Autumn Budget 2025: Key changes and what they mean for you

The UK government manages around £1 trillion in taxes and spending each year ^{Footnote [1]}.

The Budget is where the government sets out its plans for future taxation and spending. It shows how they aim to balance the books and grow the economy.

£1tn is a huge amount of money, and the decisions made in the Budget affect everyone in the UK – both directly or indirectly. That’s why the Budget usually attracts so much attention.

In a speech lasting over an hour, Chancellor Rachel Reeves emphasized the importance of economic growth and outlined her priorities: “cutting NHS waiting lists, cutting the cost of living, and cutting government debt.”

We’ll look at what this means for pensions, savings and investments below.

The Chancellor’s speech highlighted the key messages of the Budget. Alongside the speech, the government publishes hundreds of pages detailing every planned change.

Here, we’ve summarised the headline changes most relevant to pensions, savings and investments.

The state pension

The state pension continues to represent the biggest single source of income in retirement for most pensioners in the UK ^{Footnote [2]}.

The Budget has confirmed that the state pension will rise by 4.8% from April 2026. This will take the full new state pension from £230.25 per week to £241.30 per week.

The amount individuals actually receive will be different, depending upon their national insurance history. Recipients of the state pension will automatically receive the 4.8% increase from April 2026.

The government has also re-committed itself to the state pension triple lock throughout this parliament, which guarantees an annual increase in the value of the state pension by the highest of price inflation, wage inflation or 2.5%. 

Private pensions

Despite much pre-Budget speculation, many rules that relate to private pensions have not changed in the Budget. Private pensions continue to represent an attractive retirement savings product for millions of people in the UK.

The Budget confirmed that there will be no changes to the rules relating to private pensions tax relief; no changes to the amount that can be taken tax-free when accessing your private pensions; no changes to the amount that can be saved every year into your private pensions (i.e. the annual allowance).

Salary sacrifice

One change that relates to pensions is “salary sacrifice”. Salary sacrifice is an agreement between you and your employer where you give up part of your salary or bonus in return for a benefit – most commonly an extra pension contribution paid by your employer in order to benefit from relief from National Insurance Contributions (“NICs”).

From April 2029 onwards, the amount of pension contributions under salary sacrifice that can benefit from NICs relief will be limited to £2,000 per tax year. Pension contributions can continue to exceed this amount, but they’ll be subject to NICs.

This change is not immediate - it comes into effect from April 2029. Initially, it’s for employers who use salary sacrifice in their workplace pensions to examine the changes and consider the options for them and their employees.

Individual savings accounts (ISAs)

Before the Budget, adults could save up to £20,000 every tax year in a cash ISA or a stocks & shares ISA, or in a combination of both.

To encourage more people towards stocks & shares ISAs, with their potential for higher investment growth over the longer term, the government will reduce the amount that can be saved in cash ISAs from £20,000 to £12,000 per year, with effect from April 2027. The overall amount that can be saved in stocks & shares ISAs remains at £20,000.

Despite this change, if you’re over 65, you’ll keep the £20,000 limit for both cash and stocks & shares ISAs.

This has no impact on those holding cash ISAs today as the changes announced in the Budget are due to take effect from 2027, but those considering ISAs in the future will need to bear in mind these new limits.

Income tax on savings, property and dividends

Unlike income from employment, income from savings, property or dividends is not subject to national insurance.

To bring the tax regime for these other sources of income more in line with income from employment, the government will increase income tax on these other sources.

• For property income, the basic rate of income tax will be 22%, the higher rate will be 42%, and the additional rate will be 47% from April 2027.
• For dividend income, the basic and higher rates of tax on dividend income will increase by 2% from April 2026. The current basic rate is 8.75% and the higher rate is 33.75%. There will be no change to the dividend additional rate.
• For savings income, the tax rate will increase by two percentage points across all income bands from April 2027.

Savings in pensions and ISAs will be exempt from these increases.

Income tax thresholds

Another change of secondary consideration for savings, pension and investment customers is the government’s decision to freeze income tax thresholds for a further three years, until at least 2031.

Income tax thresholds are the income levels at which individuals begin paying different rates of income tax.

Historically, these thresholds have increased in line with inflation. In the 2021 Budget, however, the then government chose to freeze these thresholds. This year’s Budget has extended this freeze until at least 2031.

The thresholds will remain at the levels below until at least 2031:

• Personal Allowance: £12,570
• Basic Rate (20%): £12,571 – £50,270
• Higher Rate (40%): £50,271 – £125,140
• Additional Rate (45%): Above £125,140

These thresholds relate to taxpayers in England, Wales and Northern Ireland. The Scottish government will set a separate policy when it presents its own Budget.

Take your time.

None of the changes summarised above take place today. Saving and investing for the long term is an important and valuable activity that benefits from consideration and planning.

By investing time today in considering your own situation, and your own options, you will be best placed to secure your future financial wellbeing.