We have outlined below a breakdown of the main policy changes in the Budget:

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Salary Sacrifice 

 

• Only the first £2,000 of salary sacrifice pension contributions will remain exempt from National Insurance contributions, from April 2029. 

• This means that both employees and employers will have to pay NI on any salary sacrificed over this amount. 

• Ordinary employer pension contributions will remain exempt from NICs. 

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Frozen Thresholds 

 

• Income tax thresholds remain unchanged and will remain frozen until April 2031. 

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Inheritance Tax 

 

• The Inheritance Tax nil rate band of £325,000, main residence nil rate band of £175,000 and the combined agricultural and business property relief allowance of £1 million are also frozen until April 2031. 

• Significantly, any unused £1,000,000 allowance for 100% relief for business property relief and agricultural property relief will be transferable between spouses and civil partners from 6th April 2026 (this also applies where the first death happened before 6th April 2026). 

 

 

Savings Tax 

 

• Savings tax - tax on savings income will increase by 2% across all bands. 

• The basic rate will rise from 20% to 22%, 

• The higher rate from 40% to 42%, 

• And the additional rate from 45% to 47% from April 2027. 

 

 

Dividends 

 

• Tax on dividend income will increase by 2% for basic and higher rate taxpayers. 

• The ordinary rate will rise from 8.75% to 10.75%, 

• And the upper rate from 33.75% to 35.75% from April 2026. 

• The additional rate will remain unchanged at 39.35%. 

 

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• Property Income 

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• The Government is creating separate tax rates for property income. 

• From April 2027, the property basic rate will be 22%, 

• The higher rate will be 42% 

• And the additional rate will be 47%. 

• This will only apply to income for residents in England, Northern Ireland and Wales initially. 

 

 

ISA 

 

• There’s no change to the overall ISA contributions limits: the ISA allowance will remain at £20,000, the Lifetime ISA allowance at £4,000 and the Junior ISA allowance at £9,000 but these limits will be frozen until 5 April 2031. 

• However, the Cash ISA allowance will reduce to £12,000 for under 65’s. 

• For over 65’s – the limit will remain unchanged. 

• The government has announced it intends to scrap the Lifetime ISA and replace it with a new simpler ISA product to support first time buyers to buy a home. It will consult on this in early 2026. 

 

 

State Pension 

 

• The State Pension will rise by 4.8%, from April 2026 as the triple lock is retained for the duration of this parliament. 

 

 

Additional Tax for High Value Properties 

 

• Starting in April 2028, owners of properties valued at over £2,000,000 will be subject to an additional yearly tax. 

• This will be payable by the homeowner and collected at the same time as council tax. 

• It will begin at £2,500 and scale in bands to £7,500 per year for properties valued at £5,000,000 or more.