Rachel Reeves announced several changes in her Autumn Budget. We've broken it all down so you know how it could impact your finances.
Article last updated 8 December 2025.
Rachel Reeves delivered her much-anticipated second Budget on 26 November. Over the course of an hour, she laid out her plans to plug the oft-cited “black hole” in the nation’s finances, and to stimulate economic growth.
Our panel didn't get time to answer all the questions from viewers on the day, so we asked them for their thoughts after the event on some of the questions that were left:
Salary sacrifice and pensions
What’s changing with salary sacrifice pension contributions?
Salary sacrifice pension contributions are an arrangement, where an employee gives up some of their salary in exchange for their employer making a pension contribution on their behalf. Neither you nor your employer pays national insurance on this amount. Reeves announced a cap of £2,000 on this. This means that from April 2029, only £2,000 of salary that’s ‘sacrificed’ will be exempt from national insurance. Any additional money sacrificed into your pension scheme will be subject to national insurance contributions from both you and your employer.
Does the cap apply to company pension contributions for directors?
Yes, it applies to all members of salary sacrifice arrangements.
Will defined contribution (DC) pensions and SIPPs be included in inheritance tax (IHT) from April 2027?
Yes, if you pass away after 5 April 2027, your unused pension funds – including defined contribution pensions and SIPPs – will generally be subject to inheritance tax (IHT). IHT is ordinarily 40% above the nil-rate band. Funds going to a spouse or civil partner will be exempt from this, so IHT will usually only apply on the second passing.
ISAs: Age, allowances and flexibility
What are the new ISA rules?
The overall allowance remains unchanged at £20,000 each tax year. But from 6 April 2027 the amount that under 65s can hold in a cash ISA is limited to £12,000. The remaining £8,000 can either be put in a stocks and shares ISA, or split between a stocks and shares ISA and a Lifetime ISA (LISA). You can only put a maximum of £4,000 per tax year into a LISA. In her Budget, Reeves announced the government will consult on LISA reform in 2026, with a view to phasing them out in favour of a simpler ISA product aimed to help first-time home buyers.
Can over-65s still contribute £20,000 to an ISA?
Yes, they can still pay the full £20,000 into a cash ISA. The exemption for over-65s is intended to protect savings and financial security for people in retirement.
Dividend, savings and rental income tax
Which incomes are affected by the additional 2% tax?
From April 2026, the rate of dividend tax will increase by 2% from 8.75% to 10.75% for basic-rate taxpayers, and from 33.75% to 35.75% for higher-rate taxpayers. The rate for additional-rate taxpayers remains 39.35%.
The tax rate on savings interest will also increase by 2% and will come into effect in April 2027. Basic-rate taxpayers will pay 22% on savings interest, higher-rate taxpayers will pay 42%, and additional-rate taxpayers will pay 47%.
Reeves’ Budget also introduced a 2% rise in income tax rates on rental income from April 2027. The new rates for basic-rate, higher-rate and additional-rate taxpayers are 22%, 42%, and 47% respectively.
Does this apply to properties owned by companies?
No, these are personal tax rates. However, if you receive a dividend from a company holding a property, the new basic and higher rates will apply from April 2026.
‘Mansion tax’ / high value council tax surcharge
Who values properties for the mansion tax, and can owners appeal?
A ‘mansion tax’, officially known as the ‘high value council tax surcharge’, is being introduced from April 2028. Homes worth over £2mn will become liable for an annual charge of £2,500, increasing to £7,500 for properties above £5mn. The Valuation Office Agency will conduct a targeted valuation exercise in 2026–2027 to identify properties above the threshold.
The valuation will reflect current market values, but details of how valuations will be made haven’t been released yet. Properties will be revalued every five years. Our understanding is that owners who disagree with the property valuation will be able to challenge it through a tribunal.
Are farms, charities, and properties in other UK nations included?
The surcharge applies from April 2028 to properties in England worth over £2mn. Properties in Scotland, Wales and Northern Ireland are not included. Farms are generally treated as agricultural property so they’re expected to fall outside the scope unless they include a large residential dwelling valued above £2mn. No explicit exemption for charities has been confirmed yet. A consultation will take place next year that will provide additional detail and clarification.
Electric vehicle (EV) road pricing
How will EV road pricing work, and when does it start?
The new pay-per-mile road pricing system, officially called Electric Vehicle Excise Duty (eVED), will begin in April 2028. It will charge electric cars £0.03 per mile and plug-in hybrids £0.015 per mile, with rates increasing annually in line with consumer price inflation.
Tax code complexity and fiscal drag
What does ‘fiscal drag’ mean?
Fiscal drag happens when tax thresholds remain fixed while incomes rise, often due to inflation or wage growth. In the UK, the personal allowance (£12,570) and higher-rate threshold (£50,270) have been frozen since 2021, and this freeze now extends to 2031. This means more people are ‘dragged’ into paying tax for the first time, or existing taxpayers are dragged into paying higher rates of tax, even though tax rates haven’t changed. This is often called a ‘stealth tax’, because the government pushes more people into higher tax bands, where they pay higher rates, without increasing the tax rates for each band.
Building and preserving wealth
What happened to venture capital trust investments in the Budget?
The major change for investors is the cut to upfront income tax relief on venture capital trust (VCT) investments. Relief will fall from 30% to 20% from 6 April 2026.
Were there any changes to inheritance tax?
No, there weren’t any material changes to inheritance tax (IHT), despite much speculation in the weeks leading up to the Budget. A small tweak was made to the changes announced last year so that from 6 April 2026, any unused portion of the £1m allowance for 100% business relief and agricultural property relief can be transferred to a surviving spouse or civil partner. This applies even if the first passing occurred before 6 April 2026, so widows and widowers can still benefit from the additional allowance.
Are there changes to capital gains tax, gilts, the enterprise investment scheme, business relief, the Alternative Investment Market, or employee ownership trusts?
No changes were announced to capital gains tax (CGT), gilts, the enterprise investment scheme (EIS), business relief (BR) and the alternative investment market (AIM) or employee ownership trusts. EIS remains an attractive but high-risk investment.
