Today Rachel Reeves, Chancellor of the Exchequer, delivered her 2025 Autumn Budget, laying out her plans to build a ‘fairer, stronger and more secure Britain’.
Here are the main takeaways from this year’s Autumn Budget and what they mean for your money.
Cash ISA allowance cut to £12,000
After months of rumours, chancellor Rachel Reeves confirmed that the Cash ISA allowance for under 65s will be cut from £20,000 to £12,000 from April 2027.
The government is hoping that by cutting the Cash ISA allowance by almost half, savers will now be incentivised to invest more of their overall ISA £20,000 allowance in the stock market — using a Stocks and Shares ISA.
Only time will tell if this gets more Brits investing. But since the rumours started flooding in, industry pushback has been strong.
The concerns are that a lot of these savers use the Cash ISA allowance for things like home deposits or short-term spending needs. So, by cutting the allowance, it could just mean these groups end up paying more tax on their savings.
Cash ISA vs Stocks and Shares ISA: which one’s right for you?
What can Cash ISA savers do?
If you put over £12,000 into a Cash ISA each year, you’ll need to find a new home for the excess — over 65s are exempt.
Overnight Rate ETFs, for example, aim to match interest rates in the UK, based on the government’s SONIA rate benchmark. This is essentially an average of the interest rates being offered by the major banks. Right now, the target is a 4% return.
Extension of frozen income tax thresholds: what does it mean for you?
Under the Conservatives, income tax thresholds were frozen until 2028.
Today, Rachel Reeves made the call to extend these frozen thresholds by another three years to 2031. The hope is to bring in an extra £8.3 billion a year by the end of the decade.
The result? More people paying higher tax.
In fact, it’s expected that one million more people will now pay income tax, bringing the total number of UK taxpayers to 42.1 million.
There’s a reason they call it the ‘Stealth Tax’ — here’s how it works.
For many, inflation is baked into yearly wage rises to help you keep pace with rising prices. Over a few years, this can add up and mean you earn a fair amount more than you were before.
If income tax bands don’t go up in line with inflation, more and more workers creep up into higher tax brackets.
For example, if you’re close to the £50,270 higher-rate tax threshold, it could just take a couple of decent pay rises to go from paying 20% to 40% tax.
Top-rate taxpayers also aren’t immune. The new policy is expected to mean the total number of higher-rate taxpayers will creep up to 10.1 million.
Perhaps more importantly, it’s been estimated that half a million more people will be dragged into the £100,000 tax trap by 2029, where they face the dreaded 60% effective tax rate.
And this is where your finances can get really squeezed.
That’s because for every £2 you earn over £100,000, you start to lose £1 of your £12,570 personal allowance. So, once you start earning between £100,000 and £125,140, you’ll effectively be paying 60% tax on that income.
Property, savings and dividend tax hike
Among the tax hikes is a 2% rise in tax on savings and dividends from April 2026.
This means for any investments outside of an ISA or a SIPP, you’ll be paying more tax if you go over your personal savings and dividend allowances.
Basic-rate taxpayers get a personal savings allowance of £1,000 and for higher-rate taxpayers it’s £500. The current dividend allowance is £500, no matter how much you earn.
Our Head of Investments, Andrew Prosser, said: “Dividend tax from April next year will increase to 10.75% for the basic rate of tax and to 35.75% for the higher rates of tax. Investors should therefore ensure they make full use of their tax wrappers like ISAs and SIPPs to shield their investments from this new higher tax rate.”
Salary sacrifice capped at £2,000
Reeves also confirmed that the amount you can put into your pension through your workplace before you start paying National Insurance will be capped at £2,000 from 2029.
The cap will have little effect on anyone earning £40,000 and sacrificing 5% of their salary. This £2,000 would remain within the limit so no extra tax would be paid. The issues come for higher earners, where the addition of National Insurance on contributions will be felt.
Fidelity estimates that, if you earn £105,000 and you’re sacrificing £10,000 to your pension, you’d pay about £160 a year in NI. For a worker earning £120,000 and sacrificing £20,000, this number rises to £320.
This may seem relatively minor each year but, over time and when investment growth is taken into account, this can have a major impact on how much you have in retirement.
The real issue is for employers. Those same workers would cost their employers about £1,200 a year and £2,700 a year more respectively. It is, then, more likely than employers would be the ones to scale back contributions. This could lead to lower employer contributions and could have a significant impact on retirement savings over time.
Mansion tax on properties over £2 million
In the run-up to the Autumn Budget, a big part of Reeves’ overall messaging has been that the greatest tax burden will fall on the ‘broadest shoulders’.
So it’s perhaps no surprise to see her introduce a new ‘mansion tax’ on homes worth more than £2 million.
The ‘mansion tax’ surcharge will work on a sliding scale and be on top of the existing council tax charge, but will go to the Treasury instead of local councils.
The policy is expected to hit well over 100,000 properties and bring in around £400-450 million a year, with the average bill sitting at around £4,000 a year.
3 tips to pay less tax following the Autumn Budget
1. Make the most of your ISA
Whether you’re still working or retired, one of the best ways to build tax-efficient wealth is by making the most of your ISA allowances.
That’s because once your money is in an ISA, you won’t pay income or capital gains tax.
The good news is that although the Cash ISA allowance has been cut, the overall ISA allowance is staying at £20,000.
What’s even better is that the InvestEngine ISA is flexible, too, which means you can deposit and withdraw without affecting your yearly allowance. You also don’t pay a penny in withdrawal or platform fees when you do so.
2. Use tax relief to power up your pension
While more people will now be dragged into higher tax brackets thanks to the frozen income tax thresholds extension, it’s a good opportunity to make the most of any extra tax relief you get.
Because you get tax relief at your highest marginal rate, these are especially powerful for higher earners.
See how much tax relief you could get
For higher-rate taxpayers, a £20,000 pension contribution actually costs just £12,000. The government pays 20% (£4,000) and you can claim another 20% back in tax relief.
For additional-rate tax payers, the amount you can claim goes to 45%, so a £20,000 contribution costs you even less.
So, if you’re a higher-rate or additional-rate taxpayer (or about to become one), pension contributions, like into the InvestEngine Self-Invested Personal Pension, are a powerful way to make the most of the tax tools available.
For basic-rate taxpayers, you still get the 20% government uplift on contributions.
The income tax freeze might mean you paying a higher rate than you’re used to, so considering adding money to your pension and making the most of extra tax relief is a no brainer.
They’re about more than just saving for your future — the powerful tax benefits are something all investors should be aware of.
Bonus: make sure you’re maxing out your workplace pension contributions where possible. Free money from your employer is too good a deal to pass up, especially when our wallets are being squeezed from higher taxes.
3. Use any spouse or civil partner allowances
If you have a spouse or civil partner, it makes a lot of sense to plan your finances as a couple, especially if one of you pays less, or no tax at all.
Not only do you both get ISA and SIPP allowances, but you could be making more of other allowances as a couple — for example the personal allowance, personal savings allowance, capital gains and dividend allowances too.
Make sure you’re both using these as best as you can.
And if one of you isn’t using all of yours, then you could think about gifting investments (without worrying about capital gains tax from gifting), so you can shelter more from tax using any allowances you have left.
How to make the most of your tax allowances
Important information
Capital at risk. The value of your investments may go down as well as up, and you may get back less than you invest.
ETF costs apply. If in doubt, you may wish to consult a professional adviser for guidance.
Tax treatment depends on your personal circumstances and may change in future. This article is for general information only and does not constitute financial advice.