Such was the excitement held for the Chancellor’s November 2025 budget statement, people can be forgiven for not noticing certain other news. I’d like to thank the BBC for, in their post-budget article, reminding me that Lucozade – like so many other great old British marques – was founded in Newcastle (although like many great old British marques no longer under British ownership). They also reported that Lucozade has less sugar per 100g than an Arla strawberry protein shake, and close to half that of a Starbucks iced latte. There you go.
In other news….
Financial Services Compensation Scheme
A few days before the Chancellor’s budget statement, it was announced that the Financial Services Compensation Scheme (FSCS) compensation limit for deposits is increasing by quite a margin.
Under the Deposit Guarantee Scheme Regulations 2015, the Prudential Regulation Authority (PRA) is required to review the FSCS deposit compensation limit periodically – at least every five years. The PRA consulted on a proposed increase to the deposit compensation limit in March 2025 and confirmed its final rules in November 2025. From 1 December 2025 the FSCS deposit protection limit is rising from £85,000 to £120,000. This means that if you hold deposits or savings with a UK-authorised bank, building society or credit union and it goes out of business, the FSCS can compensate you up to the new limit of £120,000 per eligible person, per authorised firm. Additionally, for temporary higher balances such as those occurring due to selling your house or receiving inheritance, the limit is increasing from the current £1m to £1.4m (this applies for a 6-month period).
For full details please refer to the FSCS website.
The Budget – November 2025 “Autumn Statement”
Then of course, there was the Chancellor of the Exchequer’s much anticipated budget statement. I am not going to list all the changes here, but am highlighting some key factors for consideration from a financial planning perspective. For a more detailed analysis of how changes may affect you, it is best to speak to your financial adviser or other suitably qualified professional with regard to your circumstances.
Pensions
For many years, there has been speculation about the level of tax-free cash being reduced. Once again, this has not happened, so tax free cash remains (as a default) at 25% of pension value subject to the Lump Sum Allowance cap (£268,275). Some people may have schemes or protections that allow for more tax-free cash, and for those who crystallised pension under the old (pre 6th April 2024) regime and are wondering how much tax-free cash allowance they have remaining, a Transitional Tax Free Allowance Certificates MIGHT allow for higher tax free cash. Advice should be sought on these matters, as applying for a TTFAC can also result in lower tax-free cash in some cases.
The annual allowance for pension funding remains unchanged and rates of tax relief remain unchanged.
What will be changing relates to salary sacrifice; where employees give up some of their salary in exchange for an employer pension contribution. Employer contributions are free from both income tax and National Insurance (NI). As of April 2029 the NI relief from salary sacrifice will be limited to £2,000 of sacrificed salary p.a. beyond which any further salary sacrificed contributions will simply attract income tax relief. For a higher rate taxpayer this will not have a large impact as the NI rate is only 2%. For a basic rate taxpayer it is more significant at 8%. The employer rate is most significant at 15%, although who loses out will depend on how much (if any) of this employer NI saving is passed on to the employee.
We have until 2029 before this comes into force, so some employees may opt for forward planning, subject to affordability and the risk that future employment is not guaranteed.
State Pension
The much discussed “Triple lock” remains. The 2026 increase will be based on the Average Earnings increase = 4.8%.
Tax on Income
Remember that income tax is a devolved issue so the Chancellor’s announcements re core income tax applies to UK rates and thresholds where devolved administrations do not take a different approach. Scotland already applies (overall) higher income tax rates and has different thresholds (not for dividends and savings).
The core income tax rates and allowances are not changing. The tax band thresholds were already frozen until 2028 – this has been extended to 2031. This raises nothing for the Treasury now, but creates further mid-long term tax revenue.
Dividends, Savings and Property Income are to be subject to an increase in taxation; +2% across all bands except the additional rate for dividends.
From April 2026, Dividend taxation will increase to 10.75%/35.75% at the basic/higher rate. The additional rate will remain at 39.35%.
