After months of “leaks” and speculation, almost none of the measures debated were actually included despite the extraordinary number of changes proposed – over 80. Most were of limited application and few will significantly affect clients of Thomson Tyndall: we will try to summarise just those here as full descriptions of all the measures are covered in newspapers etc.
Freezing of income tax thresholds
This is the biggest revenue raiser and affects all those who have taxable income in excess of the Personal Allowance of £12,750, or will after inflation. There is no immediate effect as the proposal is a 3-year extension of the freeze which was already due to last until 2028. The impact generally rises with inflation but there seems to be reason to hope that this will slow to about 2% before long.
Increased tax on rental income, dividends and savings income
Dividend tax will be raised by 2p for Basic Rate and Higher Rate but not Additional Rate. From April 2027 the tax on property income will rise by 2p and on savings income also.
Limiting salary sacrifice for pension contributions
This mechanism saves National Insurance contributions on the amount of the gross contribution and has always seemed an anomaly. Limiting it to £2,000 is a little less painful than might have been expected.
Cash ISA restriction
The contribution limit will be £12k for those under age 65, out of the overall £20k allowance which is unchanged along with the other ISA limits. Subsequently, some anti-avoidance provisions have been announced to complicate it.
A consultation will be launched on replacing the Lifetime ISA with another arrangement to support first-time house buyers.
Mansion Tax
Houses worth in excess of £2 million will pay a surcharge of £2,500 pa (rising in steps to £7,500 over £5 million) from April 2028 based on a revaluation of relevant properties at outset and every 5 years thereafter, although the mechanisms need further clarification. It will be collected by Councils but handed straight to the Exchequer.
Inheritance Tax
IHT being applied to the value of pension funds at death remains on track for April 2027 with a small tweak making the £1 million exemption of Business and Agricultural Relief assets transferable between spouses. The mechanics of payment of the tax are also being modified. The Nil Rate Band will remain at £325,000 until April 2031.
Venture Capital Trusts (VCT) and Enterprise Investment Schemes (EIS)
The limits on the sums that can be invested into these are being almost doubled to allow later-stage companies to raise more money but the tax rebate on VCTs is being reduced from 30% to 20% from April (no change to EIS).
Comment
The rise in the tax burden continues inexorably to try to cover the continuing rise in the cost of welfare: there were no measures to limit that, just further expansion through the removal of the two-child benefit cap. Most of the new demands will not take effect immediately but that is little comfort.
To view a more detailed commentary, click here.
If there are any matters you would like to discuss in relation to the Budget, or any aspect of your financial planning, then please do not hesitate to get in touch.
This note is intended as a summary only and should not be regarded as a specific or personal recommendation. The Financial Conduct Authority does not regulate tax advice.
Certain measures remain potentially subject to change until enacted into legislation.
All details are believed to be correct at the time of writing (28 November 2025).