Pensions
ISAs
Perhaps the most surprising thing about Chancellor Rachel Reeves’ 25 November budget was the lack of surprises after the Office of Budget Responsibility (OBR) accidentally released the details on its website immediately prior her statement to the House of Commons.
The overall theme was that income from work will continue to be supported (through the National Living Wage and the State Pension), while income from assets and higher levels of wealth will bear more of the tax burden.
When reading this blog, it is important to remember that tax treatment depends on your circumstances and is subject to change.
All data included in this blog is freely available on the Government website1.
The government confirmed that the State Pension triple lock will remain in place for the rest of this Parliament. In April 2026, the basic and new State Pension will rise by 4.8%, worth up to around £575 a year extra for someone on the full new State Pension compared with 2025/26.
For many, this is welcome support against higher living costs. However, with income tax thresholds frozen until 2031, more older people are likely to be brought into income tax as State Pension income rises over time.
The Budget confirmed that personal income tax thresholds (such as the £12,570 personal allowance) will now remain frozen until 2031 with no change to the basic, higher or additional rate of income tax on earned income.
In practice:
Despite pre-Budget speculation, no change was announced to the standard rule allowing up to 25% of most pension pots to be taken tax-free.
From April 2029, the National Insurance exemption on pension salary sacrifice will be capped at £2,000 per year per employee. Contributions above that via salary sacrifice will attract employee and employer NI in the normal way.
The Treasury’s own numbers indicate that around three-quarters of basic-rate taxpayers using salary sacrifice will be unaffected, with the impact mainly on higher earners making large sacrifice contributions.
Importantly, this Budget did not alter the previously announced changes to inheritance tax (IHT) on pensions. From 6 April 2027, most unused pension funds and death benefits will be included in the value of an estate for IHT purposes, with personal representatives responsible for reporting and paying any tax due.
For those with larger pension pots and estates, this remains a significant planning point.
A major theme of the Budget was that income from assets should contribute more, to narrow the gap between tax on work and tax on wealth. The government is therefore increasing tax on property, dividend and savings income, while keeping existing allowances (such as the Personal Savings Allowance and Dividend Allowance) in place.
Key points and timings:
For most retirees with modest savings and dividends inside ISAs, the impact will be negligible. The largest extra tax bills will fall on those with significant taxable rental income, large dividend portfolios held outside ISAs, or sizeable cash savings above the allowances.
ISAs remain central to the strategy of shielding savings and investments from tax. The Budget made an important change to the cash ISA element while keeping the overall annual ISA allowance unchanged.
From 6 April 2027:
For many in their 50s and early 60s, this encourages a shift towards investment-based ISAs rather than very large cash balances. For older retirees who prefer cash, the ability to shelter up to £20,000 a year tax-free in cash ISAs is preserved.
The Budget confirmed the introduction of a new High Value Council Tax Surcharge on high-value homes in England.
Key points:
For the vast majority of households this will have no direct impact, but it is relevant for a small number of clients who own, or may inherit, higher-value properties, particularly in London and the South East. For those affected, it becomes another factor alongside inheritance tax, pensions, and investment income when thinking about long-term wealth and estate planning.
Many in their 50s, 60s and even 70s now combine work with drawing some pension income. The Budget increased the National Living Wage to £12.71 per hour from April 2026, which the government estimates is worth around £900 a year extra for a full-time worker, benefiting around 2.4 million low-paid workers.
For older workers topping up retirement income with part-time or lower-paid work, this is a direct boost. It may, however, interact with frozen tax thresholds, pulling more income into tax over time.
The Budget confirmed that the controversial two-child limit in Universal Credit will be removed from April 2026, allowing families to receive the child element for all children regardless of family size.
Government analysis estimates that this change will lift around 450,000 children out of poverty, rising to around 550,000 alongside other measures such as expanded free school meals.
While this is primarily a measure for working-age families, it is relevant for many retirees who support adult children and grandchildren. It may slightly ease pressure on family finances and on the “Bank of Mum and Dad/Grandad” in the future.
There will be new excise duty on electric cars, payable alongside vehicle excise duty, at 3p a mile for electric cars and 1.5p for plug-in hybrids, to help double funding for road maintenance in England.
Vehicle Excise Duty (road tax) for cars, vans and motorcycles will rise in line with RPI from April 2026.
Fuel duty remains frozen for another five months at least, until September 2026.
Duty rates on all tobacco products will rise by RPI + 2 percentage points with all Alcohol Duty rates increasing in line with RPI inflation.
For most people in or approaching retirement:
As always, reacting quickly to headlines is rarely wise. The key is to ensure your retirement income strategy, tax planning and estate planning are reviewed in the light of the new rules, rather than speculation.
If you would like to discuss any element of the budget changes and how they relate to you, or any part of your retirement planning, please contact us on 0800 0093388 or adviseme@harbourrockcapital.co.uk.
This document is for information only and does not constitute personal advice. The impact of these changes will depend on your personal circumstances. If you are unsure how any of the measures affect you, seek regulated financial advice.
