This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Tax rules can change and benefits depend on personal circumstances.
They discuss key dates to watch in the year ahead, including the rise in the state pension, higher dividend tax and the continued freeze on income tax thresholds. The episode also explores what this means for savers, investors and pensioners and the outlook for household financial resilience.
Use the player icons above to listen on your favourite podcast app, or read the full transcript below.
This podcast isn’t personal advice. If you’re unsure what’s right for you, seek financial advice. 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
[0:11] Sarah Coles: Hello and welcome to the Switch Your Money On podcast from Hargreaves Lansdown. I’m Sarah Coles – Head of Personal Finance.
[0:15] Helen Morrissey: And I’m Helen Morrissey – Head of Retirement Analysis.
[0:19] Sarah Coles: And it’s the crystal-ball time of year again, when we look at what 2026 might hold in store for your finances. So, we have some key dates coming up in the next year, which you do need to be aware of – but we can also look at the outlook for people’s financial resilience, plus what’s on the agenda for you. So, ‘What are your financial New Year’s resolutions – and, crucially, will they actually work this year?’
So, let’s start with those dates, Helen.
[0:40] Helen Morrissey: Yeah – thanks, Sarah.
So, the key one is gonna be the rise in the State Pension in April. So, the full rates for 2026-2027 will be £241.30 per week for the full new State Pension. So, that’s people that reach State Pension age on or after 6th April 2016 – and this was up from £230.25 in 2025-2026.
Now, for those who retired – or reached State Pension age earlier than that on the basic State Pension – that is going to be going up from £176.45 per week this year, up to £184.90 per week from April 2026.
[1:27] Sarah Coles: And I suppose that’s something – when we talk about the State Pension and the triple lock – and how it rises... we do tend to talk about the figures for the new State Pension – forgetting, of course, that there’s lots of people who are on that old State Pension – and, of course, lots of people who don’t get the full pension.
[1:40] Helen Morrissey: Absolutely – yes – really important to mention that, Sarah. As you say, we are still in a position where there are lots of people who have retired under that basic state pension system – and, as you say, many people will not get the full amount – so it’s always really important to make sure that you include all that information for people.
[1:58] Sarah Coles: It’s not just pensions... I mean, I know, obviously, everything is just pensions for you, Helen – but another change in the pipeline, this April, is gonna be a rise in dividend tax. So, that was something that was announced in The Budget this year.
So, in April, the rate of dividend tax is actually gonna rise from 8.75% to 10.75% for basic rate taxpayers. And then, for higher-rate taxpayers, it’s gonna rise from 33.75% to 35.75%. I have no idea why these things can’t be round figures – it just seems unnecessarily complicated.
So, this is the first of three tax hikes on some income that’s not from earnings – so it’s actually gonna be followed by rises on savings and property income, but that doesn’t come into place until 2027 – so that’s April 2027.
So, for investors – particularly for income investors – that is a nasty tax hit. So, they’ve already been hit with a succession of really horrible cuts in the annual dividend allowance – and, really, given the Government’s desire to encourage investors to hold UK equities – and, given that the London market is home to so many good income stocks – it does mean particularly harsh tax treatment if you hold any of these investments outside an ISA or a SIPP – and that is gonna concentrate people’s minds on tax-efficient investment opportunities... that includes things like Stocks and Shares ISAs – and, of course, prioritising income-producing assets when they’re choosing which of their assets to put inside an ISA.
[3:14] Helen Morrissey: And so, there’s another big thing coming up in April – isn’t it? – and it’s something that’s actually not happening – if that makes [laughs] sense! – because there’s not gonna be any change to income tax thresholds, is there? They’re gonna remain frozen for yet another year.
[3:28] Sarah Coles: Yes – you’re absolutely right... it’s why it’s kind of been talked about as a ‘Stealth tax,’ because nothing gets announced – nothing happens – and, yet, it does mean the sort of big tax hit.
So, income tax and national insurance thresholds... they’re both frozen until 2031. So, it means every pay rise will push some people over the personal allowance – and others might find themselves paying higher or additional tax. And it’s not just – when you cross one of those thresholds... it’s not just more Income Tax you’ve gotta worry about – it could, potentially, be higher rates on everything from dividend tax to Capital Gains Tax – and, if you look at your savings, you might get a shrinking personal savings allowance. So, there are lots of things at play when you go over one of those thresholds.
For those who tip over the £100,000 cliff edge, it’s gonna be particularly important to think about how to cut their liability – and that can include through pension contributions.
So, those who have access to salary sacrifice schemes may well want to fill their
boots while they can – and, of course, people can take advantage of Cash ISAs for tax on their savings.
So, those frozen tax thresholds also impact pensioners – don’t they, Helen?
[4:25] Helen Morrissey: Yes – you are right, Sarah.
