Autumn Budget 2025: key changes to savings, ISAs and pensions

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Pension and tax rules can change, and benefits depend on personal circumstances. Investments can fall as well as rise in value, so you could get back less than you invest.

Full podcast episode transcript

[0:08] Emma Wall: Hello and welcome to the Switch Your Money On podcast with Hargreaves Lansdown – ‘Budget Reaction Special.’

To celebrate, we have all three hosts for you today. I’m Emma Wall – Chief Investment Strategist. I’m Sarah Coles – Head of Personal Finance. And I’m Helen Morrissey – Head of Retirement Analysis.

And, as we’re speaking, we are just recovering from the Budget – and it was quite a Budget, wasn’t it? We’ve been through a lot of them between us, but it was possibly the most chaotic we’ve actually experienced.

[0:35] Helen Morrissey: I’d absolutely agree with that. That early leak of the OBR report certainly made for a thrilling time, I have to say.

[0:43] Sarah Coles: And then, I think we were counting there’s more than 20 announcements that affect savers and investors – so there was such a huge amount to cover. So, yeah – it was madness – but, of course, we’re bright and fresh, and desperate to talk about it.

So, we’re gonna run through the key takeaways. There were so many things in the budget that we would be here all day if we tried to cover it all – so we would just look at those things that very much affect savers and investors – and, of course, people with pensions.

So, we’re gonna look at how that is all gonna be affected. We’re gonna look at the impact that has on you – and what you can do to protect yourself from it all – and we’ll also look at the wider market and the impact of the announcements.

So, there were some positives for your pocket, and one of the big ones is the pension triple lock. So, I will hand over to you, Helen – because I know, obviously, this is your chosen specialised subject.

[1:23] Helen Morrissey: Absolutely. So, yeah – the State Pension, as per usual, in the Budget – they did announce how much it would increase by next year. So, from April, they’re gonna see a 4.8% increase in the new and basic State Pensions – so there’s a bit of certainty there for people over State Pension age. H

What was also quite interesting is that there’s been a lot of debate going on about the level of the full new State Pension and how close it is to the threshold under which people pay basic rate tax – and people were concerned that, in the coming years, you might see more people who are reliant on that full new State Pension being pulled into tax-paying territory for the first time – and what that means for them.

Now, what was announced is that they are gonna look into how they can address the admin burden of people who are in this potential situation – that, hopefully, they won’t have to fill out a simple assessment form. As yet, we don’t have details, but we should find out a bit more about that next year.

[2:26] Sarah Coles: That’s great – so that’s two pieces of good news for the price of one!

But there were some tougher announcements. So, the need to raise more tax did result in a lot of individual rises. So, before the announcement, there was talk about whether there was just going to be one big announcement – one big rise – or loads of little ones. And to say, ‘Loads of little ones’ is a massive understatement – there was just a spectacular number of tax rises.

So, one of the ones that, obviously, is gonna affect the most people is the changes to Income Tax. So, the situation before the announcement was that income tax thresholds were gonna be frozen to 2028. Now, those are gonna be frozen for even longer, so all the way to 2031.

Now, there was a lot of talk about this before the Budget, but this freeze is actually even longer than expected – and that, of course, means more people... as you get a pay rise, it means it’s gonna take more people over those tax thresholds and pay tax at a higher rate. And, of course, when you go over, it’s not just your income tax rate that affects – it also means that you’re gonna pay a higher rate of tax if you’re liable to things like dividend tax, and for things like savings interest. So, it actually has a much wider impact than just on your income.

[3:26] Helen Morrissey: And there was also some news for Cash ISA savers in the Budget as well, wasn’t there, Sarah?

[3:31] Sarah Coles: Yes – that was one of the huge rumours that was doing the rounds before the announcement. So, the cut to the Cash ISA is actually going to happen – so it’s gonna fall from the full £20,000 allowance to £12,000 – and it’s gonna be from 2027.

Now, there is going to be a slight carve-out of the rules for those people who are aged 65 and over. So, they will be able to put their full £20,000 a year allowance into cash savings – and that’s partly because people of that age tend to be doing things like de-risking. So, they might be trying to move more of their portfolio into cash, and there was a concern that, of course, it was limited, then that might limit their ability to do that.

So, I think that’s a really positive carve-out – but, obviously, it does make life more complicated. And, of course, one of the things that we look at with the ISA – that people really love about ISAs – is how straightforward they are. They know they can transfer from one to the other – and then back again. You can go from a Cash ISA to a Stocks and Shares ISA – and, how ever many times you want, backwards and forwards.

Now, obviously, when there is that change, there’s going to have to be discussions of how to make sure that doesn’t add unnecessary complexity.

