The Chancellor’s Autumn Budget, delivered yesterday, outlined the Government’s updated fiscal plans.
This statement focuses on balancing support for households and businesses without exacerbating the cost of living crisis, while maintaining long-term fiscal sustainability.
In this report, we outline the key initiatives and announcements made in the Budget that are most relevant to our clients. We conclude by reviewing the initial response in the markets, providing context regarding market sentiment and, in particular, how investors judge the credibility of this fiscal plan.
In future publications, we will provide clear, actionable insight into how these measures may affect your portfolio, tax position, and long-term financial goals. In the meantime, if you have any questions regarding the Autumn Statement and how it may affect you, please do get in touch.
The Budget was leaked before the official announcement was made
The Autumn Budget might be remembered as much for the theatre as the content. While there was no shortage of measures to occupy the minds of savers and investors, it was the inadvertent release of the content by the Office for Budget Responsibility (OBR) before Rachel Reeves stood up that attracted as much attention.
Of course, the run-up to the Budget has been notable for the “will they, won’t they” speculation around whether election pledges on taxes would be broken and political kite-flying generally, issues which drew a sharp rebuke from Nusrat Ghani, the Deputy Speaker.
And so, the statement made history as the first to be released by the OBR into the public domain before the Chancellor took centre stage, undoubtedly to her chagrin.
Given the parlous state of public finances, this was always likely to be a tough Budget, with an emphasis on higher taxation, and so it proved, but it broke more recent norms through a smorgasbord of 88 different fiscal measures, around 50% more than the average of the last decade.
In other words, Rachel Reeves, rather than choosing to target one or two key areas to raise revenues, opted for more of a cheese-grater approach, with the freezing of tax thresholds delivering the largest component.
You can read more about this and the other key measures from the 2025 Autumn Statement below.
The headlines regarding GDP, national debt, and inflation
The Chancellor says the Government’s plans will reduce borrowing more over the rest of this parliament than any country in the G7.
Gross Domestic Product (GDP) is expected to grow by 1.5% in 2025, higher than the OBR’s 1% forecast from earlier this year. In subsequent years, the estimations are as follows:
- In 2026, the economy is forecast to grow by 1.4%, below the previous forecast of 1.9%
- In 2027, it is forecast to expand by 1.6%, falling short of March’s estimate of 1.8%
- In 2028, growth is expected to rise by 1.5%. In March of this year, the OBR said this figure would be 1.7%
- And for 2029, the economy is expected to expand by 1.5%, again falling short of the previous estimate of 1.8%.
Due to weaker underlying productivity growth, the OBR estimates that tax receipts will be £16 billion lower in 2029/30 than initially forecast in March 2025.
Average inflation is expected to fall over the next three years.
- 3.5% in 2025, an increase of 0.2% from the OBR’s original forecast
- 2.5% in 2026, up from the OBR’s 2.1% forecast from March
- 2% from 2027 to 2029.
National debt will stand at £2.6 trillion this year. £1 in every £10 the Government spends is on debt interest.
Tax threshold freezes extended until 2031
The Labour manifesto promised not to increase Income Tax or National Insurance (NI), and despite pre-Budget speculation, the Government has kept to that promise in this Budget.
However, the Chancellor did announce that the Income Tax thresholds will remain frozen for a further three years beyond the previous 2028 freeze, staying where they are until April 2031.
This is known as “fiscal drag” and will raise £8 billion, the largest contributor to tax revenues being generated. Similarly, the Inheritance Tax (IHT) threshold freeze is extended from 2030 to 2031.
The Government is also upholding its commitment to bring pension pots within the scope of IHT from April 2027, and to introduce reforms to relief for business and agricultural assets from April 2026.
The tax rates on dividends, savings, and property income will rise by two percentage points
Tax rates are set to rise for dividends, savings, and property income.
- Dividends – From April 2026, basic and upper rates of tax on dividend income will rise by two percentage points to 10.75% and 35.75% respectively. There is no change to the additional rate, which will remain at 39.35%.
- Property and savings – From April 2027, the rate of tax on property and savings income will increase by two percentage points across all tax bands to 22%, 42%, and 47% respectively.
