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The Chancellor delivered her much anticipated second Autumn Budget on 26 November 2025. Despite weeks of speculation regarding significant changes to Inheritance Tax, Principal Private Residence Relief from Capital Gains Tax, the taxation of pensions, and the possible introduction of a wealth tax, the announcements were less radical than expected. The focus was on fiscal stability and raising revenue through stealth tax measures rather than headline rate increases.
We have set out below some of the key personal tax highlights from the Budget.
Income Tax
The freeze in income tax and National Insurance thresholds has been extended for another three years until April 2031.
Perhaps more surprisingly (and contrary to her election manifesto), the Chancellor announced an increase in the basic and higher rates of income tax on dividends, property and savings income by two percentage points, to take effect as follows:
- From April 2026, the ordinary and upper rates of tax on dividend income will rise to 10.75% and 35.75%, respectively. There will be no change to the dividend additional rate of 39.35%.
- From April 2027, the basic rate, higher rate and additional rate for property and savings income will increase to 22%, 42% and 47%, respectively.
Capital Gains Tax (CGT)
Whilst there was no increase to the rate of CGT, relief on disposals to employee ownership trusts was reduced from 100% to 50% with immediate effect.
Inheritance Tax (IHT)
Predictably, the IHT nil-rate bands and the £1 million allowance for Agricultural Property Relief (APR) and Business Property Relief (BPR) will remain frozen at their current levels until April 2031.
One helpful change is that from 6 April 2026, the £1 million allowance for the 100% rate of APR and BPR will be transferable between spouses and civil partners, including if the first death was before 6 April 2026.
Mansion Tax
There had been much speculation regarding a new property tax, and this was announced in the form of a high value annual council tax surcharge on properties in England worth more than £2 million. The surcharge, which applies from April 2028, is somewhat more modest than feared, with a top rate of £7,500 per year.
The surcharge will be collected alongside council tax, levied on owners, although paid to central government rather than local councils.
There will be four price bands as follows:
| Property Value | Surcharge |
| £2m – £2.5m | £2,500 |
| £2.5m – £3.5m | £3,500 |
| £3.5m – £5m | £5,000 |
| £5m+ | £7,500 |
ISA Reform
There had been much speculation that cash ISAs would be abolished in the Budget, but it was announced that from April 2027, the cash ISA allowance will be reduced to £12,000 for under 65s, with £8,000 exclusively for investments. Over 65s will retain the full cash allowance of £20,000 and the investment ISA allowance will remain at £20,000.
Pensions
There had also been concerns regarding changes to the taxation of pensions and a possible reduction in the tax-free lump sum. Whilst that did not materialise, it was announced that National Insurance is to be charged on salary-sacrificed pension contributions above an annual £2,000 threshold from April 2029.
Conclusion
Overall, the tax changes were less dramatic than expected, although the vast array of tax tweaks will require careful analysis and scrutiny over the coming weeks. There is a sincere sense of relief that the period of intense speculation is over, and we now have some long-awaited clarity.
At Michelmores, we are here to help our clients navigate any issues or uncertainty arising from these fiscal changes. For further information, please contact a member of our Tax, Trusts & Succession Team.
For the Budget impact on UK and international private clients with offshore interests, read here.