As we approached the 2025 Budget Statement, speculation once again ran wild about how Chancellor Reeves might increase the tax intake without breaching the Labour Party manifesto.
Predictions of dramatic changes to capital gains tax, pensions, and wider wealth planning were everywhere. At Wells Gibson, our advice was the same as last year: wait for facts, don’t act on rumours.
Despite the noise, the Chancellor announced no changes to capital gains tax, no changes to VAT, and no substantial pension reforms. For clients who resisted the urge to make hasty decisions, this is reassuring. The sweeping reforms many feared simply didn’t materialise.
Instead, the Budget delivered a series of smaller, targeted changes, designed to gradually increase tax receipts over the coming years. None of these require rushed or reactive decision-making. As always, our approach is to plan with clarity, not panic.
Below is a summary of the main announcements and what they may mean for your long-term planning.
Tax Thresholds Frozen Until 2031
The freeze on income tax thresholds has been extended by three years to 2031.
This means any pay rise could push more of your income into a higher tax band—a continuation of long-running “fiscal drag”.
This doesn’t require immediate action, but it does reinforce the value of ongoing planning and tax-efficient structuring within your Wealth Plan.
High-Value Property (Mansion Tax)
From April 2028, homes in England valued at £2 million or more will face a council tax surcharge of £2,500–£7,500 per year depending on value.
Around 100,000 homes, mostly in the South East, will be affected.
This will not impact every client, but those with high-value property holdings may wish to review estate planning, ownership structures, and liquidity considerations over the coming years. We will help guide these conversations
Cash ISA Allowance Reduced
From April 2027, the annual cash ISA allowance for those under 65 reduces from £20,000 to £12,000.
The stated purpose is to encourage more investment into growth assets, something that aligns with the evidence-based investing philosophy we already apply at Wells Gibson. Long-term wealth is more reliably built through globally diversified portfolios, not cash-heavy strategies.
Salary Sacrifice Pension Cap
From April 2029, pension contributions made via salary sacrifice will be capped at £2,000 per year for NI savings.
Income tax relief remains unchanged, but this may affect certain higher-earning clients, business owners and senior professionals. The impact varies, and we will revisit this as part of your ongoing pension and retirement planning.
Dividend Tax Increase
From April 2026, dividend tax rates will rise by two percentage points:
- Basic rate → 10.75%
- Higher rate → 35.75%
- Additional rate → unchanged at 39.35%
For clients drawing dividends from investments or business interests, this may slightly increase annual tax exposure. We can incorporate this into future planning and cashflow modelling
Property & Savings Income Tax
From April 2027, property income and savings income tax will rise by two percentage points:
- 22% (basic)
- 42% (higher)
- 47% (additional)
Clients with rental portfolios or significant interest-bearing assets may experience modest increases in tax. These changes are forecastable and manageable within your Wealth Plan.
Electric Vehicle Road Pricing
From 2028, electric and hybrid vehicle drivers will face new road-usage charges to replace declining fuel duty revenue.
This introduces a future cost to consider, but it’s unlikely to materially alter personal financial plans
A Budget That Rewards Patience
There is some good news:
- The state pension will rise by 4.8% from April.
- Regulated rail fares will be frozen until March 2027.
- Fuel duty remains frozen until September 2026.
These will not transform a Wealth Plan, but they are helpful context.
More importantly, looking back at the speculation of recent weeks, most of it never came to pass.
Clients who waited avoided unnecessary stress, and potentially costly mistakes. This echoes a core Wells Gibson principle:
Facts beat speculation. Evidence beats emotion. Purpose beats panic.
The announced changes are moderate and phased in over several years. That gives us time, time to model, time to adjust, and time to make decisions with clarity and confidence.
What This Means for You
Every client’s circumstances are unique. Some measures may affect you more than others.
At your next Wealth Plan meeting, we will walk through:
- How these changes interact with your Wealth Plan
- Whether any action is recommended
- How your long-term financial clarity, contentment and certainty can be maintained
If you have any immediate questions or would like to explore any aspect of the Budget in more detail before your next meeting, please get in touch.
Wells Gibson is here to help you navigate these changes with purpose, evidence, and peace of mind.
Risk Warnings
This blog is for general informational purposes and is not personal financial, tax, or investment advice.
Every client’s circumstances are unique; decisions should not be made solely based on this content.
The summary reflects the 2025 Budget announcements at the time of writing; future legislation or policy changes may alter their impact.
Many changes are phased over several years, and effects will vary depending on individual situations.
Wealth planning, pensions, property, and investments carry inherent risks, including potential loss of capital or tax implications.
Clients should consult their Wells Gibson adviser before taking action or making financial decisions.
Our team is here to help you navigate these changes with clarity, purpose, and confidence.
Wells Gibson Limited is authorised and regulated by the Financial Conduct Authority (FRN 731027).
