In the Autumn Budget 2025, Chancellor Rachel Reeves introduced several measures that will influence how many people save and plan for the future.
In this blog, we focus on three key areas from the Autumn Budget 2025: the continued freeze on income tax thresholds, the forthcoming cap on national insurance relief for pension salary sacrifice and the revised rules around cash ISA allowances.
Each of these changes may affect individuals in different ways, so taking time to review your arrangements and discuss them with your financial adviser could help you stay prepared as the new measures take effect.
Tax thresholds frozen to 2030/31
The Autumn Budget 2025 confirmed that income tax and national insurance thresholds will remain fixed until the end of the 2030/31 tax year. Until 2021, the UK income tax thresholds were typically increased each year in line with inflation.
When the then Chancellor, Rishi Sunak, delivered his budget that year he announced that thresholds would be frozen from April 2022 until 2026. The Conservative government extended that freeze until 2028, and now Reeves has announced it will continue until 2030.
Keeping thresholds unchanged for such an extended period gradually draws more people into higher tax bands. Individuals whose earnings are close to key limits, such as the £12,570 personal allowance or the £50,270 point at which higher rate tax begins, could be more affected as wage growth nudges a greater share of their income into taxation.
The Office for Budget Responsibility has suggested that the proportion of taxpayers paying higher or additional rate tax could rise from 15% in 2021/22 to around 24% by 2030/31.
Crossing into a higher band can also influence other areas of personal taxation. The personal savings allowance reduces from £1,000 for basic rate taxpayers to £500 for higher rate taxpayers, and is removed altogether at the additional rate. Capital gains tax and dividend tax rates also change as income moves between bands. With that in mind, it is worthwhile reviewing your tax position and considering any planning steps that may help support your long term financial objectives.
Pension salary sacrifice capped from April 2029
From 6 April 2029, national insurance (NI) relief on pension salary sacrifice will be capped at £2,000 a year. At present, both employees and employers receive full NI relief on any level of sacrificed contributions, but under the new rules only the first £2,000 will qualify. Anything above this will still receive income tax relief, although NI will apply to the excess in the same way as earnings.
While salary sacrifice may still offer tax advantages to many, the change could be more noticeable for those close to the £50,270 higher rate threshold. For instance, someone earning that amount and contributing the minimum 5% into their pension would exceed the cap by £513.50, increasing their NI bill by about £41.08. Earning £1 more may reduce the impact due to the lower 2% NI rate on higher earnings. Employers are also expected to pay 15% NI on amounts sacrificed above £2,000.
Although the measures do not take effect until 2029, it may be sensible for employers and employees to start reviewing arrangements. Understanding potential cost implications, considering alternative benefit structures and planning clear communications could help ease the transition.
ISA reforms from April 2027
The Autumn Budget 2025 also confirmed that, from April 2027, savers under 65 will be able to place only £12,000 of the £20,000 annual ISA allowance into cash ISAs. The overall ISA limit remains £20,000, and those aged 65 and over will still be able to use the full amount for cash savings. Lifetime ISAs will continue to have their separate £4,000 limit.
This change means savers may need to consider alternative homes for any remaining allowance. You could either:
- Pay into a savings account. You wouldn’t benefit from the tax advantages of ISAs though, meaning you may have to pay tax on interest.
- Invest it, for example into a stocks and shares ISA. This appears to be the main aim of the proposed changes.
Speak to an independent adviser today
Several other measures were also revealed in the Budget, from an increase in the National Living Wage to a new “Mansion Tax” on homes valued above £2 million. To read the full executive summary of the Autumn Budget 2025, please click here.
As a reminder, it’s also worth noting that changes announced in last year’s Budget mean that defined contribution pensions could form part of an estate for IHT purposes from April 2027. While the finer details of the changes are yet to be finalised, it’s clear that careful planning will be essential to minimise their impact. Read our blog on how to prepare for the 2027 pension changes to learn more.
If you’re worried that any of the new measures will affect your financial plans, please do get in touch. Our advisers can help you understand the possible implications and keep your long-term strategy on course.
To speak to one of our independent advisers, please call us on 0115 947 5545 or send us a message here.