From April 2027, Savings taxation will increase to 22%/42%/47% at the basic/higher/additional rate bands.
From April 2027, taxation on property income will increase to 22%/42%/47% at the basic/higher/additional rate bands.
The greatest impact here in the short-term is probably for small/medium sized business owners, for whom remuneration is mainly dividend. On the surface it may seem like the dividend rate remains a nice low rate (compared to standard income tax rates), but it needs to be remembered that dividends are paid from company profits after corporation tax has been applied. It will still work out more tax effective for a business owner to take dividends rather than salary (after the personal allowance is used) but the margin has narrowed. Business owners take on considerably more risk than employees, and are only paid if they personally generate the income (I have to admit to being based here… but I feel it is a fair statement). I do not believe, though, that this will discourage people from seeking to run their own small businesses as there are other reasons for wanting to do so – autonomy being one of them and, arguably, the feeling that running one’s own business is part of Maslow’s “Self-actualisation”. People can of course, elect to run their own business as a sole trader rather than as a company, so this change may impact this decision process for small businesses.
There is a more general concern that there are further increases to the costs associated with UK business ownership. The minimum wage (for 21+) will be increasing by 4.1% – this follows a significantly higher increase from the 2024 Autumn Statement. For some businesses, these additional business costs could be very impactful.
Class 1 NI contributions (employees and self-employed) and class 1A NI contributions (employers) limits will also remain frozen from April 2028 to April 2031.
The Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) will increase by the September 2025 CPI rate of 3.8% from 2026-27. The LEL will be £6,708 per annum and the SPT will be £7,105 per annum.
For those paying voluntarily, the government will also increase Class 2 and Class 3 NI rates by September CPI of 3.8% in 2026-27. The main Class 2 rate will be £3.65 per week, and the Class 3 rate will be £18.40 per week.
There is also a change with regard to voluntary NI contributions for periods abroad from April 2026. Loopholes in the current rules allow people with a limited connection to the UK to build UK State Pension entitlement at a cheaper rate whilst overseas, but these loopholes are to be closed. The Government intends to remove access to the cheapest Class 2 voluntary NI contributions for individuals abroad, and increase the initial residency or contributions requirement for voluntary NI contributions to 10 years. This will not affect voluntary NI contributions for time abroad before 6 April 2026.
Inheritance Tax
The Oct 2024 budget announced significant changes with regard to IHT, in particilar with regard to pensions, Agricultiral Property Relief and Business Relief. There was little of note in this Autumn statement.
One change is that the IHT relief afforded to individuals via Business Relief and Agricultural Property Relief allowances are now transferable between spouses on death, in the same way as the Nil Rate Band.
The Nil Rate Band is frozen until 2031 so no change there. It has not increased since Gordon Brown was PM.
Capital Gains Tax
Again, last year’s October budget introduced changes in rates. In recent years the annual exempt amount was slashed so there seemed less scope to make further changes of note, other than changing the position on death where Capital Gains are effectively reset – this has not changed.
A change that was announced is with regard to the transfer of shares from a business owner to an Employee Ownership Trust (EOT), and this takes effect immediately, from budget day. The previous rules allowed for 100% relief where company owners made a qualifying disposal of shares to the trustees of an EOT, but under the new measures 50% of gains will be treated as chargeable gains and subject to CGT.
VCTs
From April 2026, the income tax relief afforded to Venture Capital Trusts will reduce from the current 30% to 20%. The subscription amount remains as at present – £200,000.
ISAs
The ISA subscription limit will remain at £20,000 p.a. until 2031.
As of April 2027, if you are under 65 you will be able to put no more than £12k of the £20k subscription into cash.
There is no change to the Junior ISA or Lifetime ISA limits. There will be a consultation to replace the current Lifetime ISA with something else, ideally simpler, with the same aim of assisting first time buyers.
There will be further detail and discussion following these announcements, before they become law. For a more detailed discussion of your personal circumstances, please get in touch.