The twelve-week period from the Chancellor announcing the Budget date saw an armada of possible Budget measures floated into the media. You could be forgiven for some confusion about which rumours sailed into the Chancellor’s Budget speech and which sunk on route.

Once the Chancellor had abandoned a straightforward rise in income tax rates, it was inevitable that there would be a raft of tax changes, complicating the tax system still further and making advice more important than ever. Some are likely to be significant for you:

• Income tax freezes: A further three years have been added to the freeze on income tax bands and the personal allowances, taking it to the end of 2030/31 – one year longer than the rumour mill had suggested. The extended freeze will mean more taxpayers in general and more higher- and additional-rate taxpayers in particular. If you are married or in a civil partnership, you should review whether you can save tax by transferring the ownership of investments (and thus their income and capital gains) to your spouse/partner. There may also be scope for reducing taxable income without reducing your spendable income by restructuring how you hold your investments.
• Salary sacrifice: A £2,000 cap on the amount of salary that can be tax-efficiently sacrificed for pension contributions will be introduced from 2029/30. Any amount over the cap will be liable to national insurance contributions for both employer and employee. This may appear a buy-now-while-stocks-last opportunity, but while pensions remain highly tax-efficient, very large contributions may push some individuals above the lump-sum allowance, limiting how much tax-free cash they can take at retirement. With IHT rules changing from April 2027, those expecting very large pots should consider how much of their pot they expect to draw personally versus leave to beneficiaries.
• Dividends tax: The rate of tax on dividends for basic-rate and higher-rate taxpayers increases by two percentage points to 10.75% to 35.75%, respectively from 6 April 2026. The dividend tax rate is unchanged at 39.35% for additional rate taxpayers, as is the dividend allowance of £500. ISAs are an obvious route to shelter dividend income from tax, but their frozen contribution ceiling of £20,000 limits the scope for moving funds across a large portfolio. Other investments can shield dividends from an immediate tax charge, but whether they are right for you depends on your current and future circumstances and some complex number crunching.
• Property and savings: One year after the dividend tax increase, all tax bands for property income and savings income will be subject to a two-percentage point rise. At the same time there will be a reduction to £12,000 in the maximum subscription to a cash ISA for anyone aged under 65. If you hold a large cash buffer on deposit, the higher tax on interest should prompt a review of whether you can reduce the reserve or hold it in a way which defers or lowers your tax bill.

For more information on how any of these changes affect you, please contact us.

✣ The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change.

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