrappers increasingly important.

High-value property: new annual charge from April 2028

A new annual charge will apply to very high-value homes from £2 million upwards, typically in council-tax bands F, G, and H. Indicative costs range from around £2,500 to roughly £7,500 per year for the top tier.

If this applies to you, it’s worth factoring into long-term cashflow planning and considering whether your current ownership structure remains the most effective.

Salary sacrifice changes from 2029

Salary sacrifice into pensions will be capped at £2,000 pa. These changes don’t take effect until 2029 but will affect higher earners or anyone making large contributions via salary sacrifice.

We’ll review this in plenty of time and discuss alternatives if needed.

Electric vehicles: small tax changes, incentives remain

New road pricing per mile is planned on top of existing road taxes and will be charged per mile.  Calculating the number of miles that drivers cover will be difficult, so more information more information will be released in this area.

On the positive side, EV salary sacrifice schemes remain highly tax-efficient, and Benefit-in-Kind rates are staying low. This continues to make EVs an attractive, government-supported option for many employees.

State pension rises — and more retirees drifting into tax

The triple lock remains, so state pensions continue to rise. With frozen income thresholds, more retirees may see parts of their state and private pension income become taxable. This makes coordinated planning around withdrawals, sequencing, and tax-efficient provider choices more valuable.

What should you do now?

For most clients: nothing urgent.

These changes give us time to review and adjust plans thoughtfully. The most useful steps over the coming months include:

• Reviewing how ISA allowance changes may affect your savings mix
• Checking salary-sacrifice contributions if you’re a higher earner
• Building the 2028 property charge into long-term cashflow projections
• Stress-testing retirement income against frozen thresholds
• Considering EV running costs if you own or plan to own one

All of this can be covered in your regular planning meetings.

The Strength of Your Financial Plan

 Budgets like this reinforce the value of a long-term, structured financial plan. When rules shift, even gradually, having a clear strategy in place means you don’t need to react to headlines or make snap decisions.

If you’d like to discuss any part of the Budget in more detail, or check what it means for your own plan, we’re always here to help. Just speak to your usual contact or, if you’re not already working with us, book a call with one of our qualified advisers here.