If you’re in your 40s or 50s, part of a high-income household, and possibly supporting a family, the 2025 Autumn Budget introduced a range of measures that could directly affect your finances.
From freezing tax thresholds and changing ISA allowances to new property and vehicle taxes, many of the reforms announced by the chancellor, Rachel Reeves, could influence how you plan your finances.
Read on to find out what the Budget could mean for you.
The freeze on thresholds could mean you pay more Income Tax
In the Budget, Reeves announced an extension to the freeze on Income Tax thresholds. Originally scheduled to remain unchanged until 2028, the freeze will now continue until April 2031.
While this won’t directly increase your Income Tax or IHT bills, it creates what’s known as “fiscal drag”.
This means that over time, more of your income and wealth may fall into higher tax bands. As wages typically rise, pay increases or promotions could push more of your earnings into these higher rates, increasing your overall tax burden.
To mitigate this, you may want to explore tax-efficient strategies, such as increasing pension contributions or using salary sacrifice schemes to help reduce your taxable income.
A financial planner can help you review your options and structure your finances to maximise efficiency while staying aligned with your long-term goals.
Your alternative income sources could face higher taxes
You may have income from sources such as dividends, rental properties, or interest on savings, and these can be useful ways to diversify your earnings and boost your overall income.
However, measures announced in the Budget mean that most rates on these types of income have increased by two percentage points.
For savings interest and property rental income that exceed the usual allowances, the new rates are:
- 22% for basic-rate taxpayers
- 42% for higher-rate taxpayers
- 47% for additional-rate taxpayers.
For dividend income, the updated rates are:
- 10.75% for basic-rate taxpayers
- 35.75% for higher-rate taxpayers
- 39.35% for additional-rate taxpayers (unchanged).
So, if you rely on dividends, rental income, or savings outside ISAs, these changes could reduce your income.
Reviewing your financial plan now can help you prepare for and mitigate the impact. This could include restructuring your investments, making full use of remaining allowances, or adjusting your rental rates. A financial planner can help you decide the best way to proceed.
The pension contributions you can make through salary sacrifice will be capped
The Budget included a cap on National Insurance (NI) relief for pension contributions made through salary sacrifice. From 6 April 2029, both employer and employee National Insurance contributions (NICs) will apply to any pension contributions above £2,000 per year made via this method.
If you’re a higher earner and use salary sacrifice to reduce your taxable income, you could see a reduction in the NI savings you currently benefit from. So, it may be worth reviewing your pension strategy now.
A financial planner can help you explore alternative ways to maximise your efficiency, such as adjusting contribution levels, making full use of your personal allowances, or considering other tax-efficient investment options to ensure your retirement savings stay on track.
You may need to restructure your ISAs
The Budget also included reforms to ISA allowances for under-65s.
Currently, adults can contribute up to £20,000 each tax year across all their ISAs.
However, from April 2027, £8,000 of this allowance will be reserved exclusively for investment accounts, such as Stocks and Shares ISAs. This will leave £12,000 available for non-investment accounts, such as Cash ISAs.
Those aged 65 and over will continue to be able to deposit up to £20,000 in a Cash ISA each year.
According to the BBC, around a quarter of Cash ISA savers currently contribute more than £12,000 annually. If you include yourself in that group, you may need to restructure your ISAs.
You can read more about this in our previous article on the topic.
If your property is valued at £2 million or more, you could face higher tax
The long-rumoured “mansion tax” was unveiled in the Budget and will target the top 1% of homes.
It will be structured into four bands, with properties valued between £2 million and £2.5 million incurring a charge of £2,500 a year, rising to £7,500 for homes worth more than £5 million.
So, if you own a property worth over £2 million, you will need to factor this new surcharge into your household expenses.
A financial planner can help you review how your current property fits in with your long-term plans and assess how the new tax could affect your progress towards your goals.
You could be hit by a new tax if you drive an electric vehicle
If you own an electric or hybrid vehicle, you’ll face a new tax from 2028.
The Electric Vehicle Excise Duty (eVED) will charge 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrids. The rate per mile will increase annually in line with inflation.
Research from YouGov shows that 41% of high-income households (those earning £60,000 or more a year) own or regularly use an electric vehicle, meaning higher earners are likely to feel the impact of this change.
So, it may be worth reviewing the total cost of your vehicle ownership and factoring the new tax into your budget.
Get in touch
Our team of independent financial advisers in Lewes is here to support you in adapting your plan to ensure it remains resilient and efficient in light of policy changes.
To find out more, please get in touch by emailing us at financial@barwells-wealth.co.uk or by phone on 01273 086 311.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
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