Speculation in the lead-up to the Chancellor’s Autumn Budget created an atmosphere of uncertainty, with many unsure whether manifesto pledges would hold and where the fiscal burden might ultimately fall. As expected, the measures announced will be felt most sharply by landlords and pensioners, with targeted increases to tax rates on property income and investment income.
These changes carry direct implications for many individuals and families across Cambridge and our wider client base. To help you navigate the impact on your personal tax affairs, we have summarised the key announcements from this Budget below:
1. Tax rates and thresholds
The Chancellor has extended the freeze on the personal allowance and higher-rate thresholds until April 2031. As incomes rise, more individuals will be pulled into higher tax bands, continuing the trend of fiscal drag.
Alongside these freezes, the government has confirmed increases to dividend, property and savings (i.e. interest) income tax rates over the next two years:
- Dividend tax rates will rise first from April 2026, with the basic and higher rates rising by 2% to 10.75% and 35.35% respectively. The additional rate remains unaffected.
- Property income tax rates rise by 2% across all bands from April 2027.
- Savings income follows the same timetable as property income, with a 2% rise from April 2027
To make these changes clearer, we have set out the current and future rates side by side:
Tax rates currently in force
| Property income | Savings income | Dividend income | |
| Basic (to £37,700) | 20% | 20% | 8.75% |
| Higher (£37,701–£125,140) | 40% | 40% | 33.75% |
| Additional (£125,141+) | 45% | 45% | 37.35% |
Tax rates 2027/28 tax year
| Property income | Savings income | Dividend income | |
| Basic (to £37,700) | 22% | 22% | 10.75% |
| Higher (£37,701–£125,140) | 42% | 42% | 35.75% |
| Additional (£125,141+) | 47% | 47% | 39.35% |
2. Pensions and investments
Salary sacrifice capped
Salary sacrifice tax relief will be capped at £2,000 per year. Employer and employee national insurance will apply on any sacrificed amount above this threshold from April 2029. This reduces the appeal of large pension salary sacrifice arrangements and may see a reduction in such benefits being offered by employers in the future.
Individual Savings Accounts (ISAs) and tax-efficient investment reforms
The government has announced a variety of changes to the ISA regime, Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) designed to nudge investment towards startups and smaller companies.
From 6 April 2027, the cash ISA subscription limit for under-65s will be capped at £12,000. The overall ISA limit will remain at £20,000, incentivising those who wish to optimise their ISA subscriptions towards Stocks & Shares or Innovative Finance ISAs for the remaining £8,000.
In order to better balance the tax advantages of VCTs compared to EIS, income tax relief from VCTs will reduce from 30% to 20%. This will take effect from 6 April 2026.
Finally, the government has also committed to increase company investment limits for VCTs and EIS from 6 April 2026. This should increase the scope of eligible investments for those seeking to invest in tax-advantaged instruments.
3. Inheritance tax (IHT)
The chancellor has confirmed IHT reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) announced in October 2024 budget are to proceed according to the draft legislation released in July.
Perhaps more unexpectedly, the Government has announced that the £1 million allowance for full Business Property Relief (BPR) and Agricultural Property Relief (APR) will now be transferable between spouses and civil partners. Importantly, this applies even if the first death occurred before 6 April 2026, offering retrospective benefit to surviving spouses. While this should greatly simplify tax planning, it remains crucial to review your inheritance tax exposure to ensure your estate has the means to fund any potential IHT charges.
This is especially important as the chancellor has extended the freeze on IHT thresholds (including the £1,000,000 APR/BPR allowance) until April 2031. We expect this will pull many more estates into the scope of IHT as property prices rise.
4. Other changes
The Government is introducing a High Value Council Tax Surcharge (HVCTS) in England for residential properties worth £2 million or more, from April 2028. The charge will start at £2,500 per annum, rising to £7,500 per annum for properties valued above £5 million. This will likely have a significant impact on taxpayers living in Cambridge and London, where property prices are high.
The government has also announced the introduction of an Electric Vehicle Excise Duty of 3p per mile coming into effect from April 2028. We expect more details on the relevant reporting requirements and how the charge will be enforced will follow.
What now?
We expect remuneration planning will become especially relevant in the wake of this budget. Landlords in particular will need to pay close attention to how remuneration planning and corporate ownership structures interact with the new property income rates and the ongoing restrictions on mortgage interest relief.
If you are concerned about the impact of the budget on your personal tax planning and would like to explore options, please get in touch.
