Please see our summary below:

ISA reform

From 6 April 2027 the annual ISA cash limit will be set at £12,000, within the overall annual ISA limit of £20,000. Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2031. Savers over the age of 65 will continue to be able to save up to £20,000 in a cash ISA each year.

Jonathan Watts-Lay, Director, WEALTH at work, comments;

“Many people save into a cash ISA for access purposes but there is a belief that many are missing out on the growth which can be gained for saving into a Stock and Shares ISA. Although those aged over 65 can save the full allowance, I would urge working people to save into a Workplace ISA and invest for their future as building financial resilience is important”.

Lifetime ISA Reform

The government will publish a consultation in early 2026 on the implementation of a new, simpler ISA product to support first time buyers to buy a home. Once available, this new product will be offered in place of the Lifetime ISA.

Jonathan Watts-Lay, Director, WEALTH at work, comments;

“Anything that makes it easier to help people save for their future has to be a good thing. I look forward to seeing the details of the consultation.”

Salary Sacrifice for pension contributions

The government will charge employer and employee National Insurance contributions (NICs) on pension contributions above £2,000 per annum made via salary sacrifice. These changes will be legislated for through primary and secondary legislation which will be introduced in due course. This will take effect from 6 April 2029.

Jonathan Watts-Lay, Director, WEALTH at work, comments;

“We’re on the brink of a generation retiring without sufficient pension savings. It is widely recognised that saving the auto enrolment minimum of 8% is not enough for a secure retirement, and that millions are on track for an inadequate retirement. Therefore restricting NI only limits saving, reducing overall contributions for savers and overall pot size.”

“Whilst it’s not going to be an immediate change, this will have an impact on both employers and employees, so people need to prepare. Many people will have to pay more into their pension in order to have the same outcome at retirement, or accept they will have less income in retirement than would otherwise be the case. Also, the NI saving that employers make on pension contributions, in many cases, is given back to the employee in the form of additional pension contributions or a contribution to other benefits such as medical insurance. Clearly, if this NI saving goes, this will potentially reduce even further the level of benefits the employee receives from the employer. It begs the question for the future, if people will opt to receive a pay increase in part as an employer pension contribution.”

Tax on dividend income

The government is changing the rates of income tax applicable to dividends. From 2026-27, the ordinary rate will be increased by 2 percentage points to 10.75% and the upper rate will be increased by 2 percentage points to 35.75%. The additional rate will remain unchanged at 39.35%. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2026.

Tax on savings income

The government is changing the rates of income tax applicable to savings income. From 2027-28, the savings basic rate will be increased by 2 percentage points to 22%, the savings higher rate will be increased by 2 percentage points to 42% and the savings additional rate will be increased by 2 percentage points to 47%. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2027.

Tax on property income

The government will create separate tax rates for property income. From 2027-28, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%. These rates will apply across England, Wales and Northern Ireland. The government will engage with the devolved governments of Scotland and Wales to provide them with the ability to set property income rates in line with their current income tax powers in their fiscal frameworks. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2027.

Jonathan Watts-Lay, Director, WEALTH at work, comments; “An increase in taxes is always going to mean that people will have less money in their pocket. It’s more important than ever for people to take control of their finances, and make the most of any income or savings they have by careful tax planning measures.”

He adds; “Many workplaces provide staff with financial education, guidance, and access to investment advice to help employees navigate the impact of the budget.. It’s always worth speaking to your employer to see how they can help.”