The key takeaways from the Budget 2025

On 26th November, Chancellor Rachel Reeves delivered her second budget. Our experts share their initial thoughts on what it means for pensions and broader savings from the perspective of employers, trustees and individuals.

Impacts for employers, trustees and individuals

Salary sacrifice changes to drive employer action

Mark Jones, Employee Benefits Partner, commented: “The Chancellor has delivered a Budget that increases taxes on employees’ savings.  Firstly, by freezing tax and NI allowances on wages, then by applying NI on salary sacrificed pension contributions above £2,000 and finally by increasing tax by 2% on savings income.

“Employers will already be thinking about making plans to offset the NI salary sacrifice loss long before these changes kick in from 2029. We need to see the detail around implementation but, for employers where a significant proportion of the workforce are making use of salary sacrifice above the £2,000 level, they are going to look for ways to mitigate any additional costs. That may include changing their scheme, so they don’t pay more than £2,000 in salary sacrificed contributions or changing the balance of remuneration with higher pay rises making up for reduced contributions.

“There is a long time for this to pan out, with three planned Budgets and potential even the next General Election to come before it comes into effect. Employers will be frustrated when they consider the amount of time and effort they are going to have to expend in complying with the new requirements and looking at alternatives to minimise the additional tax they will have to pay.”

Budget changes compound challenges from next year’s pension IHT changes

Mark Campbell, Head of Wealth, commented: “The changes announced in today’s Budget will compound the long-term financial planning challenges created by introducing inheritance tax (IHT) for defined contribution pensions in April 2027.

“By deciding to increase income tax rates on property, savings and dividends –  and from 2029,  introduce National Insurance on pensions salary sacrifice contributions above £2,000 – on top of what is already planned for next year, the Chancellor introduces a whole new set of disincentives and costs to saving and investing for the long-term, including for retirement.

“Much of the wealth that is saved, invested and eventually passed down, including through pensions, supports today’s younger generations with important life events like getting on the housing ladder, weddings and having children, which make significant contributions to the economy. Tax doesn’t have the same multiplying effect.

“We need to explore more intelligent solutions for incentivising an investing culture in the UK and, with it, long-term financial goal setting and security, particularly in retirement. Solutions should focus on the transfer of wealth to where the gaps in ability to save for the longer-term sit, ensuring that the next generations benefit from the asset growth their predecessors have benefited and which may not be repeated, be that property or indeed pensions.”

Mansion Tax is indiscriminate and flawed

Mark Campbell, Head of Wealth, commented:“While the intent behind the ‘Mansion Tax’ may appear fair on paper, the proposal is indiscriminate and makes a flawed assumption that those living in homes worth over £2 million have the liquid wealth or income to pay such a tax. It risks penalising people who are “asset rich, cash poor,” particularly in regions like London and the Southeast, where high property values don’t necessarily reflect high incomes. Many will still have significant mortgages, especially as fixed-rate terms end and interest rates bite, while property values themselves could be negatively affected.

“It also fails to account for circumstance or tenure. Someone who bought their home decades ago and now lives on a pension could face punitive costs simply for staying put and, if forced to move, they would face further burdens through stamp duty and potential capital loss. The measure also raises questions of fairness between those who own a single property and others with multiple, smaller assets.

“For some, particularly those nearing retirement or with limited pension provision, this could accelerate downsizing and disrupt family and community ties. And at a broader level, it risks sending a message that the UK is a less attractive place for wealth creators, entrepreneurs and investors. We should be encouraging people to stay, invest, and contribute to a thriving economy, not pushing them away. People don’t stay for the weather; they stay for opportunity, stability, and a fair, predictable tax environment.”

Reduced cash ISA limit will have unintended consequences

Mark Campbell, Head of Wealth, commented: “The reduction in the cash ISA limit from £20,000 to £12,000 may encourage some individuals to invest for the future, which is a good thing so long as they have suitable time horizons, understand how to invest and the risks associated.

“But there is also the risk this will shoe-horn people without the knowledge and experience into the investment market, or detrimentally cause them to place more of their money into regular savings accounts where the tax rate is now set to increase.

“Ultimately, we need to encourage an investment culture through education, which should start with children in schools. In the meantime, there should be continued focus on ensuring people have access to personal advice that ensures that they make informed and well understood decisions.”

Measures for entrepreneurship seem insufficient

Rob Agnew, Partner & Head of Private Capital, Isio, comments: “The Chancellor has clearly indicated a desire for the UK to become a hub for entrepreneurs and fast-growing firms. However, while the 2025 Budget includes some targeted measures, they appear insufficient to genuinely attract entrepreneurs – particularly when set against the profound impact of previous reforms to capital gains tax and inheritance tax.

“Elsewhere, the Budget has doubled the eligibility thresholds for Enterprise Management Incentives (EMI) and increased the limits for Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) to £10-20m for Knowledge Intensive Companies (KICs). Yet despite these advancements, their attractiveness is diluted by other measures, such as the reduction in income tax relief on VCTs from 30% to 20%.

“For wealth creators and entrepreneurs looking either to pass businesses to heirs or to exit after successful ventures, the cumulative burden of these policies can often outweigh the incentives. Ultimately, the Budget is notable more for what it omits than for what it includes, particularly the absence of substantial reforms to the tax and succession landscape that could meaningfully drive national investment.

“Taken together with recently announced increases in capital-based and property-related taxes, and earlier restrictions on pensions and inheritance, the broader direction of taxation for the wealthy in the UK indicates a continuing trend of targeted tax hikes on wealth creators. For globally mobile individuals, this looks less like an invitation to relocate to the UK and more like a signal that the country is increasingly aiming to fund social and investment priorities by relying more heavily on accumulated wealth and asset-derived income.

“This creates a growing disconnect. The UK continues to offer deep markets, a strong rule of law and public-investment-led growth, yet the tax trajectory for the wealthy remains one-way. This is unlikely to halt – and may indeed reinforce – the trend for entrepreneurs and high-net-worth individuals to diversify their residences and establish alternative bases in other jurisdictions, such as the UAE.