Simon Roue and Laura Sant give an immediate response to the Autumn Budget.

Yesterday (26th) Rachel Reeves presented the Autumn Budget. We have recording a special episode of the Tax Compass Podcast to give our initial reactions which is available wherever you get your podcasts now.

By maintaining the election pledge not to raise National Insurance (NI), income tax or VAT, Reeves has focused the largest portion of raising revenue on freezing tax thresholds. Among other changes, she has also introduced new taxes on wealth and assets and restricted reliefs such as pensions salary sacrifice.

In response to the questions and interests of our clients, both inside and outside of the UK, we have highlighted a few of the details of the budget below.

Income tax and National Insurance thresholds frozen until April 2031

Despite the fact that the personal allowance, higher-rate threshold and additional-rate threshold remain fixed until April 2031 in England, Wales and Northern Ireland, people will slowly pay more in income tax over time as they move into higher tax bands with future salary rises. 

A new council tax surcharge on homes worth over £2m and £5m

From April 2028, a new High-Value Council Tax Surcharge (HVCTS) will be implemented for properties valued over £2 million. The surcharge will be payable by the property owner and will be added to the existing council tax. The charge will be set at £2500 per year for properties valued at £2m or over and at £7500 per year for properties valued at £5m or over. 

Voluntary National Insurance contributions for people who live and work abroad

From April 2026, individuals who are UK tax non-residents who want to continue to pay NI in the UK to top up their future UK state pension, will no longer be able to pay the lower rate voluntary Class 2 National Insurance contributions for the periods of time that they live or work abroad. Only voluntary Class 3 contributions will be available for tax years 2026 to 2027 onwards. HMRC will contact you by July 2026 if you are impacted by this change. 

Any individuals who apply to pay voluntary Class 3 NI contributions from April 2026 onwards will need to have lived in the UK for 10 years or paid at least 10 years of NI contributions while living in the UK to be eligible.

Higher taxes on dividends, savings and property income

From April 2026, dividend tax rates will rise by 2% for both the basic and upper-rate taxpayers. 

This means that any dividend income subject to tax at the basic rate (assuming no other income, between £13,070 and £37,700) will be taxed at 10.75% and any dividend income subject to the higher rate of tax will be taxed at 35.75% from April 2026. 

The Additional tax rate of 39.35% on dividends for those whose income exceeds £125,140, will remain unchanged.

Additionally, the tax on savings and property income will also rise by 2% across all tax brackets from April 2027, meaning tax rates of 22%, 42% and 47% accordingly. 

Tax credit on dividends received by non-UK residents has been abolished

Further to the last point, any non-UK resident who receives dividend income from UK companies, UK rentals or partnerships up to April 2026 will be allocated one of two options to determine their UK tax position:

1. The first alternative is that the entirety of their UK income is assessed, they may claim their Personal Allowance, if eligible, and their UK dividends are granted a non-refundable tax credit at the basic.
2. The second alternative is that certain income sources, such as savings and dividend income, can be disregarded from their UK taxable income through their UK tax return, leaving only their UK rental or earnings as taxable, however they may not claim their Personal Allowance.  

From 6 April 2026, the basic rate tax credit will be abolished for non-residents, to sit in line with the tax treatment for UK tax residents.  For a number of our clients, this will create an additional tax liability, as often the disregarded option route will not provide the best UK tax outcome for them, subject to their dividend and rental income levels.

Anti-avoidance rule changes for temporary non-UK residents

From April 2026, if you are a temporary non-UK tax resident taking any dividends from closed companies whether UK or non-UK companies, those dividends will fall under the scope of UK taxation upon repatriation to the UK.  This includes post departure trade profits, which have typically been excluded from these rules to date.

A £2,000 cap on tax-free pension salary sacrifice pension contributions from 2029

Salary sacrifice schemes allow employees to exchange some of their salary for non-cash benefits. These schemes are attractive because they reduce the taxable income leading to lower income tax and NI contributions for both employers and employees. However, from 2029 any salary sacrificed into a pension above £2000 will now be taxed like any other pension contributions. 

The two-child benefit cap scrapped from April, ending the policy entirely

From April 2026, the Government will remove the two-child limit on means-tested benefits. We recently detailed this two-child limit in one of our newsletters, so for more information on this means please follow this link.

Cash Isa Allowance changes 

From April 2027, the cash ISA tax-free allowance will drop from £20,000 to £12,000. While the allowance will remain at £20,000, £8000 of this allowance will be designated for investment only. The only exception to this change is for people aged over 65 who will retain the full £20,000 cash allowance.

EIS and VCT changes

The Government is proposing several updates to EIS and VCT rules. In simple terms, companies will be able to raise more, but individual investors will receive less upfront relief.

What’s changing:

• Companies can qualify with larger asset values and raise more annual and lifetime funding under both EIS and VCT.
• For investors, VCT income tax relief will fall from 30% to 20%.
• The higher limits won’t apply to certain Northern Ireland companies in goods or electricity-related sectors.

The bottom line is the schemes become more generous for companies, but less favourable for individual VCT investors.

These are some initial details and thoughts about the Autumn Budget. We will provide more information in greater depth over the coming weeks and months as we unpick what was presented on 26 November. 

In the meantime, if you have any questions or concerns about anything raised in the Budget, included in this newsletter or in our podcast, please contact us. We are ready to respond to your queries and help you understand how best to manage your own particular financial circumstances in light of these changes.

Contact LSR Partners today to speak with our expert team and pay the right tax, in the right place, at the right time.