The following is a transcript of a bonus podcast episode of The Pension Confident Podcast. Listen to the episode or scroll on to read the conversation.
PHILIPPA: Hi, welcome back to The Pension Confident Podcast. Today, we’re unpacking the Autumn Budget and what it means for your finances. Labour told us this year’s Autumn Budget aimed to address an economy that’s “not working well enough for working people“. But will the changes they’ve announced leave you better off, or worse off?
To unpack exactly what the Chancellor said, I grabbed a few minutes with the very busy Holly Mackay. She’s Founder and CEO of Boring Money, an independent business designed to help normal people cut through jargon and better understand their savings, investments, and pensions.
Here’s the usual disclaimer before we start. Please do remember, anything discussed on the podcast shouldn’t be regarded as financial advice or as legal advice, and when investing, your capital is at risk.
Now, before Budget day, analysts were estimating that the government was facing a £30 billion shortfall. The challenge for the Chancellor, well, that was to fill that hole while balancing economic growth and fairness. So the first question I put to Holly was, how much pressure was the Chancellor under?
HOLLY: When she got to her feet, I think it’s fair to say that Rachel Reeves was under a huge amount of pressure from all sides. She was under pressure from the Labour backbenchers, who were really keen to see the two-child benefit cap [removed].
She was under pressure from financial markets. If you think back to Liz Truss’s disastrous Mini-Budget, financial markets went into turmoil after that. So, she had to present a clear, stable view for the economy moving forward.
Last but not least, she was under pressure from us. She spoke to consumers that morning and said, “I know you guys are angry”. So there was a lot of pressure under her, lots of people with lots of demands.
And not only that, but when the Chancellor finally got to her feet to speak, an hour before there had been a leak from the Office for Budget Responsibility (OBR). And so when she got to her feet, she was not only under a lot of pressure from all sides, she was also visibly furious.
Changes to take-home pay and cost of living
PHILIPPA: So what exactly did Rachel Reeves announce that matters to ordinary people, in terms of take home pay and the cost of living? What does Holly think?
HOLLY: For me, the single biggest thing that came out of the Budget is this ‘freeze’ we hear so much about on tax thresholds. For me, this is an enormous change. Now, that’s a freeze that’s going to be in place now [until] 2031. The problem with this is it sounds almost innocuous because they’re not doing anything - they’re not putting any percentage rates up. But they’re freezing the thresholds at which we move from, say, [being a] basic rate to [a] higher rate taxpayer.
Now, freezing tax thresholds is going to hurt all of us. I think we can get a handle on how much, by the fact that by 2030 one-in-four of us will be a higher rate taxpayer. So next time you’re on a train or in a supermarket or down the pub, look around and think one-in-four of these people is going to be a higher rate taxpayer. That’s the impact of freezing tax thresholds.
Another way I can give an example is imagine saying to a seven year old boy, “how much food do you eat today? We’re going to freeze that amount, and you can only eat that same amount in six years time, when you’re 13 years old.” That’s going to hurt, right? So it’s a similar impact by freezing these tax thresholds. So more and more people are going to be dragged into higher rates of tax.
This doesn’t just impact Income Tax either. It changes how much we pay on Capital Gains Tax. For some of us, it might change our Child Benefit. So we really have to think about “how is this going to impact me over the next six years?” It’s a long time. And therefore, “what can I do to plan and mitigate around that?”
I think another key announcement she made, which will impact many of us, is ‘salary sacrifice‘. Again, this sounds very technical, but it’s something used by millions of British people. And effectively, it means you can pay a bit of money, your employer can pay some of your salary, into a pension before that’s taxed, before that has National Insurance paid on it. So it’s a very tax-efficient way for lots of people to try and ratchet up more in their pension. Now, the cap was announced yesterday in the Budget on that of £2,000 [from April 2029]. That’s the maximum amount [before National Insurance applies]. That’s going to hurt a lot of people who’re using salary sacrifice today to save into a pension.
