Autumn Budget: Bringing clarity in an evolving landscape

Chancellor Rachel Reeves revealed a diversified approach to raising the government’s income at the Autumn Budget on Wednesday, likely impacting much of the British population. Changes to property tax, workplace pensions and unearned income could help deliver the £22 billion “headroom” for the Chancellor to create a budgeting buffer and reduce the proportion of spending going toward debt interest.

Irene Wolstenholme, Wealth Planning Specialist at Coutts, said: “This is one of the most pre-empted Budgets we have seen in a number of years. Most of the tax changes announced were covered by the media in advance of Wednesday, however, several tax reforms rumoured were not included in the statement.

“Many of the changes confirmed by the Chancellor will still need to go through consultation and therefore could result in further amends.”

High-value council tax surcharge

Residential properties in England worth £2 million or more, as valued from 2026, will be liable to a recurring annual charge in addition to council tax from April 2028. Starting at £2,500 for properties valued £2 million and over, the four surcharge tax bands will be capped at £7,500 for properties valued above £5 million. The tax bands are value based rather than percentage based.  

No changes were made to stamp duty or capital gains tax (CGT) regarding property sales and purchases. 

Unearned income tax rise of two percentage points

Tax on income from outside of a typical salary or pension – referred to as ‘unearned income’ – will rise. From April 2027, income from savings accounts outside of tax-free ISAs, and income from rental properties will all be subject to the usual income tax rate plus two percentage points.

In addition, from April 2026 income from dividends within the basic and higher tax rate brackets will also be subject to a two percentage point increase. The tax rate for dividends within the additional rate will be unchanged. 

Exemption for salary-sacrificed pension contributions to be capped at £2,000

From April 2029, a £2,000 annual cap will be introduced on salary-sacrificed pension contributions. Therefore, any contributions in excess of £2,000 will be subject to both employer and employee national insurance contribution (NIC). 

Lump sum pension withdrawals unchanged

Tax-free lump sum withdrawals from pensions remain unchanged at 25% of pension value up to £268,275.

Additionally, there were no changes to the annual allowance or up-front pension tax relief.

Frozen income tax thresholds

Income tax and national insurance thresholds are to remain frozen until the 2030/2031 tax year – a three-year extension. Referred to as a ‘stealth’ tax, more individuals’ annual income could fall into the next respective tax band as wages grow, meaning additional income that falls into the next tax bracket will be paid at an increased rate. 

No changes to inheritance tax or gifting

No changes were announced to tax on gifting which means any money gifted seven years before you die could be exempt from inheritance tax (IHT).

It’s also worth remembering that in last year’s Autumn Budget, the Chancellor announced  that, from April 2027, pensions will form part of an individual’s estate when they die.

Cash ISA allowance down to £12,000 for under 65s

The Cash ISA allowance is set to reduce to £12,000 for savers aged under 65 from April 2027. The total ISA allowance remains unchanged at £20,000, meaning an individual that maximises their £12,000 Cash ISA allowance, could still use their remaining £8,000 allowance in a Stocks and Shares ISA, for example.

Individuals aged 65 and over will retain a £20,000 ISA allowances that could be spread across Cash and other ISAs as desired.

Rise in minimum wage

From April next year, minimum wage for employees aged over 21 will rise by 4.1% to £12.71 an hour. Staff aged between 18 and 20 will see an 8.5% rise to £10.85 an hour.

For apprenticeships and those aged 16 to 17, minimum wage will rise 6% to £8 an hour.

APR/BPR inheritance relief transferable

At last year’s Autumn Budget, the Chancellor announced trading businesses and farms worth over £1 million will only be entitled to 50% inheritance tax relief, and so will effectively be subject to 20% inheritance tax (IHT), on the excess over £1m. In this budget the chancellor announced that from April 2026, the 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) allowance will be transferable to a spouse on death.

CGT relief on employee ownership trusts reduced

With immediate effect, capital gains tax (CGT) relief on employee ownership trusts (EOT) will be reduced from 100% down to 50%. Company owners that make a qualifying disposal of shares to trustees of an EOT will be subject to CGT for 50% of their gains. 

Three-year stamp duty relief for newly listed companies

Companies with shares newly listed on a UK regulated market could receive a three-year exemption from paying the 0.5% stamp duty reserve tax (SDRT).