The Government confirmed that, even after these reforms, 90% of taxpayers will still pay no tax on their savings. However, these changes are set to impact business owners and landlords.
The Chancellor says these increases will raise £2.2 billion in 2029/30.
The ISA allowance will be reformed for under-65s, and some allowances have been frozen
The Chancellor announced that from April 2027, the Individual Savings Account (ISA) allowance will change for under-65s.
As it stands, adults can contribute £20,000 across their ISAs, including Cash ISAs and Stocks and Shares ISAs, each tax year.
From April 2027, £8,000 of this allowance will be reserved exclusively for investments, leaving an available £12,000 that savers can pay into their non-investment accounts, such as Cash ISAs.
Savers over the age of 65 will continue to be able to contribute up to the maximum £20,000 into a Cash ISA each year.
The allowances for Junior ISAs and Lifetime ISAs are frozen until April 2031 at £9,000 and £4,000 a year, respectively.
Salary sacrifice on pension contributions to be capped at £2,000
The Chancellor moved to limit the National Insurance savings on pension contributions made under salary sacrifice.
Salary sacrifice schemes cost the Government £2.8 billion in 2016/17, but this figure was set to almost triple to £8 billion by 2030/31.
The Government will charge employer and employee National Insurance contributions (NICs) on pension contributions above £2,000 a year made via salary sacrifice. This will take effect from 6 April 2029.
The Chancellor says that many of those on low and middle incomes will be able to continue using salary sacrifice as normal, while high earners can expect to pay increased NI.
New “mansion tax” on high-value properties
The Chancellor announced the much-speculated “mansion tax” that will affect the top 1% of properties.
The new property surcharge will be paid alongside Council Tax.
There will be four price bands starting with an additional £2,500 for a property valued between £2 million and £2.5 million. For properties valued more than £5 million, the levy will be £7,500.
The measure is estimated to raise £400 million by 2031.
Welfare reforms expected to increase by 2029/30
The BBC reported that changes to the Government’s previously announced winter fuel payments and health-related benefits will cost £7 billion in 2029/30.
In addition, Reeves revealed she would remove the two-child benefit cap. This will cost £3 billion by 2029/30.
Removal of overseas access to Class 2 National Insurance contributions
As a result of a loophole in the Class 2 voluntary NICs regime, overseas individuals with a limited connection to the U.K. can build a State Pension entitlement through cheaper rates.
The Government is looking to end this by removing access to the cheapest Class 2 NICs for these individuals. Additionally, it will increase the initial residency or contribution requirements for those living outside the U.K.
The Chancellor also confirmed the Government’s commitment to the triple lock. From April 2026, this will increase the basic and new State Pension by 4.8%, offering up to an additional £575 per year to pensioners, depending on their entitlement.
A range of significant changes for business owners
In addition to the Dividend Tax increase, the Chancellor announced a range of changes that could affect business owners, including:
- Increases to both the National Living Wage (NLW) and National Minimum Wage (NMW). From 1 April 2026, the NLW paid to workers aged 21 and over will rise by 4.1%, from £12.21 to £12.71 an hour, increasing annual income by approximately £900 a year for full-time employees. For those aged 18 to 20, the NMW will rise by 8.5% from £10 to £10.85 an hour, equivalent to around £1,500 a year if working full-time. For 16- and 17-year-olds, and those on apprenticeships, the NMW will rise by 6%, going from £7.55 to £8 an hour.
- Listing Relief from Stamp Duty Reserve Tax for some businesses. The Chancellor said this will “make it easier for entrepreneurs to start, scale, and stay in the U.K.”
- Reduced Capital Gains Tax (CGT) relief for Employee Ownership Trusts (EOTs). When a business is sold to an EOT, CGT relief will fall from 100% to 50% starting from November 2025. This will raise £0.9 billion from 2027/28 onwards.
- Fully funded apprenticeships for under-25s. This will make them effectively free for small- and medium-sized businesses (SMEs) from April 2026.
- Lower business rates for more than 750,000 retail, hospitality, and leisure properties. This move will be funded through higher rates on properties worth £500,000 or more, such as warehouses used by online retailers.
