During the 2025 Autumn Budget, Chancellor Rachel Reeves introduced several significant updates that will impact pensioners and those who put money into savings.
In this article, our Tax team break down the key updates to pensions, ISAs, and tax rules, and explain what they mean for you.
Key changes to pensions
From the 2026/27 financial year, the state pension will rise by 4.8% following the triple lock mechanism. For those reaching state pension age after 6th April 2026, this means an increase of £570 per year to the full new state pension.
The salary sacrifice arrangement, which is an exchange of part of your salary for extra pension contributions, will also see new limits. Starting April 2029, only the first £2,000 of pension contributions made via salary sacrifice will benefit from National Insurance Contributions (NICs) relief each tax year. Contributions above this threshold can still be made but will be subject to NICs.
Changes to ISAs
To encourage long-term investment, the government will reduce the annual limit for cash ISAs from £20,000 to £12,000 starting April 2027. However, the overall limit for stocks and shares ISAs remains at £20,000. If you are over the age of 65, you can continue to save up to £20,000 in both cash and stocks and shares ISAs.
As part of these changes, income tax will also be charged on interest paid on cash funds held in a stocks and shares or Innovative Finance ISA.
Taxation on savings, property, and dividends
Income tax changes
- Property Income: From April 2027, the basic rate of income tax will be 22%, the higher rate 42%, and the additional rate 47%.
The current income tax rates are:
| Band | Taxable income | Tax rate |
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
- Dividend Income: The basic and higher rates of tax on dividend income will increase by 2% from April 2026, but the additional rate remains unchanged.
How much tax you pay on dividends above the dividend allowance depends on your income tax band:
| Tax band | Tax rate on dividends over the allowance |
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
Savings Income: Tax rates on savings income will rise by two percentage points across all bands from April 2027, but savings in pensions and ISAs are exempt from these increases.
Additionally, income tax thresholds will remain frozen until 2031.
Inheritance tax on pensions and death benefits
From April 2027, unused pension funds and certain death benefits may be subject to inheritance tax. Personal representatives can request pension administrators to withhold up to 50% of taxable benefits for up to 15 months to cover potential Inheritance Tax liabilities. This policy does not apply to death-in-service lump sum payments or pension benefits paid to dependants.
Residence
Where non-UK residents receive both dividend income and UK rental or partnership income, they can choose to pay tax on:
- just their UK rental and partnership, but they may not claim their personal allowance; or
- the whole of their income and claim their personal allowance and get a tax credit at the ordinary rate against their dividend income (this was not repealed when the UK resident tax credit was abolished).
From 6th April 2026, the notional tax credit will be abolished to bring non-UK residents in line with UK residents.
Get in touch with our team today
The changes announced in the 2025 Autumn Budget will affect how you save, invest, and plan for retirement. Whether you’re a pensioner or are saving for retirement, it is important to review your financial strategy in light of these updates.
If you want to ensure you’re making the most of your options, get in touch with our expert team today for personalised guidance.
All changes are subject to legislation and HMRC guidance.
