Autumn Budget 2025 – What It Means for Your Money
3 Dec, 2025
1. Pensions: What Changed and What You Need to Know
The Autumn Budget 2025 sparked pension panic, with record amounts of tax-free cash withdrawn as savers feared the worst. But what actually changed? Michelle Holgate, Director of Financial Planning at RBC Wealth Management, separates fact from fiction.
What DIDN'T Change
The good news first: tax-free cash entitlement, contribution limits, and the core benefits of pensions remain intact. The fundamentals—tax relief on contributions, tax-efficient growth, and 25% tax-free cash—are all unchanged.
The One Big Change: Salary Sacrifice Cap
From April 2029, only £2,000 of pension contributions via salary sacrifice will receive National Insurance relief. Contributions above this will face both employer and employee NI.
The pension saving itself wouldn't be impacted, what would be impacted is your take-home pay because the National Insurance contributions would be due.
Why This Matters: The £100,000 Tax Trap
Salary sacrifice reduces your deemed income, helping you avoid brutal tax thresholds. The worst is £100,000, where you lose £1 of personal allowance for every £2 earned above it.
The Expression of Wish Form: Critical for IHT Planning
Unlike other assets, pensions pass via an expression of wish form, not your will. This matters enormously now.
Currently, pensions sit outside your estate for inheritance tax. But from April 2027, they'll be pulled in for IHT calculations. If you pass away before April 2027, your pension could still pass IHT-free—but only to the beneficiaries named on your expression of wish form.
You might want to consider: Is passing it to my spouse still right? You may be better off having it pay through to a later generation without inheritance tax.
Action Points
Update expression of wish forms now—consider younger generation beneficiaries before April 2027 IHT changes
Maximise salary sacrifice if near £60,000 or £100,000 thresholds—you have until April 2029
Consolidate old pensions to see your full picture
Seek professional advice—your circumstances may vary
2. Inheritance Tax: The Freeze That Changes Things
The Autumn Budget 2025 changes were subtle but significant. See why the "freeze" matters more than you think.
The Basic Rules
You can pass on £325,000 (nil-rate band) plus £175,000 for your main home to direct descendants—all IHT-free. But if your assets exceed £2 million, you lose £1 of that residence allowance for every £2 over.
What Changed: The Stealth Tax
They've extended the freeze on the £325,000 limit until April 2031. Far more estates are going to fall into an inheritance tax payable estate.
If this threshold had increased by CPI, it would now exceed £500,000. By freezing it, more families get pulled into the IHT net through fiscal drag.
Agricultural and Business Relief: Now Transferable
Last year's £1 million cap on agricultural/business property relief is now transferable between spouses—giving couples up to £2 million combined relief.
Critical deadline: To put agricultural/business assets into trust without an IHT entry charge, you must act before April 2026.
The Seven-Year Rule Stays
Despite speculation, the seven-year gifting rule remains unchanged. Gifts made more than seven years before death still fall outside your estate.
Annual Gifting Allowances
£3,000 annual allowance: Gift £3,000 each year IHT-free. Unused allowance from last year can be carried forward.
Gifts from regular income: If income exceeds expenditure, you can gift the surplus regularly without using any IHT allowance.
The onus of proof is on the people trying to prove it when you're no longer here.
Keep detailed records—spreadsheets showing income, expenditure, and gifts made.
Action Points
Before April 2026: Urgent advice needed if you hold agricultural/business assets for trust planning
Use your £3,000 allowance (plus last year's if unused)
Document gifts from income meticulously—your beneficiaries will need proof
Start gifting early—the seven-year clock starts today
Seek professional advice—IHT planning is complex, and individual circumstances vary enormously
3. Property: The Mansion Tax and Landlord Challenges
Property grabbed headlines with the introduction of the "Mansion Tax"—though for most homeowners, the Budget changes were less dramatic than feared.
The Mansion Tax: Who Pays?
An annual charge now applies to properties valued over £2 million, affecting approximately 145,000 UK properties:
There's not a lot of detail around it at the moment, Michelle notes, particularly around how properties will be valued, whose valuations they'll use, and whether valuations will be annual.
Liquidity concerns: This applies to existing properties, not just new purchases. If you've inherited a property, you may be asset-rich, but where's the cash going to come from to pay these annual charges?
For rental properties: The charge is due by the owner, not the tenant, though many expect these costs to be passed on through higher rents.