So, those frozen thresholds do impact pensioners who are gonna find themselves being pulled into paying more tax – and tax at higher rates. With the State Pension also increasing in line with the triple lock, it means it’s gonna be just under the threshold for paying basic rate tax next year – and it is expected to actually breach that in 2027. And, you’ll remember, that led to the announcement during The Budget that pensioners who’s sole income is gonna be the State Pension won’t have to pay Income Tax on it for the remainder of this parliament.
There are, however, some things that you can do if you’re worried about a tax bill. You can make use of ISAs alongside your pensions to manage that Income Tax bill – and make sure that you’re handing a little bit less over to the taxman.
[5:12] Sarah Coles: So, this year, we have spent a lot of time talking about tax – but it’s not the full picture. So, if you look a big bigger, there are some actual positives to look forward to next year!
So, the HL Savings and Resilience Barometer – it does do a forecast ahead – and it actually forecast fairly steady trends in disposable income. So, it’s likely to rise about 1.2% - and that’s between the middle of 2025 and the middle of 2026. At the same time, inflation is actually expected to ease towards the target rate – and that’s backed up by forecasts from the Bank of England – which forecast inflation is going to be 3.2% by March – so that’s actually continuing to fall.
Of course, if inflation falls, this could mean more rate cuts in 2026. Now, there aren’t expected to be many at the moment, so rates could settle around 3.25%. Unfortunately, the Barometer forecast wage growth is also anticipated to slow, which will limit the real gains and income – but those gains should mean people keep saving. So, on average, households will have enough savings to cover 3.5 months of essential spending – that’s up from 3.3 months – and it’s worth bearing in mind that we often say that, you know, if you’re looking to build an emergency savings net, you should have between three and six-months’ worth of essential spending – so, obviously, that’s within that zone.
Another key to resilience, of course, is the employment picture. So, the unemployment rate has actually risen to 4.8% – and the bad news is that more weakness is expected. So, depending on things like the progress of AI – and the continued rush to delay organisations – things could actually get worse – particularly for entry-level positions and middle management.
So, the Barometer also held bad news for retirement – so, Helen, what’s the bad news?
[6:44] Helen Morrissey: Yes – it did.
So, the Barometer gives us an indication of the percentage of households who are on track for an adequate retirement – and it’s shown that there are some big gaps, with just 43% of households on track.
It also shows that there’s a real shock in store for higher earners, who may not realise that they are actually under-saving for retirement – and that they would be unable to maintain the lifestyle that they’ve had during their working life in retirement. So, it shows that there’s still much to be done to get us to improve our retirement resilience.
[7:18] Sarah Coles: Yes – I mean, I suppose, this is the time of year to be thinking about how things could improve – because, as ever, people are keen to make changes in 2026 to improve their lives.
So, we actually ran a survey – with Opinion – of 2,000 people in October this year – and we asked people about the resolutions they were making. So, more than half of people actually say they’ll definitely make financial resolutions this year.
Now, women are more likely to make financial resolutions than men. Hard to know why that is – I don’t know whether the gaps are bigger, or whether they’re just super-keen to make a change.
24% of people say they want to save more in 2026 – so that makes it the most popular financial resolution this year. Meanwhile, 8% of people are pledging to start investing – and 10% to invest more. So, investment’s obviously quite a theme that’s coming through for next year.
And, of course, there’s loads of other things make the list – so spending less, getting on top of their finances, shopping around, paying down debts – and paying into a pension, you’ll be pleased to hear, Helen – and making a will too! So, there’s quite a lot on that list.
So, I kind of wanted to ask you... I mean, obviously, paying into a pension is clearly something that people go, ‘Oh, yes – probably should do more about my pension’ – but can you just take me through what people need to do when they’re thinking about their pension resolutions?
[8:22] Helen Morrissey: Absolutely – and I think they are all very worthy resolutions there, aren’t they?
So, I think – if you’re looking at your pensions... I think, sometimes, people think it’s gonna be a much bigger job than it actually is. Whereas, there’s some relatively quick things that you can do that can have really big impacts on your financial resilience.
So, the first thing that I would say is take a look at online pension calculators – that you will see with your providers – you know, on their websites and such like – and you can use these to check if you are on track with your retirement planning – and it can give you the confidence of knowing either that you are – or, if not, it gives you some time to do something about it and put a plan in place.
So, I think, once you’ve had a bit of a look around these pensions calculators – and seeing what you’re on track for – you can have a think about whether maybe you can afford to contribute more. So, many people contribute at auto-enrolment minimums – which is 8% – and that may be enough to get you where you want to be. But, you know, if it’s not, can you afford to have a bit of wiggle room in your budget to boost that contribution? And, if you can’t do it now, can you maybe think about, every time you get a pay rise – or a new role – and using the extra money that comes with that – to increase those contributions?
I would also say... make sure that you’re making the most of your employer contribution – because most employers will contribute at auto-enrolment minimum levels, but there are others that are willing to boost their contribution if you boost yours. So, that’s what’s known as an ‘Employer match’ – and it can be a really great way of significantly – in some cases – increasing your pension contribution, without you necessarily having to put in a lot more, yourself. So, it’s well worth checking to see if your employer offers that.
