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Income Tax and National Insurance thresholds frozen until 2031
Income Tax and NI thresholds were already due to remain frozen until 2028, but it was announced in the Budget that the freeze will be extended to 20311. This means more people will gradually move into higher tax bands as wages rise.
The same approach has been taken with Inheritance Tax (IHT), with the threshold freeze extended from 2030 to 20312.
Tax on income from property, savings, and dividends to increase
Tax rates on income you earn from property, savings, and dividends will increase by two percentage points for most.
For any savings and property income above the allowances, the rates will be:
22% for basic-rate taxpayers
42% for higher-rate taxpayers
47% for additional-rate taxpayers.
For dividends, the new rates are:
10.75% for basic-rate taxpayers
35.75% for higher-rate taxpayers
The rate for additional-rate taxpayers remains unchanged at 39.35%.
Despite these rises, the government says that 90% of taxpayers will still pay no tax on their savings, don’t receive taxable dividend income, and don’t have taxable property income3.
Cash ISA allowances capped for under 65s
The government wants to encourage more investment to support long-term economic growth, so the Chancellor has reduced the Cash ISA allowance to encourage savers towards investment-based ISAs.
Currently, you can save up to £20,000 a year across all your ISAs, with no tax on the returns.
But from 2027, anyone under 65 will only be able to put up to £12,000 a year into Cash ISAs. The remaining £8,000 can be allocated to investment accounts, such as Stocks and Shares ISAs.
This change is expected to affect the roughly one in four savers who currently contribute more than £12,000 a year to Cash ISAs4.
Importantly, this cap only applies to people under 65. Those aged 65 and over can continue placing up to the full £20,000 annual allowance into Cash ISAs if they prefer.
There is no change to the allowances for Junior ISAs (£9,000 per year) and Lifetime ISAs (£4,000 per year) until April 20315.
The State Pension is set to rise
The State Pension is set to rise by 4.8% in line with average wages, as per the triple lock.
This means that from April 2026, you will receive:
£241.30 a week or £12,547.60 a year if you qualify for the full new State Pension
£184.90 a week or £9,614.80 a year
if you receive the old State Pension6.
Salary sacrifice on pension contributions to be limited
Currently, one in three private sector workers and one in ten public sector workers use a salary sacrifice scheme for their pension savings, which allows both the employee and the employer to save on NI.
The Chancellor introduced a £2,000 annual limit on the amount you can sacrifice from your salary to avoid paying NI on pension contributions.
While you will be able to put in more than £2,000 and receive Income Tax relief, anything above that threshold will be charged employer and employee National Insurance contributions (NICs).
This limit is set to come into effect in 20297.
“Mansion Tax” for houses over £2 million
Properties currently in Council Tax bands F, G, and H will be revalued, and any that are worth over £2 million will face a surcharge from 2028.
There will be four price bands, and the surcharge will range from £2,500 for a property valued in the £2 million to £2.5 million band, to £7,500 for a property valued at £5 million or more8.
Fuel Duty cut extended, electric vehicles to pay road tax, and train fares are frozen
The 5p cut in fuel duty on petrol and diesel has been extended once again, this time until September 2026. After that, it is set to rise gradually over six months.
From 2028, electric car drivers will pay 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile, with the rates going up each year in line with inflation.
Regulated rail fares in England will be frozen until March 2027. This includes:
most commuter season tickets
some long-distance off-peak returns
flexible city and regional travel tickets.
This freeze applies only to England9.
A range of changes for business owners
The chancellor announced several measures that will directly impact you if you own a business:
Increases to the National Living Wage (NLW) and National Minimum Wage (NMW) to £12.71 an hour and £10.85 an hour, respectively
A new relief will reduce Stamp Duty for companies newly listing on the London Stock Exchange.
Capital Gains Tax relief for Employee Ownership Trusts (EOTs) will drop from 100% to 50%.
Fully funded apprenticeships for under-25s.
Lower business rates for many consumer-facing sectors10.
What this means for you
The measures in this Budget are broadly designed to raise revenue gradually, so the impact is likely to build over time rather than be felt immediately.
Frozen tax thresholds mean there will be an increase the amount of tax you pay if your income grows and takes you into a new tax bracket.
If you own property worth over £2 million or drive an electric vehicle, you’ll need to plan for the upcoming new charges. And there are several implications for business owners, some advantageous, others not, all of which should be factored into your plan.
Given the breadth of changes in this Budget, it’s important to review your financial plan now to ensure you remain tax-efficient and resilient over the years ahead.
126.11.2025 Income tax thresholds frozen until 2031 Investors’ Chronicle 226.11.2025 Income tax thresholds frozen until 2031 Investors’ Chronicle 326.11.2025 Changes to tax rates for property, savings & dividend income gov.uk 426.11.2025 Isas, cars and pensions: How the Budget affects you BBC 526.11.2025 Cash Isa allowance slashed except for over 65s Investors’ Chronicle 626.11.2025 Isas, cars and pensions: How the Budget affects you BBC 726.11.2025 Isas, cars and pensions: How the Budget affects you BBC 826.11.2025 Isas, cars and pensions: How the Budget affects you BBC 926.11.2025 Isas, cars and pensions: How the Budget affects you BBC 1026.11.2025 Budget 2025: The key points at a glance Sky
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FP2025-630