How the 2025 Autumn Budget could affect you

 

£12,000 annual limit for cash ISAs

• From April 2027, those under 65 will only be able to put £12,000 into a cash ISA each tax year. 

• Currently, you can put up to £20,000 into either a cash ISA or a stocks and shares ISA – or split that amount as you choose between them without paying UK income or capital gains tax on the money you earn. 

• You will still be able to add the full £20,000 into a stocks and shares ISA.

• Those aged 65 and over will still be able to put all of their annual £20,000 allowance into a cash ISA.

The government wants to encourage more people to think about investing as part of their long-term savings, and stocks and shares ISAs allow you to do this by investing in markets. 

The changes only apply to new contributions from April 2027 onwards, so individuals could continue saving up to £20,000 per tax year in a cash ISA until then. Any money that is already in a cash ISA should be unaffected and will continue to earn tax-free interest. 

No changes have been made to junior ISAs (JISAs), their allowance remains at £9,000 each tax year per child.

When it comes to investing, the value can fall as well as rise and there is a chance you may get back less than you put in. 

 

Income tax thresholds frozen

The thresholds at which income tax is paid will remain frozen for a further three years until 2031. If your income rises during this time, you may move into a higher tax bracket and pay the next rate of income tax on however much falls into that band. 

 

Potential new ISA to help first time buyers

The current £4,000 a year tax-free limit that can be put into a lifetime ISA (LISA) has not changed. However, the government is consulting on replacing the lifetime ISA (LISA) in time with a new, simpler ISA to help those buying their first home. We’ll share more on this when further information is available.

 

Unearned income tax rise

From April 2027 there will be a two percentage point tax increase on money that is not classified as earned income. This means income from rental property and savings.

• Basic rate taxpayers will pay 22% (up from 20%) tax on income that is above their £1,000 personal savings allowance.

• Higher rate taxpayers will pay 42% (up from 40%) tax on income above their £500 personal savings allowance.

• Additional-rate taxpayers will pay 47% (up from 45%). 

• In addition, from April 2026, income from investment dividends within the basic and higher tax rate brackets will also be subject to a two percentage point increase. The tax rate for dividends within the additional rate will be unchanged. 

This does not apply to income from ISAs which stays tax-free.

 

No changes to inheritance tax threshold or gifting

The amount of money that can be inherited before inheritance tax applies remains frozen at £325,000 until at least 2030.

No changes were announced to tax on gifting which means money gifted seven years before you die could be exempt from inheritance tax.

It’s also worth remembering that in last year’s Autumn Budget, the Chancellor announced that from April 2027 pensions will form part of an individual’s estate when they die.

 

Limiting the national insurance exemption for paying into pensions

From April 2029 there will be a £2,000 a year limit on the amount you can add to your pension via a ‘salary sacrifice’ agreement with your employer before national insurance tax is applied. 

 

Tax-free pension lumpsum unchanged

You are allowed to make a tax-free lumpsum withdrawal of up to 25% of your pension, up to a maximum value of £268,275 if you are aged 55 or over (57 from 2028).

 

Minimum wage rises

From April 2026, the hourly minimum wage will rise to: 

• £12.71 for those aged 21 and over.

• £10.85 for those aged 18-20.

• £8 for 16 and 17 year olds.

 

A look at the UK economy

The UK economy is predicted to grow by 1.5% on average per year for the next five years, according to the Office of Budget Responsibility (OBR). They measure this using gross domestic product (referred to as GDP).

Inflation is predicted to be: 

• 3.5% in 2025

• 2.5% in 2026 

• 2% in 2027, 2028, 2029

 

Market reactions to the Budget

Equity and bond markets were largely unmoved by the government’s Budget as there were no real surprises within it, broadly signalling stability for investors. Markets continues to expect further rate cuts to the current Bank of England’s 4% base rate.

 

Everything announced in the 2025 Autumn Budget remains subject to consultation and parliamentary approval which may take many months and could include some further changes. 

Very few announcements made on Budget day happen immediately and when it comes to finances the aim is to give people time to plan ahead for changes, not to catch them off guard.

 

We're here to help, but please be aware that we cannot offer any tax advice. We recommend you contact an independent tax advisor to discuss your personal tax situation. 

Tax reliefs referred to are those applying under current legislation which may change. The availability and value of any tax reliefs will depend on your individual circumstances.