Autumn Budget 2025: what it means for your savings
The Budget brings big shifts for savers – from ISA limits to tax and pension changes. We break down what’s changed, and how it could affect your savings strategy.
This article is not advice. If you would like to receive advice on your savings and investments, consider speaking to a Financial Adviser.
The Chancellor’s Autumn Budget introduced several measures that reshape how savings and investments will be taxed and protected over the coming years. The policies announced paint a nuanced picture, particularly for those holding meaningful sums of cash or generating income through pensions, dividends, or interest.
From frozen tax thresholds to ISA reforms and changes to pension contributions, we break down the key measures – and what they could mean for your long-term financial plans.
Income Tax thresholds frozen until 2031
One of the most consequential announcements was the extension of the freeze on Income Tax thresholds from April 2028 until April 2031.
As a result, the Personal Allowance threshold remains unchanged. With wages continuing to rise, more people will gradually be drawn into paying tax – or paying tax at higher rates. As Simon Merchant, Flagstone’s CEO, commented:
‘Maintaining the same Income Tax bands means that more people than ever will be pushed into higher tax bands and pay more tax on their income. This disproportionately impacts those aged 65 and over. The Institute for Fiscal Studies says that almost two thirds of those aged 65+ will pay Income Tax this year – more than those aged 16-64.
‘It’s particularly hard for those nearing pensionable age for whom the chances that Income Tax bands will increase before they need them to look very slim.’
Saving for your pension knowing that you will pay considerable Income Tax on whatever you withdraw from it is a bitter pill to swallow.
For those approaching retirement, the lack of movement in thresholds makes it more important to plan how much of your future income comes from tax-free or tax-efficient sources.
Cash ISA allowance cut for under-65s – a major shift for savers
From April 2027, the amount under-65s can save tax-free in a Cash ISA each year will fall from £20,000 to £12,000. Savers aged 65 and over will continue to have access to the full £20,000 allowance.
This shift marks a notable change in how future tax-free savings will need to be managed – particularly for those who prefer holding larger sums in cash rather than investing.
Simon notes:
‘The £12,000 threshold for cash savings is more palatable than the lower caps touted previously, but it’s still a blow to younger savers. Savers should move what they can into their current £20,000 Cash ISA allocation before the threshold is reduced in April 2027.’
Policymakers hope the reduced allowance will encourage more investment in stocks, but consumer sentiment suggests otherwise.
The idea that a lower Cash ISA allowance will magically turn cautious savers into confident investors is deeply flawed. Savers want protection and autonomy, not pressure or paternalism.
Flagstone’s customer insights echo this: 53%* of Flagstone savers say they would be concerned about any requirement to invest in the UK market.
Their financial advisers agree. According to Flagstone’s pre-Budget poll**:
- 68% of advisers say reducing the Cash ISA limit won’t encourage more investment in UK equities
- only 20% say they’re seeing more UK equities that are undervalued and attractively priced
- 32% say they have not recommended UK-focused funds to clients for three or more years.
Higher taxes on savings interest, dividends, and rental income
From April 2026, the government will increase tax rates on savings interest, dividends, and property income by two percentage points.
Alongside the freeze on income-tax thresholds, this means many people will end up keeping less of the interest or investment income they earn. It’s a noticeable change for anyone who receives regular income from savings, investments, or property.
As a result, it becomes even more important to make use of tax-efficient accounts such as ISAs and pensions, where this income can remain shielded from the new charges.
Salary-sacrifice pensions capped – a major change for long-term savers
The Chancellor confirmed that from April 2029, only the first £2,000 of pension contributions via salary sacrifice will be exempt from National Insurance. Contributions above this will be treated as normal salary.
This will be particularly impactful for those who routinely use salary sacrifice to maximise pension contributions in a tax-efficient way.
Simon comments:
‘There is a real risk that, as workers’ take-home pay decreases, they will start to change their saving behaviours – and not for the better.
‘For those who do reduce pension contributions to mitigate this cap, it’s hugely important to establish good habits around excess take-home pay – ensuring that savings continue to accumulate both inside and outside the pension.’
This is a startling and scary step to creating a less affluent, more dependent later-life population.
This may shift savers toward building more wealth outside pension structures, particularly through Cash ISAs and high-interest savings accounts.
Council tax surcharge on homes worth over £2m
The government has confirmed a new council tax surcharge for homes valued above £2m, starting in April 2028. This measure (often referred to as a ‘mansion tax’) is expected to raise around £400m in the 2029–30 tax year.
There will be a high-value council tax surcharge of £2,500 a year for homes worth more than £2m, rising to £7,500 a year for properties valued above £5m. This will apply on top of normal council tax.
While only a small number of households are likely to be affected, it does create an additional ongoing cost for owners of high-value homes and is worth factoring into long-term financial planning.
Make more of your money with Flagstone
As savings rules and allowances shift, having a clear view of your options matters more than ever. That’s where Flagstone comes in.
Through our platform, you can access a smorgasbord of savings accounts from over 65 banks, and compare, switch, and track savings performance – all in one platform, with one password.
Discover how to protect and grow your cash today.
*Survey of 450 Flagstone savers, November 2025
**Survey of 103 UK financial advisers, November 2025
Next steps for savers
This Budget reinforces the importance of taking a planned, proactive approach to how and where your money is held. You may want to:
- make full use of your current £20,000 Cash ISA allowance while it's available
- review where your income and interest are generated – and whether you can shield more in tax-efficient accounts
- revisit long-term pension-funding plans in light of the salary-sacrifice cap
- take stock of your overall savings structure to ensure it remains tax-efficient under the new framework
- consider professional financial advice if you have multiple income streams or larger cash portfolios
Understanding financial terminology
The Autumn Budget can be challenging to follow. To make things simpler, we’ve created a savings glossary that explains key financial terms in plain English, so you can feel more confident when it comes to managing your money.