Should You Buy Property Now?
One reader asked: "Would it be mad to buy a house right now given this budget?"
The verdict: probably not. Stamp duty is now stable (markets hate uncertainty), and interest rates are forecast to fall slightly next year—though we won't return to the ultra-low COVID-era rates soon.
On a £2 million property, the £2,500 annual mansion tax represents just 0.125% of the property value—hardly a dealbreaker for buyers in this price range.
Landlords Face Higher Tax Bills
From April 2027, tax on rental income increases by 2% across all bands:
Are landlords going to pass that onto their tenants? Will we see rental increases as a consequence? Or will more landlords sell up, putting pressure on the rental market?
The rules have progressively tightened for landlords over recent years, and this may be the final straw for some to exit the market entirely.
4. Other Tax Changes: Dividends, Savings, and ISAs
Dividend Tax Rising (April 2026)
Dividend tax increases by 2% from April 2026, affecting limited company
owners and investors holding dividend-paying shares outside ISAs:For business owners: As the bands get closer together, there's going to be conversations around: Is this still the best way to draw my income? Some may reconsider the traditional approach of capping salary and taking the rest as dividends.
For investors: High-yielding assets
become more expensive to hold outside tax wrappers. This makes ISAs more valuable than ever for dividend-focused investors.Savings Interest Tax Also Up 2% (April 2027)
Interest from savings accounts faces the same 2% increase:
Basic rate: 22%
Higher rate: 42%
Additional rate: 47%
Plus, reliefs and allowances now apply after all other sources of income—potentially pushing more people into higher tax brackets on their savings interest.
Cash ISA Limits Reduced for Under-65s (April 2027)
From April 2027, those under 65 can only hold £12,000 in Cash ISAs (down from £20,000). The remaining £8,000 of the annual allowance must go into stocks and shares ISAs.
The goal is to get more people investing, which I think is the right aspiration; however, my fear is that the complexities of changing all the ISA rules will make things more complicated rather than encourage participation."
Strategy shift: Consider using regular savings accounts for emergency funds instead of Cash ISAs, and reserve your ISA allowance for investments that benefit most from tax protection—high-yielding assets or those likely to see significant growth.
Income Tax Threshold Freeze Extended to 2031
The freeze of income tax thresholds continues until April 2031—pulling more people into higher tax brackets through fiscal drag as wages rise with inflation.
Transfer assets between spouses to utilise both CGT allowances and personal allowances
Use £3,000 annual CGT allowance strategically—sell winners to realise gains, sell losers to offset them
Consider charitable donations to extend your basic rate tax band
Maximise ISA allowances—tax-free growth becomes more valuable as tax rates rise
Capital Gains Tax: Use It or Lose It
The annual CGT allowance is just £3,000 per person (£6,000 for couples).
Bed and ISA: Don't have spare cash but want to use your ISA allowance? You can sell up to £20,000 of investments from a general account and immediately repurchase them within an ISA wrapper. Future growth is then tax-free.
Action Points To Consider Before April 2026
Maximise ISA allowances (£20,000 each, or £40,000 for couples)—especially important given reduced Cash ISA limits and rising dividend/savings tax
Use your CGT allowance through strategic selling—it's only £3,000
Transfer assets between spouses to spread income and gains across both allowances
Consider Bed and ISA if you hold investments outside tax wrappers
For grandparents: Gifts from regular income could go into children's pensions (£2,880 contribution = £3,600 with tax relief) or Junior ISAs (£9,000 limit)
Review your financial plan—who holds which assets, which tax wrappers you're using, and whether your strategy still makes sense
When Professional Advice Is Worth It
You can't underestimate the importance of planning and understanding what you've got. Review old pensions, look at what you can actually save, and understand if making contributions will be net positive for you.
Many advisers offer initial consultations at no cost to explore your options—it's worth taking advantage of this to understand your specific situation.
RBC Wealth Management: The right advice has never mattered more. From reviewing your investment strategies to retirement and inheritance planning, our expert wealth managers can help.
Capital at risk.
The bottom line: While the changes aren't as draconian as feared, they make tax-efficient planning more valuable than ever. ISAs, pensions, and smart use of allowances will increasingly separate those who keep more of their money from those who don't.
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In what way do any changes made to Pension rules since the Labour took over government encourage people to save for their Retirement?
Michael
03 December 2025