Budget Update from Robert Bell
Highlights from announcements on 26th November 2025
Rachel Reeves’ second Budget as Chancellor sets out a wide range of changes aimed at raising government revenue, with around £26 billion coming from freezes to tax thresholds and increases to taxes on dividends, savings, and rental income.
Importantly, despite months of speculation, there were no changes to tax-free cash from pensions, pension tax relief, or inheritance tax rules around gifting. The main rates of Income Tax and National Insurance also remain unchanged.
Below is a summary of the key points most relevant to your financial planning.
Pensions
No change to tax relief or tax-free cash
There is no alteration to pension tax relief or the amount you can take tax-free from your pension. These remain as they are today.
Salary sacrifice – NI exemption cap from April 2029
From April 2029, the National Insurance (NI) exemption on pension contributions made through salary sacrifice will be capped at £2,000 per year.
NI will be due on any salary you sacrifice beyond £2,000.
This affects employees and employers.
For many earners, this will mean a small reduction in take-home pay and, in some cases, lower employer pension contributions where part of the employer NI saving is currently added into the pension.
For some households, continuing to use salary sacrifice above the cap may still offer benefits—for example, helping maintain eligibility for Child Benefit or tax-free childcare.
Inheritance Tax (IHT) on unused pension funds
The government are going to allow the personal representatives (PRs) to instruct pension scheme adminstrators to withold 50% of taxable pension death benefits for up to 15 months. This is to ensure there is sufficient money available to meet the IHT liability applicable to that pension scheme. Pension beneficiaries will only be able to access 50% of the amount they inherit where the PRs have instructed the scheme.
PRs will also not be liable for IHT due on any pensions which come to light after the administration of the estate has been completed. The pension beneficiary will continue to be liable for any IHT on pension discovered after the PRs have been discharged.
State Pensions
The triple lock will continue for the rest of this Parliament.
State Pensions will increase by 4.8% in April 2026, taking:
Full New State Pension to £241.30 per week
Full Basic State Pension to £184.90 per week (single) or £295.70 per week (married/civil partners)
As State Pensions continue to grow while the Personal Allowance remains frozen, the government is exploring how to avoid pensioners with only State Pension income being drawn into the tax system.
Income Tax & National Insurance
Tax thresholds frozen
The personal allowance and higher and additional rate thresholds will remain frozen until 2030–31.
Scottish thresholds will be confirmed in the Scottish Budget in January 2026.
Employer NI thresholds are also frozen, and NI rates remain unchanged.
Tax increases on dividends, savings, and rental income
These increases make tax-efficient planning more important:
From April 2026 (dividends):
Basic and higher-rate dividend tax rise by 2 percentage points.
From April 2026 dividends taxed at the ordinary rate and upper rate will increase to 10.75% (currently 8.75%) and 35.75% (currently 33.75%) respectively. There will be no changes to the additional rate which remains at 39.35%.
Allowance remains £500.
From April 2027 (savings income):
Basic, higher, and additional rate taxes rise to 22%, 42%, and 47%.
From April 2027 (rental income):
Tax rates rise to 22%, 42%, and 47% depending on tax band.
Other tax measures
Venture Capital Trust (VCT) income tax relief reduces from 30% to 20% from April 2026.
From April 2027, your personal allowance will be applied first to earnings and pensions, before dividend, savings, or property income.
Transferable IHT Business Relief (BR) and Agricultural Relied (AR) £1m allowance
The Chancellor has confirmed that any unused £1 million allowance for business relief and agricultural relief will be transferable between spouse and civil partners. This will be effective for deaths after 6 April 2026 when the new cap on relief at 100% comes into force.
ISAs
The annual ISA limit remains at £20,000, but with changes from April 2027:
Aged 65 and over:
You can continue to place the full £20,000 into a Cash ISA if you choose.Under 65:
Cash ISA contributions will be capped at £12,000, with the remaining £8,000 needing to be invested in a Stocks & Shares ISA.
The government will also consult on replacing Lifetime ISAs with a new ISA aimed specifically at first-time buyers (expected early 2026).
Property: High Value Council Tax Surcharge (“Mansion Tax”) England & Wales
While not a full wealth tax, a new surcharge will apply to properties worth £2 million or more from April 2028.
Properties will be valued by the Valuation Office and an additional fixed annual charge applied depending on value band.
(Full details will be confirmed following consultation, including treatment of trusts and business ownership structures.)
Further detail to follow
HMRC will release more technical documents in the coming days, and we will review these as they become available.
Disclaimer
The information contained in this fact sheet should not be construed as financial advice.
Should you have any questions please contact:
Robert Bell
Tel: 01896 808198
