Autumn Budget 2025
Rate increases to income tax
Income tax rates are to rise by 2% for income from dividends, savings and property income.
For dividend income, the changes are to take effect from April 2026, increasing basic rate tax from 8.75% to 10.75% and higher rate tax from 33.75% to 35.75%. Additional rate tax on dividends will remain unchanged at 39.35%.
Savings income rates are increasing from April 2027 by 2% across all three tax bands. Separate tax rates will also be introduced for property income from April 2027, increasing the rate of tax payable by 2% across all tax bands. A summary of the new rates is illustrated in the table below.
The starting rate for savings will remain for low earners with other income of less than £17,570 (not including savings or dividend income). Up to the first £5,000 of savings income is taxable at 0% within the starting rate for savings band.
The personal savings allowance of £1,000 for basic rate taxpayers, or £500 for higher rate taxpayers, is also unchanged.
The calculation of income tax will be amended so that personal allowances and other reliefs, such as losses, are deducted from other lower taxed sources of income first, before being offset against income from dividends, savings and property. These changes are to take effect from April 2027.
Thresholds frozen for income tax and national insurance
The current thresholds for income tax and national insurance contributions (NICs) have been frozen for a further three years from April 2028 to April 2031.
It also includes a freeze to the class 1 secondary NIC threshold, for employer contributions, at £5,000.
ISA reforms
The annual ISA cash limit will be reduced to £12,000 (currently £20,000) from 6 April 2027. The overall limit will remain at £20,000 with the remaining £8,000 reserved for stocks and shares ISAs. Over 65s will not fall within this restriction and will continue to be able to add £20,000 annually to cash ISAs.
The government will publish a consultation in early 2026 on a new simpler ISA product to support first time buyers to buy a home. The intention is for this to be offered in place of the current Lifetime ISA.
.