- Customs duty will apply to parcels of any value from March 2029 at the latest. There is an existing exemption for parcels worth less than £135, favouring large-scale importers.
Other announcements that may affect you
- Household energy bills will fall. The Chancellor is scrapping the Energy Company Obligation (ECO) scheme, saying that on average, families will save £150 a year in 2026.
- A new tax on electric vehicles. The Electric Vehicle Excise Duty will come into effect in 2028 and will be 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrids. The rate per mile will increase annually in line with the CPI.
- Fuel duty will be frozen until September 2026. In addition, a new “fuel finder” will help drivers find the cheapest fuel, saving the average household £40 a year.
- Reducing the levy threshold on soft drinks. From 1 January 2028, the sugar tax will also be applied to milk-based drinks, including bottled milkshakes and lattes.
- A spousal exemption for agricultural and business asset IHT relief. Unused combined business and agricultural asset IHT relief will become transferable between spouses and civil partners.
- Tobacco and Alcohol Duty will both be uprated. Tobacco Duty will be uprated as announced last year, and Alcohol Duty will now rise with inflation.
- Rising taxes on online gambling. From April 2026, Remote Gaming Duty will increase by 21% to 40%. A new Remote Betting Rate set at 25% will be introduced from April 2027, though “in-person” betting will be exempt from the changes.
Other key thresholds that remain the same
More broadly, the Chancellor made no mention of other key thresholds that will remain the same. These include:
- The pension Annual Allowance
- Stamp Duty Land Tax for residential properties
- The headline rates of Income Tax, NI, and VAT, as outlined in the Government’s election manifesto.
Our Chief Investment Officer, Rory Smith, had the following to say following the Autumn Statement:
“After weeks of speculation, investors have finally got sight of the government’s latest fiscal plans and crucially steps it would take to meet its fiscal rules and rebuild a financial buffer. The initial read from markets is a positive one – U.K. equities have moved higher, the pound is broadly unchanged, and government bond yields have declined slightly across the curve.
A fiscal buffer of £22 billion by 2030/31 surpassed expectations of £15 to 16 billion, which is also more than double that of 12 months ago. This should provide the government with significant breathing space against any unexpected shocks. A higher tax take through targeted hikes and reform is forecast to generate £26 billion in additional tax receipts, some of which is earmarked for higher welfare spending.
Most of the tightening and tax hikes looks to be back-end loaded or “kicked down the road”, coming into effect from 2029, or around the time of the next general election This means the negative impact of tighter fiscal policy on the economy in the near-term may be limited and we may see a pick-up in activity near-term now that the budget uncertainty has been lifted.
Forecasts from the OBR suggest that the inflation impact should be limited, forecasting inflation declining to 2.5% in 2026, 0.40% lower than its original forecast. It remains to be seen whether increases to the national minimum wage could put some upward pressure on wages more generally, and see corporates look to cover higher costs through price increases. Meanwhile, estimates for growth in 2026 and beyond have been downgraded to 1.5%, bringing this closer into line with other official forecasts, following the downward adjustment to productivity improvements. Questions remain around a more long-term comprehensive growth strategy.
The net result is that it does little to change the dial for the Bank of England and interest rates in the near-term, with investors assigning a 92% probability that they will cut rates on 18 December, followed by one further cut in the New Year. From a gilt issuance perspective, public sector debt is forecast to rise slightly initially before starting to decline, absent a shock to the economy, potentially providing additional comfort in the near-term to the gilt market.
Investors were looking for reassurances in several areas – the size of the fiscal buffer, implications for future Gilt issuance, and the impact the fiscal measures announced would have on inflation, the economy and the outlook for interest rates. Judging by the moves post the announcement, there is a sense of relief that there were no nasty surprises, and for now, investors are prepared to give the government the benefit of doubt. Looking forward, we will continue to assess the impact of the budget on our positioning in both U.K. equities and fixed income.
Please note
All information is from the Budget documents on this page.
The content of this Autumn Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
While we believe this interpretation to be correct, it cannot be guaranteed, and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.