Impact of raised National Insurance and Minimum Wage for employers
PHILIPPA: Last year, the Chancellor announced a substantial National Insurance hike for business - and it hit hard. Profits were down for many, and so were plans to invest and to hire new people. In the run up to this Budget, business loudly urged Rachel Reeves to leave them alone. But did she listen? Here’s Holly.
HOLLY: I think the environment’s really hard out there for employers at the moment. I mean, as you say, employers - and I’m one of them, I employ about 30 people - we’re still getting used to that 15% National Insurance rate that we have to pay. That was announced, of course, last year. That hit hard. And so I think businesses are still feeling the impact of that.
Now, there’s also been announced an increase in the [National] Minimum Wage, which sounds like good news, right? For people over 21, the [National] Minimum Wage will go up to £12.71. But of course, this has to be funded by employers, who are still struggling to digest the impact of those higher National Insurance rates.
So you think about small businesses, for example, in the hospitality sector, you think about care homes, you think about businesses like that. And increasing the National [Minimum] Wage is going to be another blow for them. I think as a result of it, we might see a freeze on further employment, because someone’s got to stomach those costs. So I think that was difficult.
Also, I’ve talked about salary sacrifice. Now, if you’re an employer and you’re using salary sacrifice with your staff, you don’t pay the 15% National Insurance on those contributions that get made into a pension via salary sacrifice. So with that being removed [for contributions over the £2,000 cap], now, granted, that’s from 2029, there’s time to plan. But it’s another thing on the horizon that could see National Insurance costs going up for them.
There were a few glimmers of better news out there. For companies looking to list their shares on the London Stock Exchange, there’s been announced a three year holiday on Stamp Duty. What this means is when we buy shares in the UK, we have to pay a fee of 0.5% on the shares that we buy on the London Stock Exchange. Now, if we waive that, as the Chancellor has done, for firms who list on the London Stock Exchange for the first three years, it means those shares are more attractive for people to buy. So it’s a little sweetener for firms that might be looking to list here.
Another change she announced was to something called an ‘EMI Scheme‘. That stands for Enterprise Management Initiative Scheme. It’s basically a way where smaller businesses that are starting up, that want to really incentivise and find the best talent out there, can give staff a little share in the business. And there were announcements in the Budget yesterday which make it easier for more firms to participate in that.
There were some good news comments coming out of the Budget, but generally, I think the environment remains really very hard for a lot of employers out there.
How will homeowners and landlords be hit by the Budget
PHILIPPA: Did you know more than half of us now own our own homes? So was there any good news for homeowners in the Budget? Here’s Holly’s take on that.
HOLLY: Well, it was certainly not good news for people who own more expensive properties. So the so-called ‘Mansion Tax’ was announced yesterday. This will be the form of a Council Tax Levy for people who own properties valued at £2 million or above. Now, this will be done via a revaluation of properties currently in Council Tax Bands F, G, and H [from April 2028]. If your home is valued at £2 million and above, you’ll pay £2,500 extra a year. If your home is valued at £5 million and above, arguably a nice problem to have, you’ll pay an extra £7,500 a year. So not great news for people sitting on expensive properties.
The other thing that came out, that I think will impact property markets, is for landlords. Now, landlords do pay tax on their rental income. That was increased by 2% yesterday. So moving forward, landlords will actually pay, if they’re a basic rate taxpayer, 22% tax on income from rental properties. If they’re higher rate taxpayers, they’ll pay, just check my notes here, 42% [and] additional rate, 47%. But actually, it’s been getting tougher and tougher out there for landlords.
What this might mean, we’ll have to wait and see, is that more landlords throw in the towel and say, “do you know what? This has just got too difficult. Progressively each year, it’s been getting harder and harder, so I’m going to sell up”. So there might be more properties coming onto the market which might impact housing valuations.
