Bailey Cook Financial Planning Autumn 2025 Budget Briefing

The Autumn Budget introduces a range of measures that will increase the tax burden for many individuals over the coming years. Below is a concise breakdown of what’s changing and planning points to consider.
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1. Income Tax

• Extended Tax Thresholds freeze until April 2031, pulling more people into higher tax bands (“fiscal drag”).
Planning ideas:
Use both partners’ allowances, increase pension contributions, consider EIS/VCT investments (higher risk), and make use of charitable giving, for business owners: consider the balance of salary vs dividends
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2. Higher Tax on Dividend Income (From April 2026)

• Basic rate: 10.75%
• Higher rate: 35.75%
• Additional rate: unchanged at 39.35%
• You still receive a £500 tax-free dividend allowance each year.
Planning ideas:
Moving investments into an ISA or pension may help reduce dividend tax.
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3. Higher Tax on Savings Income (From April 2027)

• Basic rate: 22%
• Higher rate: 42%
• Additional rate: 47%
Planning ideas:
Moving investments into an ISA or pension may help reduce savings tax.
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4. New Property Income Tax Rates (From April 2027)

• Basic rate: 22%
• Higher rate: 42%
• Additional rate: 47%
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5. New ‘Mansion Tax’ on High-Value Homes (From April 2028)

• Applies to homes valued over £2 million.
• Annual charge starts at £2,500, rising to £7,500 for homes worth £5 million+.
• Collected with council tax but paid to central government.
• Annual increases will follow inflation.
A deferral scheme will be available for those unable to pay immediately.
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6. Pensions & Salary Sacrifice

• From April 2029, National Insurance will apply to salary-sacrificed pension contributions above £2,000 a year.
Planning ideas:
Align contributions with tax bands, ensure you receive full employer matching, diversify across pensions and ISAs, and review strategies for managing income around key thresholds.
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7. Inheritance Tax (IHT)

• IHT thresholds frozen until 2031.
• Pensions become subject to IHT from April 2027.
• Agricultural/business property relief becomes fully transferable between spouses.
Planning ideas:
Use pension lump sums for lifetime gifting/ISA contributions, review pension death benefit nominations, review packaged Business Relief schemes.
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8. ISAs

• From April 2027, Cash ISA allowance falls to £12,000 (stays £20,000 for over-65s).
• Lifetime ISAs to be scrapped and replaced with a new simpler ISA aimed at first time buyers.
Planning ideas:
Use your ISA and for first time buyers Lifetime ISA allowances each year. Use partners’ allowances, review investment risk tolerance, and consider low-risk alternatives such as gilts/qualifying corporate bonds/money market funds.
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9. EIS & VCT Changes

• From April 2026, investment limits double, but VCT upfront tax relief reduces to 20%.
Planning ideas:
Continue or explore EIS/VCT investing where appropriate, balancing the higher risk and tax benefits.
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Summary

The Budget represents a gradual rise in the overall tax burden, particularly through frozen thresholds and increases on investment and property income. Early, proactive planning can help mitigate future liabilities.

This document is based on our initial assessment of the Budget, which may change in the future. It does not constitute individual advice.