Another amazing way of potentially giving a big bump to your resilience is... ‘Have you lost track of a pension?’ So, if you’ve had several jobs over the course of your career – you might have had a pension in quite a few of them – and you may well have lost track of it.
Now, even if that was only a relatively small pension... you know, if it’s invested in a market, it can grow over time – and you could find that, if you do track it down, you could be boosting your position by several thousand pounds – or even more.
So, what I would say is... sit down, check your pensions paperwork. If you think you’ve lost track of a pension, contact the government’s Pension Tracing Service. So, all you need is either the name of your employer or the name of the provider.
Now, the service can’t tell you if you have a pension with them, but they can give you contact details, so you can go and find out for yourself. So, that can be a really great way of – in some cases – significantly boosting your retirement resilience.
And, what I would say is... check in with your progress, periodically. It doesn’t have to take you forever – it’s keeping an eye on those pension statements – you know, logging in online, seeing how big your pension’s got – and just kind of you taking those small actions... it can really make a huge difference to what you end up with.
[11:26] Sarah Coles: You’re absolutely right – it’s not just making these resolutions – it’s actually popping back and seeing how you’re getting on. Because, if you’re struggling with things like sticking with your resolutions, it can really help to have that sort of interim ‘Win’ to keep you on track.
As somebody who’s had million financial resolutions in my life – and not stuck to all of them – there are a couple of things that really will help make them stick. So, obviously, keeping an eye on your progress is really important.
I would also say it’s really important to be specific. So – very much like if you were wanting to lose weight and say, ‘Oh, I’ll just eat better’ – that’s not going to get you down the track because it’s just not specific enough. So, you actually need to be really specific about exactly what you want to improve – and how you’re gonna go about it.
The other thing I’d say is... pay yourself first. So, it means, when your pay comes in, put that money towards whatever that goal is that you absolutely, definitely want to hit. So, if it’s paying down debt – or saving, or investing – whatever it is... make sure that you do that before you have a chance to spend the money – otherwise, you’re on a hiding to nothing!
I’d also say it’s really key to try and automate the process. So, actually, you can set up direct debits that will do the hard work of remembering to do the right thing for you. So, it might be into a savings account – if you want to build emergency savings – or, if you’re keen to invest, you can use a regular saver – that’s a great idea – lets you pay into investments every month – and all of these things take the ‘Remembering’ out of the process.
And the final thing I would say is – it’s the really boring part of doing any resolution... is, ‘Free up the cash.’ So, if you’re committing to a new habit, you actually need to work out where the money’s gonna come from – otherwise, you’re gonna end up doing the right thing at the beginning of the month, and then ending up undoing it when you get to the end of the month – in order to try and make ends meet.
So, I’d say – unfortunately, do try and start with drawing up a budget. It’s so boring, but it is so valuable as well.
[13:04] Helen Morrissey: Absolutely – it’s the kind of thing that you really thank yourself for later on, isn’t it? And, for me – you know, I’m all for saying, ‘Small steps can make a huge difference’ – so make use of those online tools available to you, and make sure that you’re on track – check your pension statements to see how much you’ve got. And even just taking the time to think about what retirement means – and what you would like it to look like – can mean that you can start drilling down into what that might cost – and that’s a really good starting point for you.
[13:34] Sarah Coles: So, hopefully, that’s given everyone some enthusiasm for their New Year’s resolutions! I think mine, unfortunately, is to spend less on things that I really don’t need – in the middle of the night when I’m scrolling through social media. So, I think someone might need to confiscate my phone to make that happen!
So, that’s almost all from us – but, before we do go, we have time for the stat of the week.
So, I had a quick dig through these findings on people’s resolutions – and one really common resolution is to pay down debts. But I want to know, ‘Who was most likely to say this?’
So, was it higher-rate taxpayers – was it the squeezed-middle (those people who are aged 35-54) – or was it renters?
[14:08] Helen Morrissey: Ah, this is a tough one, isn’t it? D’you know what... I am gonna go with ‘Renters.’
[14:16] Sarah Coles: [Laughs] It’s a really good guess – and it kinda got great logic behind it! Actually, the answer is ‘Higher-rate taxpayers’ – because we do know that higher-rate taxpayers do tend to carry quite a lot of debt. So, obviously, this is a moment at which you go, ‘D’you know what... I don’t actually need to borrow quite so much.’ We’ll have to see how everyone’s resolutions come along!
So, that’s it for this week – but, before we go, we should remind you this was recorded on December 15th 2025, and all information was correct at the time of recording.
[14:40] Helen Morrissey: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you.
[14:46] 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.
All investments fall as well as rise in value, so you could get back less than you invest.
[14:57] Helen Morrissey: So, all that’s left is for us to thank our Producer, Elizabeth Hotson.
[15:01] Sarah Coles: And, of course, to thank you very much for listening – we’ll be back again soon. Goodbye!
[15:05] Helen Morrissey: Goodbye!