A final glimmer of good news. Now, not directly influenced by the Chancellor, of course, it was interest rates. The Budget was well received by financial markets, so markets were calm. There was nothing there to spook people that might impact the Bank of England when they’re looking at what to do with interest rates. So we’re on a downward trajectory, so I’d still hope that people might see a little cut in interest rates before the end of this year.
What’s been announced about savings, investments and pensions?
PHILIPPA: This podcast is all about making the most of your money, so we were listening hard for any announcement that might impact savings, investments, and of course, pensions. Here’s Holly with everything we need to know about that.
HOLLY: So there were lots of little tax changes that were announced yesterday that will impact money we make from rental income, money we make from interest we might make on cash accounts, and money we might make on dividends. Now, these changes will come in from April 2027.
But by way of an example: if you make interest on cash at the moment, and you’re a basic rate taxpayer, you can make £1,000 of interest and not pay tax on it - you have your Personal Savings Allowance. However, as soon as you earn any interest over that, you pay tax on it. No such thing as any tax-free income anymore. So from April 2027, that rate will go up to 22%, and it goes up even higher for higher rate and additional rate taxpayers.
We’ve also talked before about property income, so rental income for landlords. Tax on that has gone up by another 2%. So from April 2027, landlords will pay more on tax on the interest they make from rental properties.
Also, dividends. Now, dividends impact people. Some business owners pay themselves using dividends. Also, people who invest in UK shares, for example. A lot of companies listed on the UK Stock Exchange pay relatively high rates of dividends. So a lot of investors use these dividends to make extra income. Now, [the] tax rate on dividends will go up again from April 2027. And it’s quite a significant amount for basic rate taxpayers, they’ll pay 10.75% on that. For higher rate taxpayers, they’ll pay tax on dividends of 35.75%.
Now, the key takeout for me on all of this because it can all sound quite academic and granular. But if we look at it in the round, the big takeout is we’re all paying more tax for pretty much everything we do. So we have to learn to love our ISAs and our pensions, because these tax quarantined accounts will be a real weapons for all of us in retaining as much of our income as money in our pockets at the end of the day as we can. So it’s really vital that we really maximise the £20,000 ISA limit we all have today and also pay as much as we possibly can afford into a pension.
Now, on that point, the Chancellor did also announce changes to Cash ISAs. That’ll be coming in from April 2027 as well [for the under 65s]. Now, at the moment, we all have £20,000 a year that we can invest into a Cash or a Stocks and Shares ISA, as long as the total doesn’t go above £20,000. The Chancellor is really keen to get more of us buying British, I guess, if you will, with our investments, investing money into the stock market, into the UK stock market.
To attempt to do this, she’s now limiting the amount we can pay into Cash ISAs to £12,000 a year in the hope that with that extra £8,000 - for anyone that can afford to save a lot into ISAs - that extra money will be diverted instead into a Stocks and Shares ISA. So Cash ISA levels [are] coming down for people under the age of 65 from 2027.
With Christmas around the corner, any good news for families?
PHILIPPA: What about families? With Christmas around the corner, finances can be pretty stretched right now. So, I asked Holly if there was any good news.
HOLLY: It’s not a Budget that’s overflowing with good news, but I’ve had a look and tried to pull out a few things. From April next year, energy bills should come down by about £150 per household. Also rail fares, such a huge expense for all of us that commute. They’ll be frozen next year, so good news there.
Also, and if you dig into the fine print of the Budget, if you like Bingo, there’s good news because the Bingo Levy has been abolished. If you’re prone to a flutter on the horses, the taxes there will be frozen, and they won’t be rising along with other changes to the Gambling Tax. If you like Bingo, if you like horse racing, if you’re a commuter, and if you’re fed up of high energy bills, there are a few glimmers of hope in the Budget.
PHILIPPA: That’s a wrap for Holly’s hot take on the Budget. We’ll be back with our final episode of the year in December. And in January, we’ll be kicking off 2026 with a whole new series.
Here’s our final reminder, nothing in the podcast should be considered financial or legal advice, and of course, when investing in capital is at risk. See you next time.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
