More anticipated and surrounded by speculation and dubbed the ‘hokey cokey budget’ by Speaker of the House, Sir Lindsay Hoyle, the budget has finally been delivered, albeit earlier than intended, after the OBR accidentally released it.
Taking place on Wednesday, 25th November, it became the latest Autumn Budget since the move to the now familiar autumn timetable, and it has been a source of significant worry and uncertainty for both households and businesses alike. After Rachel Reeves recently ruled out breaking the manifesto by increasing income tax, the speculation heightened further.
The question is, was it as bad as we all feared? The headlines and when the changes take place:
ISAs
In a move aimed at boosting investment opportunities, the cash ISA allowance has been cut to £12,000 per annum, except for those aged 65 or over from April 2027.
However, there’s no clear evidence that reducing the allowance will change behaviour or encourage more investment. At present, you can transfer freely between Stocks and Shares ISAs and Cash ISAs, which raises an interesting question: could you simply invest your full subscription in a Stocks and Shares ISA and then transfer it to a Cash ISA? We wait for further details!
The ISA saga continues
How many types of ISAs are currently available? If you guessed five, give yourself a point – and if you can name them all, go straight to the top of the class! The government now plans to scrap the Lifetime ISA (LISA), itself the successor to the Help-to-Buy ISA, and introduce a new product.
Criticisms of the LISA have centred on two issues: the £450,000 property purchase limit and the early withdrawal penalties, which meant some savers ended up getting back less than they contributed, even to cash LISAs.
As is often the case, it takes time for the industry to implement the necessary systems. Some providers still haven’t fully integrated Lifetime ISA functionality. The LISA was designed to serve two goals: home purchase and retirement. The new system, however, seems likely to have just one single objective: helping people buy their first home. A consultation is expected in early 2026 to shape what this will look like.
Electric cars – a new cost on the horizon
Whatever your reason for driving an EV, whether it’s the tax benefits or the ecological appeal (we’ll leave the environmental debate for another day), it’s about to get more expensive.
From 2028, the government plans to introduce a road usage levy:
- Hybrids: 1.5p per mile
- Pure EVs: 3p per mile
Why the change?
As more drivers switch to electric, fuel duty revenues are falling, creating a funding shortfall for road maintenance. Since all vehicles contribute to wear and tear, the logic is that all drivers pay their share – regardless of fuel type.
Why the backlash?
Critics argue this sends mixed signals about the transition to EVs and could slow adoption. After years of government incentives, introducing a mileage-based tax feels like a policy U-turn to many.
How will it work?
Interestingly, the proposed system appears to rely on self-reporting, similar to an honesty box. Drivers will estimate their mileage. How this will be verified is still to be confirmed. No mention of GPS tracking for now. More details are expected closer to the launch.
Dividend tax hike: what it means for company owners
The Chancellor has confirmed a 2 percentage point increase in dividend tax rates from April 2026:
- Basic rate: 8.75% → 10.75%
- Higher rate: 33.75% → 35.75%
- Additional rate: remains at 39.35%
This comes on the back of successive cuts to the dividend allowance, now just £500, down from £2,000 in 2023.
Dividends generally fall into two categories:
- Investment dividends from shares or funds
- Company dividends are drawn as income by business owners
For this article, we’re focusing on the latter. Many of our clients operate through limited companies and take income via dividends. While dividend tax rates still appear lower than income tax, remember that corporation tax has already been paid on company profits before dividends are taxed.
Corporation tax itself increased in April 2023, with the main rate rising to 25% for profits over £250,000. Below this level, a reduced rate of corporation tax is charged.
So, what does this mean for you? Some business owners are asking whether it makes sense to take higher dividends before the new rates take effect. This is a decision that depends on your circumstances, so it’s worth discussing with your accountant sooner rather than later.
Tax hikes on savings and property income
From April 2027, tax on savings interest and rental income will rise by 2 percentage points:
- Basic rate: 20% → 22%
- Higher rate: 40% → 42%
- Additional rate: 45% → 47%
The personal savings allowance remains unchanged (£1,000 for basic rate, £500 for higher rate), but with thresholds frozen, more people will be pulled into tax.
For landlords, this increase adds to further pressure at a time when many are already grappling with restricted mortgage interest relief and rising financial costs.
Why the change?
The government says it’s about fairness: savings and property income don’t attract National Insurance. The move is expected to raise over £1 billion a year.
This will hit those who keep large cash reserves outside tax-efficient wrappers. With the cash ISA allowance cut, it’s becoming harder to shelter savings from tax.
For landlords, this is yet another challenge in a long line of changes:
- The cap on mortgage interest relief
- Previously, higher capital gains tax rates
- Recent legislation has given tenants more rights, and now, a higher income tax rate on rental income.
Many argue that this higher tax will be passed onto tenants, which is unlikely to help with the cost of living.
VCT tax relief reduction – what you need to know
Venture Capital Trusts (VCTs) are high-risk investments designed to support smaller UK companies. They’ve long been popular with investors thanks to generous tax incentives that help offset some of the risk.
Current benefits of VCTs:
- 30% upfront income tax relief on the amount invested.
- Tax-free dividends provide a steady income stream.
- No capital gains tax when you sell shares after the minimum five-year holding period.
These features have made VCTs an attractive option for those seeking tax-efficient growth while supporting UK enterprise.
What’s changing?
From April 2026, the government will reduce the upfront tax relief from 30% to 20%. While other benefits remain, this cut could significantly impact investor appetite.
History tells us why this matters: when relief was reduced in 2006/07, VCT fundraising fell by 65% year-on-year and took 16 years to recover. A similar trend could hit funding for early-stage businesses, which rely heavily on VCT investment.
What does this mean for investors?
- Demand for VCTs may soften, particularly among those motivated by tax efficiency.
- If you’re considering VCTs, the current tax relief of 30% remains available until April 2026 – making the next few months a critical window for planning.
If you haven’t already read our article on VCT’s then you can read it here >
Salary sacrifice: what changed?
This will not impact those in the NHS final salary scheme, but it may affect other family members and therefore many families’ overall pension provision.
Here are the headlines.
- From April 2029, salary-sacrificed pension contributions above £2,000 per year will no longer be exempt from National Insurance (NI).
- Currently, salary sacrifice allows employees and employers to save NI on the sacrificed amount. Under the new rules:
- The first £2,000 of employee contributions via salary sacrifice remains NI-free.
- Any amount above £2,000 will attract employee NI (8% up to £50,270; 2% above) and employer NI (13.8%), just like standard pension contributions.
- Income tax relief on pension contributions remains unchanged.
- Employer contributions (not part of salary sacrifice) will still be exempt from NI.
- Government rationale: the cost of NI relief through salary sacrifice is projected to triple by 2030, disproportionately benefiting higher earners. The cap aims to make the system “fairer and sustainable” while raising £4.7bn in 2029/3
Summary
We knew this was going to be a painful budget. In many ways, it could have been worse, for example, if tax relief on pension contributions or pension tax-free lump sums had been touched. And for the bikers among you, one small mercy: there have been no changes to the Bike2Work scheme…for now.
The good news is that the biggest changes won’t come into force immediately. This gives you time to understand the implications and plan accordingly. We recommend speaking with your Legal & Medical specialist, financial adviser, to discuss options and ensure you fully understand how the Budget affects you before making any changes to your financial plans.
Please remember: this article is for information only and should not be interpreted as specific financial advice.