Autumn Budget 2025

In her Autumn Budget on 26 November, the Chancellor shaped the financial landscape for millions across the UK. She confirmed measures affecting pensions, retirement savings and inheritance tax. 

These new policies could affect everything from how you contribute to your pension to how you plan your estate. We’re going to break down the key announcements, explore their implications and outline what they could mean for your future financial future.

There was a lot of advance speculation about possible new pension and retirement policies. The Chancellor ended up making one major change, introducing a salary sacrifice cap for pension contributions. 

This will come into effect in April 2029, capping National Insurance relief on pension contributions made through salary sacrifice at £2,000 a year. That means that, after April 2029, you and your employer will have to pay National Insurance on any salary sacrifice-based annual pension contributions that you make over £2,000 annually.

• If that changes the amount you’d like to pay into your pension, be ready to talk to your employer or provider nearer the time to make the change.
• If you’re not sure whether it could affect you, we recommend checking your payslip or your employment contract, or asking your HR or payroll team.
• This is a change to salary sacrifice only. There won’t be any changes to any income tax relief you’re getting on any of your pension contributions.

And finally, the State Pension will be going up. From April 2026, UK pensioners on the full State Pension will get an extra £575 a year. That’s a 4.8% increase, in line with average wage growth.

The Chancellor introduced several tax changes. From this article’s point of view, there were two particularly important ones.

First of all, she extended the personal income tax threshold freeze from 2028 to 2031, affecting everyone who pays income tax. Until 2031, the amount of income at which people pay different rates of income tax won’t rise in line with inflation.

• As people get pay rises, they’ll move more easily into higher-rate tax bands. That combined with inflation could reduce the value of their take home pay.
• You may find that you’re paying more tax than you expected to after a pay rise. You might have to rebalance your spending and saving budgets in response.

Secondly, the Chancellor cut the annual cash ISA allowance. From April 2027, it will go down from £20,000 to £12,000 for anyone under 65. The stocks and shares ISA allowance will remain unchanged at £20,000. 

• If you pay more than £12,000 into a cash ISA, you’ll have to declare and pay tax on any interest the extra money earns.
• If you’re over 65, the £20,000 limit will still apply for both cash and stocks and shares ISAs. The £4,000 annual limit on Lifetime ISAs is also unchanged.
• The total overall ISA allowance will stay at £20,000 for everyone. So if you’re paying into more than one ISA, your maximum combined payment will still be £20,000.
• The change to the cash ISA allowance in 2027 is the only ISA allowance change that will happen between now and 2031. All other ISA allowances will stay unchanged until 2031.
• If you have an ISA with us, it will be a stocks and shares ISA. That means the budget changes we discuss here won’t apply to you.

There’s another important recent pensions change that wasn’t part of this Budget – the introduction of Inheritance Tax (IHT) on pensions and death benefits. From April 2027, these will be part of your estate for tax purposes.

• If your estate’s worth more than £325,000, you and your beneficiaries should plan for the IHT implications of passing on pensions and death benefits.

We’d recommend:

• Checking to see if and how these changes might impact you. If any of them do, make sure you adjust your budget or financial plans accordingly.
• Not rushing into any decisions. The changes we’ve discussed come into force between 2027 and 2029, so you have plenty of time to see how they affect you.
• Reading our Frequently Asked Questions if you want to find out more about the Autumn Budget.
• Talking to a financial adviser if you’re not sure what the best choices are for you. If you don’t have one, you can find one through Unbiased. If you seek advice, your financial adviser may charge for their services.