What’s already in train from previous Budgets?

With eyes turning to the Budget in the autumn for any changes to the taxation landscape, it’s important to bear in mind the ‘Budget lag’ effect. Changes announced rarely happen overnight. Instead, they’re often applied from the start of the following tax year, or even further out.

The last two Budgets are a case in point. Several important changes are already in train from previous fiscal events under the stewardship of former Chancellor, Rachel Reeves. Let’s recap these to help set the scene for what might happen this autumn.

Inheritance tax on pensions

A seismic change for legacy planning was announced in Rachel Reeves’ inaugural Budget in 2024. From next tax year, 6 April 2027, most unused pensions will be included in the valuation of an estate for inheritance tax (IHT) purposes. 

Previously, pensions provided a haven from IHT and allowed families a way to pass on some of their money to the next generation tax efficiently. However, the estate planning playing field has been upended, and now the retention of pension pots is far less attractive from this perspective.  The policy shift will no doubt result in more estates tipping over the nil-rate band thresholds, drawing ever more families into the IHT net.

New Prime Minister, Andy Burnham, has previously advocated for overhauling the current system of IHT, as well as the need to find the right funding model for social care. This could imply a reappraisal of the tax system lies ahead, although it is not yet known whether that will feature in the upcoming Budget.

Find out more: How inheritance tax pension rule changes will work and what you can do to reduce the impact

Higher tax on savings and property income

A rise in the ordinary and upper rates of dividend tax affecting investors took effect from this April, and there are more income tax increases in the pipeline – this time for savers and landlords. 

Income tax on rental profits and savings interest is scheduled to increase from the 2027/28 tax year, with each band increasing by two percentage points to 22%, 42% and 47% for the basic, higher, and additional rates respectively.

This comes on top of the gradual effect of ‘fiscal drag’ as income rises but tax bands and allowances stay frozen – until the 2030/31 tax year as things stand.

Find out more: Tax on savings explained

ISA reforms

Last autumn’s Budget revealed that from 6 April 2027 the Cash ISA allowance is due to fall from £20,000 to £12,000 for under-65s. The overall ISA allowance is set to remain at £20,000, and it’s intended that older savers can still use all of this with Cash ISAs should they wish. 

To avoid people getting around the new cap, HMRC has set out some rules that impact holders of Stocks & Shares ISAs. Interest paid on uninvested cash in a Stocks & Shares ISA will face a 22% tax charge, and investors will not be able to hold 100% of their portfolio in money market funds – investment funds owning only cash and very low-risk assets.

There are also restrictions planned on transfers into Cash ISAs from non-Cash ISAs from 6 April 2027. However, it will remain possible to transfer from a Cash ISA to a non-Cash ISA, and transfers of Stocks & Shares ISAs to Cash ISAs will still be permitted from age 65.

Find out more: ISA changes for holding cash – what savers and investors need to know

High Value Council Tax Surcharge

Also announced in the Autumn Budget 2025 was a new Council Tax surcharge for residential properties worth more than £2mn. The annual charge, inevitably dubbed the ‘mansion tax’, is due to arrive in April 2028 and is expected to range from £2,500 to £7,000, depending on the property's value. Could the new Chancellor re-examine this policy? There is certainly time to tinker with it if he so desires.

Salary sacrifice curtailment

Salary sacrifice has long been a popular way for employers and staff to keep more of what they earn. Rather than taking their full salary in cash, employees can exchange part of it – before National Insurance (NI) and income – for a benefit, often a pension contribution.

From April 2029, an annual cap of £2,000 is set to be placed on salary sacrifice into pensions. Beyond this cap, the NI benefits would cease, leaving the just income tax benefit. The long lead in time for this policy is so that employers can adjust to what is a major change affecting payroll systems.