Wealth
See commentary from John Chew, Tax, Trusts and Estate Planning Specialist at Canada Life.
Autumn Budget 2025: A more complex planning landscape
Explore the implications of the 2025 Autumn Budget for advisers and clients, with insights from our technical experts.
The Chancellor of the Exchequer, Rachel Reeves, delivered the Government’s Autumn Budget on 26 November. Bound by her fiscal rules and the Labour Party’s manifesto promises, the Chancellor has drawn up a number of targeted reforms aimed at strengthening the public finances and increasing the fiscal buffer, while ensuring that the Government’s plans for economic growth remain on course.
The result is a Budget that asks more of many different groups, particularly those earning an income from savings or dividends, those with significant wealth stored in assets such as property, and those using salary sacrifice to contribute to a pension.
Increasing complexity and interdependency
Many of the measures announced in the Budget sit within a web of interdependencies that will interact to shape client outcomes.
These connections mean advisers will need to navigate greater complexity, as the full implications of the Budget announcements become clear. Understanding how these changes interact with each other, and with the wider tax landscape, will be key to helping clients make informed, confident choices that support their financial goals.
Below, we look at some of the measures that will likely have a substantial impact on client strategies and the financial advice landscape.
Key Budget measures
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Frozen tax thresholds: An extension of the freeze on income tax thresholds for an additional three years until 2031 will mean that many more people will be paying higher tax rates, or will pay tax on their income for the first time. The Office for Budget Responsibility (OBR) forecasts that between 2022-23 and 2030-31, 5.2 million additional individuals will have been brought into paying income tax, 4.8 million more will have moved to the higher rate, and 600,000 more onto the additional rate. The inheritance tax threshold will also be frozen for a further year, until April 2031.
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Annual levy on high value properties: From April 2028, properties worth over £2m will face a new High Value Council Tax Surcharge, separated into bands based on property values.
Threshold (£m)
Rate (£)
£2.0-2.5
£2,500
£2.5-3.5
£3,500
£3.5-5.0
£5,000
£5+
£7,500
The Valuation Office will conduct a valuation exercise to identify in scope properties, and will conduct revaluations every five years.
The government is expected to consult in early 2026 on a full set of reliefs and exemptions, as well as proposed rules for more complex ownership structures including trusts, companies, funds, and partnerships. -
Savings, dividend and property tax increases: From April 2026, the ordinary and upper rates of tax on dividend income will increase by 2%. From April 2027, the tax rate on savings income across all bands will also increase by 2%, and separate tax rates on property income will be introduced.
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Salary sacrifice cap: From April 2029, the national insurance exemption for salary sacrifice arrangements for pension contributions will be capped at £2,000 a year.
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Cash ISA: From April 2027, the annual tax-free limit for cash ISAs will be reduced to £12,000, with the overall ISA limit maintained at £20,000. Savers over the age of 65 will continue to be able to save up to £20,000 in a cash ISA each year.
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Changes to beneficial ordering: Income tax rules will be changed from April 2027 so that reliefs and allowances deductible at steps 2 and 3 of the income tax calculation will only be applied to property, savings and dividend income after they have been applied to other sources of income.
Webinar: Autumn Budget and Outlook for 2026
Thursday 11 December 2025 at 11:00am
Join John Chew, Trusts and Estate Planning Specialist, and Nick Flynn, Retirement Income Director, as they explore, in depth, the implications of this year’s Autumn Budget for financial advice.
Expert analysis
Wealth
Read what Liz Hardie, Tax, Trusts and Estate Planning Specialist at Canada Life, has to say.
Home Finance
Read what Nick Flynn, Retirement Income Director at Canada Life, has to say.
Workplace Protection
Learn more from Chris Morgan, Head of Product and Proposition Strategy – Protection at Canada Life UK.
John Chew, Tax, Trusts and Estate Planning Specialist
“The triple lock will trigger a 4.8% rise in the State Pension from April 2026 to £12,548, meaning pensioners will be just £22 away from the income tax cliff edge.
“With income tax thresholds now extended until 2031, this stealth tax will continue to bite deeper into pensioners’ incomes. From April 2027, anyone receiving the full State Pension (who have no other income besides the state pension) will, for the first time, start paying income tax on it.
“For those who will be relying on other assets to sustain their finances in retirement - such as private pensions, annuities, or dividends - the income tax bill will rise even further. In just four months, pensioners relying on dividend income will also face a 2% increase in dividend tax, further eroding their retirement income.”
“One of the biggest hidden impacts for advisers and clients in the Budget is a change to the structure of how tax reliefs and allowances are applied to different sources of income.
“Under the current rules, advisers and their clients have flexibility in how they structure their finances for tax reasons. Beneficial ordering allows types of income which are taxed at higher rates to be set against the Personal Allowance first to give an income tax saving. From April 2027, these rules will be changed, removing the flexibility to choose which types of income are first set against the Personal Allowance.
“Therefore, assets such as savings and dividends will not only be subject to 2% higher tax after today’s announcements, from April 2027, they will also be pushed to the back of the pile.”
Nick Flynn, Retirement Income Director
“The announcement of a council tax surcharge will likely have implications for the high value property market, but much is still uncertain. These homes may become less attractive to buyers, potentially resulting in falling or stagnant prices, with fewer buyers willing to take on properties subject to annual levies.
“Homeowners with a property worth between £2 – 2.5m will face a bill of £2,500 annually, rising to £7,500 for properties worth over £5m. This could disproportionately affect asset-rich, cash poor pensioners who have seen the value of their homes appreciate over decades, but do not have the regular income to foot the bill. Introducing support or deferral mechanisms for this cohort will be critical to ensure that people in later life do not suffer as a consequence of these changes.
“The logistics of the levy, such as how it will be paid, and how properties will be valued, is not yet clear. Careful planning and advice will be essential to navigate these changes and protect financial security.”
Chris Morgan, Head of Product and Proposition Strategy – Protection
"Proposals to cap the amount workers can contribute to their pensions through salary sacrifice, before paying National Insurance, may have a broader impact for some middle-income private sector workers than intended.
"Salary sacrifice is complex, and it’s understandable that many people may not be clear how or if this change could affect their income and employee benefits, but there is time to learn what it means before it comes into effect.
"Employees can take practical steps to understand the impact by checking their payslip to see which employee benefits are included under salary sacrifice, and they may wish to discuss their circumstances with a financial adviser.
“The employee benefits provided by employers, or those that employees can opt into, often offer valuable financial support against unexpected events, such as illness, as well as helping them to save for retirement. Any changes should be approached with care as decisions could have unintended consequences for long-term financial security.”
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Any references to tax are based on our current understanding of the proposed UK tax rules changes, which may change.