Income Tax thresholds frozen
Although the Chancellor maintained Labour’s manifesto pledge not to raise the headline rates of Income Tax, Ms Reeves did announce an extension to the freeze on Income Tax thresholds to April 2031. Without thresholds rising with inflation, more people’s earnings or pensions will be pushed into higher tax brackets, without an uplift in their standard of living. This ‘stealth tax’ measure is expected to raise £8bn a year for the government, which gives a sense of how widely it will be felt.
New ‘mansion tax’ brought in
If you live in a home worth more than £2m, you’ll be disappointed to learn that from April 2028, you’ll be expected to pay a new annual high value Council Tax surcharge.
This surcharge, collected by your local authority, will be £2,500 for properties valued from £2m to £2.5m, £3,500 for homes valued from £2.5m to £3.5m, £5,000 for homes valued from £3.5 to £5, rising to £7,500 for properties valued at £5m or more. The Valuation Office will be conducting a targeted valuation exercise to identify properties above £2m. While this tax does not directly affect most households, it may influence the upper end of the housing market and reshape long-term expectations about how property wealth is taxed. For families hoping to trade up in future, it could mean longer selling times, tighter negotiation and fewer higher-value homes coming up for sale. The surcharge will also affect landlords who own properties over £2m.
State Pension
As had been announced prior to the Budget, the government has committed to maintain the State Pension Triple Lock for the duration of this Parliament, meaning that the basic and new State Pensions will increase by 4.8% in April 2026, in line with earnings growth. This means £241.30 a week for the full, new flat-rate State Pension (for those who reached State Pension age after April 2016) and £184.90 a week for the full, old basic State Pension (for those who reached State Pension age before April 2016.)
Changes to Cash ISAs and other investments
In a move designed to encourage more Britons to invest in home-grown companies, from April 2027, the annual Cash Individual Savings Account (ISA) allowance will fall to £12,000 for under 65s, but the overall annual ISA allowance remains £20,000. In other words, you can invest £12,000 in a Cash ISA each year and invest £8,000 in a Stocks & Shares ISA. As you are over 65, this will not impact you directly and you can still contribute the full amount, but it’s worth noting the change as it may affect family members.
Dividend, savings and property income taxes up
From April 2026, Dividend Tax will rise by two percentage points, to 10.75% and 35.75% for basic and higher-rate taxpayers, respectively. Small company directors who take income through dividends will see higher tax bills from April next year as a result.
Tax on savings income and property income will also increase by two percentage points from 2027. These increases apply to income held outside tax-efficient wrappers. If you have a general investment account, rental properties or meaningful cash savings, you can expect your tax bill to gradually rise.
For landlords, the basic, higher and additional rates will increase to 22%, 42% and 47% respectively from April 2027, a move that could add between £20 and £25 per month to typical rents in England. Coming on top of changes to Mortgage Interest Relief and Stamp Duty which have already increased landlord costs and hit profits, the OBR has recognised that this move will hit landlords in the pocket and force rents up.
VCT and EIS tax relief reduced
For those considering higher-risk investments, Income Tax relief on Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS) will be cut from 30% to 20% from April next year. Although this reduces the upfront incentive of investing in these funding mechanisms for UK early-stage higher risk companies, there are still other benefits. The government is increasing the VCT and EIS company investment limit to £10m, and £20m for Knowledge Intensive Companies (KICs) and increasing the lifetime company investment limit to £24m, and £40m for KICs. These changes will be legislated in Finance Bill 2025/26.
Electric vehicle owners targeted
Drivers of electric vehicles will face new per-mile charges from 2028, with a rate of 3p per mile for full EVs and 1.5p for plug-in hybrids. Although the rates are low, it introduces a running cost that did not previously exist and will need to be factored into budgeting when you plan your next car purchase.
Two-child benefit cap removed
While this change may not impact your own finances directly, it may benefit children or grandchildren navigating household budgeting. It’s a reminder that family financial planning often spans generations and that decisions taken today can strengthen the wellbeing of those you care about.
And Inheritance Tax?
The Inheritance Tax thresholds (IHT) were already set at current levels until April 2030, the Chancellor confirmed these will stay fixed at these levels for a further year until April 2031. The forthcoming combined allowance for the 100% rate of agricultural property relief and business property relief will also be fixed at £1m for a further year until 5 April 2031. This will be legislated for in Finance Bill 2025/26 and take effect from 6 April 2030.
With the government pressing ahead with changes to the IHT rules regarding unused pensions, which take effect from April 2027, there’s plenty to think about.
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Later life is about enjoying the freedom you’ve worked hard for, while feeling secure about the future. Budget announcements can sometimes feel complex or unsettling, but most of the changes unfold gradually, giving you time to adapt thoughtfully.
Whether you’re reviewing income sustainability, managing tax efficiency, gifting to family, preparing for future care needs or shaping your legacy, we’re here to guide you through each decision with clarity and confidence.
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All details are correct at the time of writing (03 December 2025)
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
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