On Wednesday, Rachel Reeves delivered one of the most anticipated Budgets in recent years. 

Our latest podcast episode and analysis break down what’s changed, what’s stayed the same, and what matters most for your money.

Now that the dust has settled, we’ve outlined the key changes and how they could shape personal finances in the years ahead below.

Frozen tax allowances and bands through to 2030

What happened?

Income tax bands will stay frozen (Scotland will continue to set its own income tax rules) until 2031.  

Whilst there were no changes to income tax rates themselves, many of us will still end up paying more income tax over time. This is because as wages and pensions rise, but the thresholds stay the same, more of your income can fall into higher tax bands.

The technical term for this is ‘fiscal drag’, which means more people are “dragged” into higher tax bands even though their day-to-day spending power hasn’t necessarily increased.

It can be especially relevant if your income moves above £100,000. At that point, your personal allowance starts to taper away, which creates an effective tax rate of 60% on that slice of income.

What to consider 

• Check whether you’re at risk of moving into a higher tax band. Freezing the thresholds means you could drift into a higher band just through normal pay rises.
• Pension contributions can help manage which tax band you fall into. Contributing to a pension can reduce your taxable income and still benefits from tax relief. So if you’re close to a band threshold, contributions might help you stay below it.
• ISAs become more valuable for long-term tax efficiency. With frozen tax bands and rising incomes, the mix of pension vs ISA contributions matters more. ISAs don’t lower your taxable income, but everything inside them grows tax-free. This can help keep more of your savings sheltered from future tax, depending on how markets perform and how you use the ISA allowance.

Cash ISA allowance to be cut to £12,000

What happened?

From April 2027, the amount you can place into a Cash ISA each year will be capped at £12,000. Your total ISA allowance will remain at £20,000. But how you can use it will depend on your age:

• If you’re over 65: Nothing changes; you can still put the full £20,000 into a Cash ISA if you wish.
  
• If you’re under 65: You’ll still have a £20,000 overall ISA allowance, but only up to £12,000 can go into a Cash ISA. 

No matter which tax band you’re in, your Personal Savings Allowance still plays a part. That means no tax on the first £1,000 of savings interest for basic rate taxpayers and £500 for higher rate taxpayers, with no allowance for additional rate taxpayers.

What to consider 

These updates highlight why thinking long term can work in your favour. The £20,000 allowance for Stocks and Shares ISAs has stayed the same, which can make them a useful option once your emergency fund is in place and you’re thinking beyond the next 3 to 5 years.

Cap introduced on National Insurance savings from salary-sacrifice pension contributions

What happened?

The way National Insurance (NI) applies to pension contributions made through salary sacrifice will change. Right now, when you pay into your pension through salary sacrifice, you don’t pay any National Insurance on that money.

From April 2029, only the first £2,000 each year will stay exempt from National Insurance. Anything above this will be charged at the usual National Insurance rates, similar to how employer pension contributions work today.

What to consider 

• Review how much you contribute through salary sacrifice today. If you sacrifice more than £2,000 a year, your take-home pay may change once NI is applied above that level.
• Check whether it still helps you manage your taxable income. Salary sacrifice can affect things like child benefit or childcare support, so it’s worth seeing how the new rules alter the picture.
• Look at whether you want to maximise contributions before 2029. Bringing forward some pension savings might make sense depending on your goals and cash flow.
• Remember, pensions still deliver valuable tax relief. Even with the NI change, they remain attractive for higher and additional-rate taxpayers.

What else has changed?

• The rate of tax on ‘non-earned’ income will be broadly increased by 2% across the board:
  • Savings (interest) and rental income taxes will increase from April 2027 to 22%,42% & 47%.
  • Dividend taxes will increase to 10.75% and 35.75% from April 2026 (the highest rate, 39.35%, will remain unchanged). 
• Venture Capital Trust (VCT) income tax relief will be cut from 30% to 20% from April 2026.
• From April 2028, a new property surcharge will be applied to owners of properties worth over £2 million, depending on how far above the threshold the property sits: 

Threshold	Rate
£2 million to £2.5 million	£2,500
£2.5 million to £3.5 million	£3,500
£3.5 million to £5 million	£5,000
£5 million +	£7,500

A future revaluation of council tax bands F, G and H could bring more homes into scope, so it’s worth keeping an eye on how this develops.

Want to talk it through?

If you’re unsure what the changes announced in the Autumn Budget mean for you, you can speak to an expert at Octopus Money.

Book a free Starter Session with an Octopus Money expert.

This is for general information only and isn’t personal advice. The value of investments, and any income from them, can go down as well as up, and you may get back less than you put in. How you’re taxed depends on your individual circumstances and tax rules can change.

Any examples of future impacts, benefits or outcomes are just illustrations. They aren’t guaranteed and shouldn’t be taken as predictions.

This article gives a broad overview of the recent Budget. It doesn’t cover every announcement, and some measures are still proposals. These could change as they progress through Parliament, so the final rules may differ. Everything shared here reflects our understanding of the legislation and proposals at the time of writing.

If you’re considering adjusting pension contributions, using salary sacrifice or investing through an ISA, make sure the approach suits your situation. It should be affordable and still allow you to keep an appropriate emergency fund.