Of course, we do know that there are people who are younger – who, actually, really do need to save more. So, they might, for example, be buying a house next year – or something like that – and they might have a lump sum ready to be buying a house.

Now, that money – because they’re gonna need it in the short-term – so over the next five years – but, actually, should be in cash. So, the risk is that, by not being able to put it all into a Cash ISA, they might then start paying some Income Tax on that.

There’s also something that we’ve seen from our clients – that savings can act as a gateway to investing. One of the things we find is that people will start off by putting money into a Cash ISA – and then, as they grow in confidence – as they start to understand a bit more – they then transfer that into investments.

Now, obviously, if you’re going to cut the amount that people can put into a Cash ISA, you might actually end up limiting the pool of money that can then be switched into investment. So, it is one of those very difficult balancing acts that the Government constantly trying to do – and so we’re, obviously, hoping that the way that all of these things come out in the wash... that it does try to keep things as straightforward as possible.

[5:27] Helen Morrissey: So, obviously, there’s a lot of detail there to get out teeth into, isn’t there Sarah? But then, there’s also some news for people who are saving outside of Cash ISAs as well, isn’t there?

[5:36] Sarah Coles: Of course, yes – and so, obviously, this might mean some people are putting more into saving outside the Cash ISAs!

So, the bad news, on top of that, is that the interest on savings is going to be taxed at a higher rate.

So, what the Government said in the announcement was that, at the moment, you pay National Insurance on any income that you make from your earnings – but, if you make income from savings interest, from dividend payments, or from rental income as a landlord... So, at the moment, you don’t pay National Insurance on those different sorts of income.

So, the idea was, they put two percentage points across the board on all those rates of tax – and deep feeling is that maybe that is an element of fairness. Now, obviously, that’s not gonna feel terribly fair to anybody who’s set to pay those higher rates of tax, but it is worth knowing about. And then, of course, it does make things like ISAs particularly valuable.

So, for your cash, that’s gonna be a Cash ISA. If you’re worried about dividend tax, then, obviously, a Stocks and Shares ISA will protect you from that as well as protecting you from Capital Gains Tax.

[6:28] Helen Morrissey: Thanks for that, Sarah – and there was also maybe a bit more of a hidden bit of news that we picked up through picking through the documents about the Lifetime ISA.

So, this is a development well worth keeping an eye on – is the fact that the Government is consulting on replacing the Lifetime ISA with a different ISA to support property buyers. So, we will have to wait to see the detail of that consultation, but it is gonna be important to provide reassurance and continuity for those people that are actually using Lifetime ISAs at the moment.

[6:59] Sarah Coles: Yes – absolutely. It’s really important that people aren’t paying a price for having done their very best to do the right thing – so we’ll be keeping a really close eye on that.

So, of course, I know that, whenever we get into the Budgets, I think your ears prick up any time anyone mentions pensions – and there were a couple of mentions.

So, one in particular related to salary sacrifice – which I know is really complicated. Can you make it super-simple?

[7:18] Helen Morrissey: Yeah – so, basically, salary sacrifice... it allows you to, essentially, sacrifice part of your income to invest in benefits, including the likes of pension contributions.

So, on that element of salary that you have sacrificed, it means that you don’t pay Income Tax or National Insurance on that part. So, it’s a real tax-efficient, great incentive for boosting your pension saving.

Now, what they’ve decided to do is to restrict the amount of someone’s salary that can be sacrificed under these arrangements and get that national insurance relief to £2,000 a year.

Now, what is important to say is that pensions do still remain incredibly tax-efficient ways of saving for retirement – and, if you are in salary sacrifice, you will still get that income tax relief as well. So, that’s important, but there will be that restriction on national insurance relief on contributions over £2,000 per year. This means that we could see less money going into pensions. I think that we could also see New Employer Costs going up as well – and I think what the concern is that there’s less of an incentive there for people to boost pension contributions over and above, say, auto-enrolment minimums. And a point in time where there’s such focus on the whole issue of pensions adequacy, it does seem counterintuitive.

[8:41] Sarah Coles: Yes, of course – because, when you do salary sacrifice, it’s not just the employee who’s saving that National Insurance, but the employer who’s saving it as well. And so, obviously, if you can’t then do salary sacrifice – and you end up doing it separately – then that does mean that the employer has then got to pay National Insurance on that extra chunk of your salary, doesn’t it?

[8:58] Helen Morrissey: Yes – that is right, Sarah.

[8:59] Sarah Coles: So, that’s covered off some of the tax stuff, but there was quite a lot of stuff in there that’s for investors as well – so we should talk to you, Emma.

So, can you just paint us a picture as to how things are looking for investors?

