Key tax changes for high-net-worth individuals, businesses, and investors

After weeks of speculation and policy teasers, Rachel Reeves has delivered her long-awaited second Budget – timed as late in the year as political realities would allow. The Autumn Budget sets a clear course: higher taxes and reforms that will influence financial planning for individuals, businesses, and investors.

Our Wealth Management team hosted a webinar to cover the key changes in the Budget and what it means for clients on 3 December. Watch the webinar below to hear their insights.

1. Personal tax threshold freezes extended to 2030/31

The tax-free personal allowance (£12,570), higher-rate threshold (£50,270), and additional-rate threshold (£125,140) will remain frozen until 2030/31.

Impact: The extended freeze will result in fiscal drag. As wages rise over time, more income will be taxed at higher rates, increasing the effective tax burden for individuals across the income spectrum. This means a greater proportion of earnings will be subject to higher and additional rates, eroding disposable income in real terms and increasing overall tax exposure.

Considerations: To mitigate the cumulative effect of fiscal drag over the next five years, it is important to review your income structures and consider strategies such as: 

• Income splitting where income is distributed among family members or entities to reduce the overall tax liability
• Maximising pension contributions
• Using tax-efficient allowances, exemptions, and investment vehicles. 

2. National Insurance on salary-sacrificed pension contributions

From April 2029, pension contributions above £2,000 per year made through salary-sacrifice arrangements will attract both employer and employee National Insurance contributions.

Impact: This measure reduces the tax efficiency of most pension arrangements and means that the cost of funding pensions through salary sacrifice will rise for employees and employers.

Considerations: Both employers and individuals should reassess pension funding strategies well in advance of the implementation date, and consider maximising pension contributions before these changes are introduced.

3. Higher tax rates on dividend and savings income

From April 2026/27, tax rates on dividends and savings income will increase by two percentage points.

Dividend tax will rise to: 

• 10.75% for basic-rate taxpayers
• 35.75% for higher-rate taxpayers.

There was no change to dividend rates for additional rate taxpayers and no change to the tax paid on any dividends by discretionary trusts.

Savings and property income will be taxed at:

• 22% for basic-rate taxpayers
• 42% for higher-rate taxpayers
• 47% for additional-rate taxpayers.

Impact: This change will be felt by people with substantial investment portfolios or property income. The increased rates will reduce net returns and may alter the attractiveness of certain asset classes, particularly those generating taxable income outside tax-sheltered environments. The increase in dividend tax will also affect business owners who draw income from their companies through dividends.

It highlights the benefits of using tax-efficient vehicles such as ISAs and pensions.

Considerations: Investors should think about seeking advice on the use of tax-efficient vehicles such as ISAs, pension schemes, investment bonds, and corporate structures. In addition, diversifying into other assets– particularly those focused on capital growth rather than income – to help mitigate the impact of these changes and preserve long-term returns.

4. Cash ISA limit cut

From April 2027, the cash ISA limit for savers under 65 will be capped at £12,000, the rest of the allowance will be available for investments. The overall ISA allowance will remain at £20,000.

Over-65s will retain their full £20,000 cash allowance. Existing Cash ISAs will not be affected, as the change applies only to new deposits. 

Impact: This change will reduce the tax benefits of ISAs for cash savings. The government’s aim is to encourage younger people to invest rather than save. The thinking is that investments are better for the economy, and they have the potential to outperform cash savings over the long term.

5. Capital Gains Tax (CGT) relief cut

Effective immediately, relief on disposals to Employee Ownership Trusts (EOTs) will be reduced from 100% to 50%.

Introduced in 2014, an EOT is a type of trust established to hold a controlling interest in a company on behalf of its employees. EOTs are often used as an alternative to trade sales or private equity exits, particularly for owners who want to reward employees and maintain independence.

Impact: This change will increase CGT liabilities for business owners planning to transfer ownership through EOTs. The measure reduces the financial incentive for this business succession route, potentially affecting long-term business continuity plans.

Considerations: Business owners and entrepreneurs may want to review and/or revise their exit plans, as the change takes effect immediately. Exploring alternative approaches, such as phased share buybacks or the use of family investment companies, could provide more tax-efficient outcomes. It is important to seek guidance from tax and accountancy specialists to help clarify available options and reduce the risk of unforeseen liabilities.

Find out more about the financial and emotional impact of business exits by reading our report Beyond the Balance Sheet.

6. High-value property council tax surcharge

From April 2028, properties valued above £2 million will incur an annual surcharge of between £2,500 and £7,500, depending on their value. The surcharge will be adjusted upwards in line with inflation (with Consumer Prices Index as the benchmark).

Impact: Owners of homes worth at least £2 million will face additional recurring costs, which are likely to influence decisions on whether to hold, buy, or sell, with potential implications on the property sector. For homeowners with multiple high-value properties, the cumulative effect could be significant.

Other measures

• Mileage-based charge on EVs (April 2028): £0.03 per mile for EVs; £0.015 per mile for hybrids, adding a new cost layer for businesses operating electric fleets.
• Corporation tax adjustments: The writing down allowance main rate will fall from 18% to 14%, although a new 40% first-year allowance will provide some relief for capital investment.
• VCT tax relief and investment limits: From 6 April 2026, income tax relief for individuals investing in Venture Capital Trusts (VCT) will reduce from 30% to 20%.