The Autumn 2025 Budget – a balancing act?

This year’s Budget risked becoming the winter budget, arriving as late as possible on 26 November after a long, rumour-filled run in.

The Chancellor’s first Budget last autumn, on 30 October 2024, came following the early announcements of a raft of revenue-saving measures to fill her infamous “£22 billion blackhole”. Rachel Reeves’s second Budget moved four weeks nearer to Christmas and was preceded by two significant summer U-turns – on the winter fuel payment and disability benefit reform – that implied about £6 billion of revenue-raising would be required.

The long lead time to the Budget this year meant almost three months of speculation after summer’s end. Thankfully, the Treasury’s constant drip of leaked policy ideas and subsequently generated media rumours finally ended, leaving the Budget as something of a 70-minute anti-climax.

The main measures of the Autumn Budget 2025 included:

• A three-year extension to the freeze on income tax bands and the personal allowances. The Institute for Fiscal Studies (IFS) had earlier calculated that a two-year freeze would mean that by 2029/30, nearly one-in-four taxpayers would face a marginal tax rate of 40% or more.
• A £2,000 cap from 2029/30 on the amount of salary that can be tax-efficiently sacrificed for pension contributions. Any excess will be liable to national insurance contributions for both employer (at 15%) and employee (at up to 8%).
• A reduction to £12,000 in the maximum subscription to a cash Individual Savings Account (ISA) from 6 April 2027 for anyone aged under 65. The overall subscription limits for an adult ISA (£20,000) and a Junior ISA (£9,000) are unchanged. The Lifetime ISA stays at £4,000, while the government consults on a new first-time buyer’s ISA as its replacement.
• The abolition of the two-child limit for universal credit and child tax credit, set to reduce child poverty by around 450,000 children in 2029/30.
• A two percentage point increase in the rate of tax on dividends for basic rate and higher rate taxpayers to 10.75% and to 35.75%, respectively, effective from
  6 April 2026. The dividend tax rate is unchanged at 39.35% for additional rate taxpayers.
• A two percentage point increase across all tax bands from 2027/28 for property and savings income.
• The introduction of a three-pence per mile road charge for electric vehicles (Plug in hybrid cars will attract a reduced rate) from April 2028.

The outcome was a Budget that did not deliver a headline punch but opted to tread a path between spending requirements and funding those requirements through additional borrowing and increased tax pressures.

For more information on any of these changes, please look at our Downloadable Autumn Budget Summary.

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