[9:09] Emma Wall: Yeah – I want to say that it wasn’t all doom and gloom for investors. You two have been talking about some policy that perhaps may weigh a little on both individuals and on businesses – but I’ll start with some good news for investors in the form of new investment hubs, championing UK investment opportunities. So, that’s launching next year – and, as the Chancellor, herself, revealed, Hargreaves Lansdown is excited to support these.

That and the confirmation of a three-year stamp duty holiday for new listings on the London Stock Exchange should, together, help boost interest in UK-listed investments.

So, currently, investors have to pay 0.5% stamp duty to tax when they buy shares. The Chancellor has confirmed this today – it was rumoured yesterday, but confirmed, today, that this would be waived for new listings for up to three years – and this should make buying British more enticing for investors, and help redress some businesses’ concerns about demand for UK shares.

We also welcomed the renewed commitment to Venture Capital Trust and Enterprise Investment Schemes, which are both types of investments that help encourage money into new, early-stage businesses. And there’s the positive new there today that both the annual and lifetime company limits will be reviewed, which should help support scale-up – which is a sort of second stage after start-up companies.

However, although it wasn’t announced in the speech, itself, we went through the small print of the budget report and we did see that there was a significant sting in the small print for VCT investors – and that was a slightly hidden detail that, in order to balance the positive change, tax relief on VCTs would be cut from 30% to 20%, following the 2025-2026 Financial Bill. So, basically, investors have until the end of this tax year before the changes come into force.

[10:52] Sarah Coles: As ever then, there’s always something lurking in the small print to catch people out!

So, there’s pros and cons for investors – but, obviously, some positives as well – and there was another positive. So, something that was worried about didn’t come to fruition in the Budget, and that’s the tax-free cash announcement.

[11:06] Helen Morrissey: Absolutely. So, this was the budget-rumour-mill potential restrictions to tax-free cash you can take from a pension. These rumours ran red hot for months, and it did cause a lot of concern – and we saw people looking to maybe access their tax-free cash early in a bid to try and avoid any cuts that the Government might bring in. So, it’s been really great to see that they have decided against making any of these restrictions.

Now, for those people who took tax-free cash as part of a long-term plan – so I’m saying, potentially, to pay their mortgage, for instance. The decision that they took to take that money probably does still make sense, but I do think that there’s still people that took it as a kneejerk reaction to the speculation – that might now be wondering what their next steps are.

So, HMRC did recently confirm that applications to take tax-free cash can’t be cancelled. However, if your application hasn’t yet been processed by your provider, I think it is still worth checking to see if they are able to cancel that.

[12:12] Sarah Coles: One of the things that people will be thinking, then... if they’ve got this money – that they’ve taken out – and they don’t have a plan for it, what sort of things can they think about doing with it?

[12:19] Helen Morrissey: One of the things that they could do is, if they’ve not used up their ISA allowance, for instance, it might make sense to reinvest into a Stocks and Shares ISA – ‘cause then you’ve got the benefit of the investment growth – you’ve got the tax-free income there as well. So, that’s a potential that you would really want to think about.

What’s really important, though, is that it might feel like the intuitive thing to do – to say, ‘Well, I took that money from my pension – I’ll just reinvest it’ – and you’ve gotta be really careful about that because you risk breaching what’s known as pension recycling rules – and, if you do that, you do risk being clobbered with quite a hefty tax bill. So, it’s really important that, if you are thinking of doing that... that you take financial advice before you take any steps to do it.

[13:06] Sarah Coles: Sure – I mean, I think one of the things that happens after the Budget... you know, the dust settles and everyone starts to think, ‘Well, actually, what do I do?’ – ‘What does it...

[13:11] Helen Morrissey: Yeah.

[13:11] Sarah Coles: ...mean?’ – ‘And what’s the best way forward?’ So, we’ve got a very quick guide of a few things people can do.

So, if you’re worried about paying Income Tax on your savings interest – and you have your ISA allowance available – then, actually, saving in a Cash ISA is gonna protect those hard-earned savings. And, of course, at the same time, you can make the most of this year’s Cash ISA allowance. And then, of course, there’s also pensions – so how is that gonna help people?

[13:33] Helen Morrissey: Yes – so, absolutely... talking about the freeze on income tax thresholds, for instance. Paying into a pension can help to protect against that freeze – and then, also, what I would say is... when we’re looking at the salary sacrifice changes, for instance – they’re not due to come in until 2029. So, there’s something to be said for making the most of the pension system as it is – and, if you’ve got a bit of spare cash available, boost your contribution to your SIPP and do what you can to boost your retirement resilience.

[14:00] Sarah Coles: I mean, I hate to say there are other things other than pensions in the world, Helen, but I’m just gonna go out on a limb and say that there are.

