So, after weeks of speculation it is finally here. No, I’m not referring to the final season of Stranger Things, I’m referring to the Autumn Budget announced by the Chancellor, Rachel Reeves.
Whilst we await to see the fate of Hawkins, we at least know the changes that are going to be made to the UK economic landscape in the years to come. So, is it all doom and gloom? We’ve picked out the key points from the Budget and summarise them below. So grab yourself a coffee and take a seat, just don’t choose a latte as they are taxing that too!
To start, despite weeks of speculation, the Chancellor will not be raising national insurance, income tax or VAT. Phew!
However, the Chancellor has announced that she is freezing personal tax and ER NICs thresholds for three years from 2028-29. This means the below personal tax thresholds will remain in place until 2030-31:
What this means for you is any kind of pay rise could drag you into the higher thresholds. So, you will pay more income tax, either by being brought into paying tax for the first time, or by being brought into paying tax at higher rates.
The personal allowance will continue to reduce by £1 for every £2 earned between £100,000 and £125,140.
Minimum wage will see an increase in April 2026. For those who are:
- Over 21 – from 12.21 to £12.71 an hour
- 18 – 20 – from £10 to £10.85 an hour
- 16 – 17 – from £7.55 to £8 an hour.
The changes above will of course be more costly to businesses who employ individuals currently being paid the minimum wage. It means that full-time workers on the 18-20 rate will see a £1,500 rise.
Elsewhere, with the government’s commitment to the triple lock, pensioners on the full state pension will receive an additional £575 from April 2026. Student loan repayment thresholds are also being frozen.
If you’re 65 or under, the amount that you can save in a cash ISA each year will be cut from £20,000 to £12,000 from April 2027. This means if you want to continue to save £20,000 tax-free then you can only put £12,000 into a cash ISA and the remaining £8,000 will need to go into an investment ISA. But bear in mind this will use up £8,000 of your investment ISA allowance.
The annual limit for investment ISAs will remain at £20,000. This suggests the Government is hoping that this change will encourage savers to invest more in investment ISAs instead of cash ISAs.
If you’re over 65, you can continue to save £20,000 a year tax-free in a cash ISA.
From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from NICs. Employee contributions above £2,000 will face employer and employee NICs.
Employers will have to report the total sacrificed through their payroll software. However, ordinary employer pension contributions will continue to be exempt from NICs.
So, whilst employees can contribute as much as they want to their pensions via salary sacrifice, any amounts above the £2,000 threshold will now be taxable.
The Chancellor has announced that she is increasing the tax rates on dividends and savings income by 2 percentage points. We’ve put these changes into a table for you below:
You’ll note from the above table that the additional rate will remain unchanged.
A separate tax rate for property income is going to be set up by the Government. These changes will mean property income will have its own tax rates. These rates are shared below:
Despite these rate changes, it is important to note that the way you report and pay tax on this type of income will remain the same.
The budget announced two big changes to business tax:
- They are bringing in a 40% permanent First Year Allowance for main rate assets. This will be available for expenditure incurred from 1 January 2026. The £1m Annual Investment Allowance that offers relief on plant and machinery equipment will remain in place.
- The Writing Down Allowance on the main pool of plant and machinery will reduce from 18% to 14% per year. This will be effective from:
- 1 April 2026 for businesses within the charge to Corporation Tax
- 6 April 2026 for businesses within the charge to Income Tax
From April 2028, drivers of electric vehicles will be charged 3p per mile in addition to other road taxes. The charge for plug-in hybrids will be 1.5p. The charge is expected to rise annually with inflation.
From April 2028, if you live in a home valued at £2 million or more in England you will be hit with a council tax surcharge.
The surcharge will rise from £2,500 for a property valued between £2m and £2.5m, to as much as £7,500 for a property value at £5m or more.
As is often the case with Budgets, there’s a lot of numbers, overly complex descriptions of the tax changes, and a lot of noise from Westminster. But we at Palm Accountancy are here to help silence the noise and offer simple advice to complex tax changes. If after reading this article you have any questions on what you need to do to keep more of your money, please feel free to reach out to us and we’d be happy to help.
