This article summarises the Autumn Budget 2025 measures affecting personal tax, with a continued emphasis on frozen thresholds alongside targeted rate changes that will gradually increase the tax burden for many individuals. It outlines the ongoing freeze to Income Tax and National Insurance bands, updates to allowances, and changes to the taxation of savings, dividends, and property income from 2026 and 2027 onwards.
It also highlights reforms to income tax ordering rules, confirmed pension tax limits, and forthcoming changes to Individual Savings Accounts. Overall, it provides individuals with a clear framework for understanding how personal income, investments, and savings may be impacted, reinforcing the value of forward planning in a tightening personal tax environment.
Tax bands and rates
The basic rate band remains at £37,700, with the higher rate threshold remaining at £50,270. The additional rate threshold remains at £125,140. The freeze of these thresholds will continue until April 2031. The NICs Primary Threshold and Lower Profits Limit remain at £12,570. The NICs Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 up to April 2031 as well. Other employer NICs relief thresholds aligned to the Upper Earnings Limit will also be maintained at this level.
The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.
The personal allowance
The Income Tax personal allowance is fixed at the current level of £12,570 and will remain frozen until April 2031.
There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. This means that there is no personal allowance where adjusted net income exceeds £125,140.
The government will increase the married couple’s allowance and blind person’s allowance from6 April 2026 by the CPI rate for September 2025 of 3.8%.
Tax on property income
Property income is any income from letting land and buildings.
Individuals have a Property Allowance. This exempts property income of £1,000 or less. Property income over £1,000 can be offset either by the £1,000 Property Allowance or by deducting relevant expenses.
The government is introducing the following separate tax rates for property income from 2027/28:
- 22% for basic rate taxpayers
- 42% for higher rate taxpayers
- 47% for additional rate taxpayers.
Tax on savings income
Savings income is income such as bank and building society interest.
The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of Income Tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.
Savings income within the allowance still counts towards an individual’s basic or higher rate band and so may affect the rate of tax paid on savings above the Savings Allowance.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. This will remain at £5,000 until 5 April 2031. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income, less allocated allowances and reliefs) exceeds £5,000.
The current tax rates on savings income will be maintained for 2026/27. From 6 April 2027, there will be a 2% increase in the applicable tax rates. The basic rate will increase to 22%, the higher rate will increase to 42% and the additional rate will increase to 47%.
Tax on dividends
Currently, the first £500 of dividends is chargeable to tax at 0% (the Dividend Allowance). This £500 is retained for 2026/27.
These rules apply to the whole of the UK.
From 6 April 2026, there will be a 2% increase in the ordinary and upper rates of Income Tax applicable to dividends. The additional rate will remain unchanged at 39.35%
Dividends received above the Dividend Allowance will be taxed at the following rates for 2026/27:
- 75% for basic rate taxpayers
- 75% for higher rate taxpayers
- 35% for additional rate taxpayers.
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.
To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.
Income Tax ordering rules
The Income Tax ordering rules will change from 6 April 2027. The personal allowance will be deducted from employment, trading or pension income first. Currently, individuals can choose which income the allowance is offset against.
Pension tax limits
For 2026/27:
- The Annual Allowance (AA) is £60,000.
- Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a minimum AA of £10,000.
- The Lump Sum Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum, is £268,275.
- The Lump Sum and Death Benefit Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum in certain circumstances, is £1,073,100.
Individual Savings Accounts
For 2026/27, the limits are as follows:
- Individual Savings Accounts (ISAs) £20,000
• Junior ISAs £9,000
• Lifetime ISAs £4,000 (excluding government bonus) - Child Trust Funds £9,000.
These limits will remain frozen until 5 April 2031.
From 6 April 2027, the annual ISA cash limit will be set at £12,000. The remaining £8,000 will be designated for stocks and shares ISA investment. This restriction will not apply for those over the age of 65, where the cash ISA limit will remain at £20,000.
If you would like to discuss the impact of the Autumn Budget on your personal taxes, then please do get in touch by calling us on 01623 490 120 or email