So, there are some people who, alongside their pension... you know, a lot of people will want to save or invest in ISAs in order to provide that tax-free income. So, if you’re worried about your Income Tax in retirement – so with those frozen thresholds – then actually using Cash and Stocks and Shares ISAs alongside will enable you to take that tax-free income – and it might actually help you keep below one of those thresholds.

There’s also, obviously... you know, I’ve mentioned that rise in the dividend tax. So, the big way to protect yourself from that would also be the Stocks and Shares ISA. If you’re starting out, then it’s making your Stocks and Shares ISA your first port of call.

If you already have existing shareholdings outside an ISA or pension, then you can actually realise gains – and then use the share exchange or Bed and ISA – or Bed and SIPP process – to sell and buy the same investments in an ISA or pension. It is worth keeping, though, within that £3,000 capital gains tax allowance when you realise those gains, just to make sure you don’t accidentally get yourself a tax bill.

And then, of course, the final thing is to consider the bigger picture – so your family. So, it’s really worth planning as a couple. So, if you’re married or in a civil partnership, you can actually transfer income-producing assets into their name – so it means you can both take advantage of your tax allowances. And, of course, you can both use all the tax-efficient vehicles at your disposal. It includes your ISAs and pensions as well as those of your spouse. It also includes the Junior ISAs and Junior SIPPS of any qualifying children – so there’s loads of opportunity to take advantage.

So, we now know what our reaction to the Budget was – and I’m sure we’ll be lying down in a dark room, very soon, to cope with it. But also, the markets have a reaction. So, Emma, can you just tell us a little bit about how the markets reacted?

[15:36] Emma Wall: Absolutely – and you’re right to ask because, of course, there are three stakeholders, really, that the Chancellor here was looking to balance. The backbenchers – and I think we can say that they will be reasonably happy ‘cause no manifesto pledges were broken. The electorate... and I think we’ll probably have to wait and see – to see what they think of it. And, as you say, the markets – and how did the markets respond? – reasonably well, actually.

So, there was an initial whipsaw in bond yields following the leaked OBR report ahead of the Chancellor’s Speech – but then, actually, as she stood up and started to deliver her Budget, gilt yields came back to where they’ve been trending at, to a similar level to yesterday – and they are down, significantly, from last week.

So, that indicates that the bond market, at least, thinks this is a fiscally-responsible Budget – and the pound is painting a similar picture – which is up against the dollar – which shows global conviction in the UK’s growth prospects.

And, finally, the FTSE 100 – so the UK’s 100 largest listed stocks... they’ve benefitted from something of a relief rally – with banks leading the charge. So, they were very much grateful not to have been hit by the much-rumoured banking levy. So, a case of ‘No news is good news’ for that sector.

[16:42] Sarah Coles: Well, it’s brilliant to be able to finish on something relatively positive – but, of course, I can’t let anyone go until I’ve dragged you through the hell that is the stat of the week – and, this time, I’ve gone through the history of Budgets.

Now, I looked, particularly, at the length of Budgets. So, by my reckoning, this current one went on for somewhere between – I dunno – two-and-a-half weeks and three months – but, actually, looking through history, the famous Gladstone – who you’ll remember from the 19^th century, of course – holds the record for the longest UK budget speech without a break in history.

So, my question is... how long d’you think that he spoke for?

So, what is almost three hours – almost four hours – or almost five hours?

Helen, I’ll come to you first.

[17:21] Helen Morrissey: Okay – so I wonder what on earth he was announcing – that he was talking for such a long time. I mean, I find it incomprehensible that he would talk for almost five hours.

I think I’m gonna go in the middle on this, so I’m gonna say, ‘Almost four.’

[17:35] Sarah Coles: Okay – and what about you, Emma – what d’you think?

[17:37] Emma Wall: I actually know this one – and I know he spoke for a whopping nearly five hours – unbelievable, though, it seems.

[17:43] Sarah Coles: Yes, Emma, you’re right – it was almost five hours.

So, that’s all for us this week – but, before we go, we should say this was recorded on 26^th November 2025, and all information was correct at the time of recording.

[17:52] Helen Morrissey: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you.

[17:58] Sarah Coles: Tax rules can change and benefits depend on circumstances. Pension money can’t normally be accessed until 55, which is rising to 57 from 2028.

[18:05] Helen Morrissey: Money taken from a Lifetime ISA before age 60 – that’s not to buy an eligible first home – is subject to a 25% penalty.

[18:13] Sarah Coles: All investments fall as well as rise in value, so you could get back less than you invest.

[18:16] Helen Morrissey: So, all that’s left is for us to thank our Producer, Elizabeth Hotson.

[18:20] Sarah Coles: And to thank you, very much, for listening. We’ll be back again soon – goodbye!

[18:23] Helen Morrissey: Goodbye!

[18:24] Emma Wall: Goodbye!