Autumn Budget 2025: What It Means for Your Take-Home Pay

Chancellor Rachel Reeves delivered her Autumn Budget on 26 November 2025, setting out tax-raising measures worth up to £26 billion. While headline income tax and National Insurance rates remain unchanged, a raft of other changes will affect what you take home. Here is a plain-English summary.

Income Tax Thresholds Frozen Until 2031

The personal allowance stays at £12,570, the higher-rate threshold at £50,270, and the additional-rate threshold at £125,140. These thresholds were already frozen until April 2028, and the Chancellor has now extended that freeze to April 2031.

Because wages tend to rise with inflation while thresholds stay flat, more of your income is gradually taxed at higher rates — a process known as fiscal drag. The Office for Budget Responsibility estimates that by 2030–31, 5.2 million more people will be paying income tax and nearly 4.8 million will have moved into the higher-rate band compared with indexed thresholds.

National Insurance: Rates Unchanged, Thresholds Frozen

Employee NI rates stay at 8% (between £12,570 and £50,270) and 2% above that. The employer NI rate remains at 15% with the secondary threshold held at £5,000 — also frozen until 2031.

No direct change to employee NI rates is good news for take-home pay in isolation, but the continuing threshold freeze means you effectively pay more as your earnings grow.

Dividend Tax Rates Rising from April 2026

From 6 April 2026, dividend tax rates increase:

• Basic rate: 8.75% → 10.75%
• Higher rate: 33.75% → 35.75%
• Additional rate: stays at 39.35%

The £500 dividend allowance remains. If you hold shares outside an ISA or run a limited company paying dividends, this will reduce your net income.

Savings and Property Income Tax Going Up (April 2027)

From April 2027 (not April 2026), tax rates on savings income (UK-wide) and property income (England, Wales, and Northern Ireland) will each rise by two percentage points:

• Basic rate: 20% → 22%
• Higher rate: 40% → 42%
• Additional rate: 45% → 47%

If you earn interest above your Personal Savings Allowance or receive rental income, your tax bill will be higher from April 2027 onwards.

Salary Sacrifice Pension Cap from 2029

From April 2029, only the first £2,000 per year of employee pension contributions made through salary sacrifice will be exempt from National Insurance. Contributions above that will attract both employee and employer NICs.

This does not affect direct employer contributions, and all salary sacrifice pension contributions remain exempt from income tax. But for anyone currently sacrificing more than £2,000 per year in this way, it is a significant change to plan for.

National Living Wage Rising to £12.71

From 1 April 2026, the National Living Wage increases by 4.1% to £12.71 per hour for workers aged 21 and over, worth an extra £900 a year in gross earnings for a full-time worker.

Other Noteworthy Changes

• Inheritance tax: Agricultural and business property relief will be reformed from April 2026, with a new £2.5 million allowance for 100% relief and 50% relief thereafter.
• ISA cash limit: Reducing from £20,000 to £12,000 for under-65s from April 2027.
• Making Tax Digital: Mandatory quarterly reporting for self-employed and landlords earning over £50,000 from April 2026.
• Two-child benefit limit: Being removed from April 2026.
• Homeworking expenses relief: Removed from April 2026.

What This Means

For most employees, the headline is simple: income tax and NI rates aren't changing. But frozen thresholds mean your tax burden grows with every pay rise. If you have dividend, savings, or rental income, the April 2026 rate increases hit harder.

The real story is fiscal drag. The government raises money without touching headline rates — by keeping thresholds frozen while wages rise. It affects everyone getting a pay rise between now and 2031, which is basically everyone. Use our calculator to see your exact position under the 2026/27 rules.