Tailored Budget response vital

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After all the expectation, the Autumn Budget itself felt surprisingly muted. Even so, its impact should not be underestimated. The headline message is clear – the group expected to contribute most to repairing the public finances is now far wider than many assume.

For years, it has been easy to fall back on the idea that the burden would fall primarily on the very wealthiest owners of land, companies, or investments. The new measures confirm that this is no longer the case. A prolonged freeze on allowances and thresholds means that individuals who would never have imagined being in the Chancellor’s sights may now find themselves paying considerably more.

This is not a judgement on the rights or wrongs of the decisions taken by Rachel Reeves. It is simply recognition that the financial consequences will fall across a broader section of the population than before.

Income Tax illustrates this clearly. Ministers have given repeated assurances about not raising headline rates. However, holding thresholds frozen for a further three years means that more people will pay tax for the first time and many existing taxpayers will be drawn into higher bands. The Budget documents indicate that this approach alone is expected to raise about £8 billion.

Those with savings or investments will also face higher liabilities, as changes to dividend, savings and property income tax feed through – noting that rental income changes only apply in England and Wales at the moment, although they could be mirrored in Scotland in January’s Scottish Budget.

Stephanie Pratt | Supplied

Pensions will not escape scrutiny either. Salary sacrifice will be capped at £2,000 per year, with contributions above this treated as taxable income. This change will influence long-term planning for many people who rely on salary exchange to maximise retirement savings. There are also new powers for executors to request that pension administrators withhold part of taxable benefits for up to 15 months in certain circumstances, which may affect estate administration and forward planning.

Inheritance Tax (IHT) remains one of the most significant areas to watch. The nil-rate band, residential nil-rate band and the agricultural and business property relief thresholds will all be frozen until 2031. Rising asset values mean that many estates which were previously below the threshold will now fall within scope. A helpful development is that the £1 million agricultural and business property allowance announced in the 2024 Autumn Budget will be transferrable between spouses and civil partners. This brings it into line with other IHT allowances, supporting succession planning, although specialist advice continues to be essential.

Beyond tax, other measures will still shape household finances. The National Living Wage will rise, fuel duty will increase, and a new charge will apply to electric vehicles. The ISA system is being reshaped, with a new £12,000 cap for Cash ISAs designed to encourage more people to use investment ISAs within the unchanged £20,000 total.

Scotland will also receive £820m through the Barnett Formula, which means further announcements are expected in the Scottish Budget early next year.

What all this shows is that the effects of the 2024 and 2025 Budget measures will unfold over several years. The changes announced last year have not yet fully taken effect. More proposals will come in 2026. As thresholds remain static and living costs rise, families, individuals and business owners will find that long-standing arrangements may no longer provide the protection or efficiency they once did.

This is a crucial moment to review asset ownership, pensions and savings, wills and trusts, and future planning. Clients with complex estates, international links or significant investment portfolios may be particularly exposed to the cumulative effect of these changes. A proactive review now will help ensure affairs remain resilient and aligned with an evolving financial landscape.

The teams at my firm, Thorntons, are already analysing the fine print and advising our clients on how best to respond. As always, tailored advice is essential before taking any financial action, but it matters more than ever at a time when the scope of tax liabilities is widening and the rules are shifting beneath our feet.

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