The Budget: Ten things you need to know

There’s no extension to the income tax freeze beyond April 2028.
There will be tax on some inherited pensions from April 2027.
The state pension will rise 4.1% in April 2025.
Pensions tax relief and tax-free cash were left untouched.
Capital gains tax on stocks and shares rose from 10% to 18% for basic rate taxpayers. It increased from 20% to 24% for higher and extra rate taxpayers. These changes were put in place instantly.
The inheritance tax threshold will be frozen until 2030. From 2026, qualifying AIM stocks that were earlier IHT free be liable to IHT at 20%.
The minimum wage will rise, in the first step to being equalised across all ages.
The stamp duty surcharge on investment property will rise from 3% to 5%.
The UK ISA was scrapped, and other ISA allowances guaranteed until 2030
Fuel duty will be frozen next year. Tobacco duty will rise. A new vaping duty will be introduced in 2026. Alcohol duty will rise from February next year (although the duty on draught beer will be cut).

“Raising taxes by £40 billion was never going to mean a Budget that brought a great deal of joy, it was all about the degree of misery it delivered – and on this front there was some good news. A further freeze on income tax thresholds didn’t materialise, and a surprise freeze in fuel duty will have been good news for drivers. Meanwhile, all the talk on changes to pensions tax relief or tweaks to pensions tax free cash came to nothing. Sarah Coles, head of personal finance, Hargreaves Lansdown:

By saying they were prioritising the ‘pound in people’s pockets’, it meant a more considerable burden elsewhere. There will be plenty to take on board for investors and those hoping to leave a legacy for their families.

No extension to the income tax freeze

The income tax thresholds will not be frozen further. They will be uprated with inflation from 2028/29. This change will end the rapid increase in people paying more tax at higher rates.

We are wading through the last years of the freeze. It’s going to keep taking a toll. It will impact not just your pay. When you start paying higher rate tax, your personal savings allowance shrinks, from £1,000 to £500. It disappears altogether for additional rate taxpayers. You pay a higher rate of capital gains tax as you cross into paying higher rate tax. Your dividend tax rate increases as you cross each income band.

Helen Morrissey, head of retirement analysis, Hargreaves Lansdown:

Tax on some inherited pensions

“The generous treatment of pension death benefits set it apart from other savings and investments and has long been considered low hanging fruit for a government in search of cash. It’s a move that could prove complex and will need changes to trust law, which is why it’s not set to take place until April 2027. It will upturn many people’s plans as we will see many more people being dragged into paying inheritance tax because their DC pension is now counted as part of their estate.

The state pension will rise 4.1% in April 2025.

There was good news for pensioners who can look ahead to a 4.1% increase in their state pension from next year. But, the rise will be vastly reduced. This reduction is due to the government’s decision to restrict the Winter Fuel payment to pensioners on Pension Credit. Fuel bills are on the rise. The loss of up to £300 will be sorely felt. Many face a tough winter ahead.

Pensions tax relief and tax-free cash left untouched.

The Chancellor’s decision not to tinker with tax-free cash has been greeted with a massive sigh of relief. This is a hugely popular part of the pensions system. Any move to reduce it would have severely undermined people’s trust. Higher-rate taxpayers will welcome the absence of any changes to tax relief. It will also be accepted by additional rate taxpayers worried about having this vital government top-up reduced.

Sarah Coles:

Capital gains tax on stocks and shares rose

“The change is a blow for investors. This situation is worse. There were suggestions of a doubling of the rate. However, it’s scant consolation for anyone hit with a bigger tax bill. This affects not only those who pay more tax. It also makes investment less attractive for newcomers who don’t want to grapple with a new tax risk. For existing investors, there’s a danger this will drive investor behaviour. People focus on tax considerations. They overlook the investments that make the most sense for their circumstances. There’s also a danger they will hoard the assets – until their death.

The inheritance tax threshold frozen to 2030, and tax break on AIM halved

While only 6% of the UK population is affected by IHT, that figure is on the rise. It’s only going to keep increasing now that inheritance tax thresholds have been frozen for another two years. It means heftier tax bills as the value of estates – including property – continues to climb. Business property relief has been incredibly valuable for AIM investors. Over the years, they hold qualifying investments for two years. These investments would then fall out of their estate for inheritance tax purposes. The cutting of this relief will mean it’s worth reassessing the role of these investments.

The minimum wage will rise

The April minimum wage boost is brilliant news for people on the lowest incomes. It can make a massive difference to people’s finances. The National Living Wage will rise 6.7% to £12.21 per hour. For 18-20 year-olds, it will rise 16.3% to £10. And for those aged 16-17 and apprentices, it will be £7.55, up 18%. More significant rises for younger people are part of a transition. This transition phases in a single adult rate. It aims to help younger earners start more positively in adult life.

The stamp duty surcharge on investment property will rise

For landlords, this budget was given with one hand and taken away with the other. There was good news on capital gains tax. It didn’t move for residential property. Still, there was a hike in the stamp duty surcharge. It remains one of the least tax-efficient ways to invest. Unlike investors in stocks and shares, property investors can’t protect themselves from this tax by using ISAs. They can’t gradually realise capital gains and take advantage of their annual allowances. It means they may wonder whether all this tax means their sums no longer add up.

The UK ISA was scrapped, and other ISA allowances guaranteed until 2030

Providing certainty over allowances until 2030 provides very welcome stability to this cornerstone of people’s finances. Rumours before the announcement led investors to fear the worst, so they’ll be breathing a sigh of relief now.

The downside of this certainty is that over time, the allowance will continue to drop in real terms. It will also become less valuable. The £20,000 allowance was introduced back in 2017 and hasn’t moved since. Given the level of inflation we’ve seen since, this has eaten into the real value of the allowance.

This is also a missed opportunity to make tweaks to the LISA. These tweaks include using the LISA framework to support self-employed people with their pension planning. The framework also supports first-time buyers against the £450,000 cap on properties bought through the scheme.

Mixed picture for duties

Fuel duty will be frozen next year. This decision is a relief for drivers. They faced the end of the 5p temporary cut in March and the annual rise in April. It’ll be the 15^th year of the annual freeze.

Tobacco duty will rise. New vaping duty will be introduced in 2026.

Alcohol duty will increase from February of next year when the freeze Jeremy Hunt announced will end. To support pubs, the duty on draught beer will be cut.”