The Autumn 2025 Statement

There was so much bad news predicted that everyone breathed a sigh of relief when November 26th came, as it could have been so much worse. Yet, for financial services, the bad news still outweighed the good news by quite some margin. Here we go.

Salary Sacrifice has been capped at £2000 per year, which means that employees will have to pay employee national insurance on their contributions above this amount. The good news is it does not kick in until 2029. Even when it does, it still pays to make big pension contributions into a pension as you gain income tax relief on the full amount.

Income Tax and Inheritance Tax bands have been frozen until 2031. This is known as fiscal drag, which is like a cancer on your wealth. It drags non tax-payers into paying tax, basic rate tax-payers into higher rate tax bands and higher rate into additional rate tax bands. Wages have gone up with inflation over decades and now we are paying the government more of our pay rises, when it was designed to allow us to simply maintain our income in real terms. At least Dick Turpin wore a mask.

The Nil Rate band of Inheritance tax has not been increased since 2009. So people whose assets are only increasing with inflation are going to pay the Chancellor sheds more money when they die. Daylight robbery. In the USA your estate has to exceed more than $13,999,000 before you pay IHT. Here it is either £325,000 or £500,000. Anything above is taxed at 40%,

The Government are increasing income tax on dividends, rental income and savings income. Investors will be affected by this, but especially anyone who pays themselves dividends i.e. limited companies. Socialists always whinge about the fact that directors only have to pay 8.75% dividend tax but the conveniently forget that their company has to pay 26.5% corporation tax on top of the dividend tax. So companies are getting squeezed again. This kicks in from April 2026.

Owning rental property is getting to be an expensive business. You would think that after the stamp duty changes, loss of mortgage interest relief, decreased capital Gains tax allowances and decreased landlord protection, they would not do anything else. But they have. They have slapped an extra 2% on rental income as well to make it "fairer" compared to salaried employees. They ignore the risk property investors take in managing property. This kicks in from April 2027.

Basic rate tax-payers can earn £1000 per annum of interest before they pay income tax (£500 for higher rate tax-payers). Any savings income you earn above these rates will incur an extra 2% income tax too. This kicks in from April 2027. Using ISAs has never been more important. Mind you, they are attacking Cash ISA holders too.

Currently you can place up to £20,000 into an ISA and it does not matter whether you opt for Stocks and shares or a cash ISA. From April 2027, you can only put up to £12,000 into a Cash ISA, unless you are 65 or older. The Chancellor states this is to encourage investing into the UK Stock-market. In our portfolios, only 3% is invested in the UK, which reflects the UK's share of the global stock-market. So it isn't going to make a lot of difference. As global shares aim to get an average return of 10% per annum and the best Cash ISAs tend to offer just over 4% per annum, it is usually best to put put the tax-free ISA wrapper around the higher returning investments. So always go for a Stocks and Shares ISA before a Cash ISA, if you want your money to work harder for you in a tax-free environment.

And now the good news: Business Property Relief was previously capped at £1mn in last year's Budget, meaning that if you owned a qualifying business, the first £1mn was Inheritance Tax (IHT) free, the rest taxable at 20%. Well, this allowance is now transferable from April 2026. A couple own a business worth £2mn. If the man dies and leaves everything to his wife, on her death she would currently only have one allowance, so their beneficiaries would pay £200,000 in IHT. From April, her executors can claim both allowances, so there will be no IHT. This will stop lots of businesses from having to close to pay the IHT which is good news. But it does NOT make up for the dreadful attack on farmers and businesses last year.

As you can see, the bad outweighs the good by quite some margin.

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