So after month’s of speculation, we finally got to hear what the Chancellor’s latest Budget had in store for us – although the OBR did try to spare us from having to sit through an hour of “it’s not our fault, it’s everyone else’s” by leaking the information on their website before she got to the dispatch box!
On the positive side, there were no changes to pension tax relief, no changes to the 25% tax-free pension lump sum, and no new restrictions on gifting for inheritance tax.
There were however quite a few changes that I think are worth bringing to your attention and so I’ve summarised the main points, how they may affect you, and what planning opportunities are available to help you stay ahead.
Pensions & Retirement Planning
Pension Tax Relief & Tax-Free Cash
Thankfully there was no change to tax relief on contributions or the 25% tax free allowance. This means pensions are still generous. and worth maximising. This is a big relief — especially after the speculation about cuts (although this happens every budget!!)
The biggest change for pensions starts in 2029 when National Insurance savings on salary sacrifice will be capped at £2,000 per year.
Let me explain…
At the moment, paying into pensions via salary sacrifice saves NI for both employers and employees.
What this means in reality:
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If you earn under £50,270 and you pay into a pension via salary sacrifice then you will start to pay 8% on any sacrificed salary above £2,000. If you earn over £50,270 your NI increases to 2% on the extra
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Employers will also lose part of their NI saving → some may reduce the contributions they top up for staff
Example:
Sarah earns £50,000 and sacrifices £4,500 a year into her pension.
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First £2,000 → no NI
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Extra £2,500 → will be taxed at 8% NI = so £200 less in her pocket
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Her employer may also contribute less since their saving is reduced
Opportunity:
Look to maximise salary sacrifice arrangement between now and 2029. You may still use salary sacrifice to:
✓ Retain Child Benefit
✓ Retain personal allowance for higher earners
✓ Reduce adjusted income to avoid tax traps
We’ll review this together well before 2029.
The other pension change worth noting is the fact that the triple lock remains on the state pension but, because the State Pension is rising and the Personal Allowance is frozen until 2030, many pensioners will soon pay income tax purely on their State Pension. The government says they’ll try to simplify this — I’ll keep you updated.
Tax Increases on Dividends, Savings & Rental Income
The table below shows the increases in tax for savers, investors and landlords. These increases are to be spread over two years:
| Income Type | Date | Current | New Rate |
|---|---|---|---|
| Dividends – Basic rate | Apr 2026 | 8.75% | 10.75% |
| Dividends – Higher rate | Apr 2026 | 33.75% | 35.75% |
| Savings income (interest) | Apr 2027 | 20% | 22% |
| Property income – Basic | Apr 2027 | 20% | 22% |
| Property income – Higher | Apr 2027 | 40% | 42% |
Dividend allowance stays at just £500, so investing tax-efficiently is more important than ever.
Opportunities:
✓ ISAs and pensions become even more valuable as they grow tax free.
✓ Offshore/onshore bonds can still be tax-efficient when used properly
✓ First call for higher-rate landlords: consider company structuring or selling unprofitable properties
Example:
David receives £10,000 in dividends taxed at higher-rate.
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Now: £3,375 tax
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From 2026: £3,575 tax – £200 extra each year.
Pamela receives £700 per month rental profit from a buy to let
- Now : £1,680 tax
- From 2026 i: £1,848 tax – an extra £168 each year.
Small changes individually — but add that up over years, and it’s material.
ISAs – Big Change for Cash Savers
From April 2027:
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Only those aged 65+ can use the full £20,000 Cash ISA allowance
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Under-65s limited to £12,000 Cash ISA + £8,000 Stocks & Shares ISA
Positive angle:
The government is nudging long-term savers toward investments that traditionally offer better returns over time.
A reform to Lifetime ISAs is also on the way — likely focusing purely on first-time buyers.
“Mansion Tax Lite” – High Value Council Tax Surcharge
For UK homes worth £2 million+, from April 2028:
| Property Value | Annual Surcharge |
|---|---|
| £2m–£2.5m | £2,500 |
| £2.5m–£3.5m | £3,500 |
| £3.5m–£5m | £5,000 |
| £5m+ | £7,500 |
Still cheaper than a full wealth tax — but worth budgeting for.
If you own a high-value property, we should discuss:
✓ Long-term ownership strategy
✓ Whether it remains tax-efficient in your estate plan
Other Tax Points
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VCT up-front tax relief cut from 30% to 20% (Apr 2026)
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Personal Allowance must be applied to earned income first from Apr 2027 (reducing some dividend tax planning flexibility)
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Business owners especially may need updated planning
So What Should You Do?
| Area | Action |
|---|---|
| Salary sacrifice | We’ll review your strategy ahead of 2029 |
| Investments (ISAs, dividends, savings) | Use all tax-sheltering opportunities possible – especially pensions and ISA allowances. |
| Rental income | Review profitability, structure, and tax planning |
| State pension | Ensure your retirement income plan reflects rising taxable income |
| Estate planning | No changes for now — still opportunities to secure tax-efficient legacies |
Final Thoughts
This Budget wasn’t dramatic — but it quietly raises tax for millions of people (especially savers and investors) without changing headline tax rates.
That means:
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More income will be dragged into higher tax bands
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More tax paid on investments and rental property
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Tax-efficient financial planning becomes even more valuable
If you’d like to understand how these measures affect you personally — or where opportunities lie — please get in touch.
Together, we’ll continue to make sure your retirement plans, investments and tax strategy stay on the front foot.
