Sam Francis & Adam Booth, Chase de Vere

Speculation swirled in the run up to the Autumn budget with concerns mounting over an expected wave of tax increases. In the end Rachel Reeves delivered a mixed package of tax and welfare reforms aimed at shoring up public finances. Whilst these measures may assist low-income households the budget risks leaving many feeling the squeeze, especially given a backdrop of potentially slower growth and continuing pressure on living standards.

A summary of some of the key budget items are provided below with accompanying thoughts regarding the impact they may have.

Personal Taxation

In relation to personal taxation, it was confirmed that the Personal Allowance, Basic, Higher and Additional rate thresholds will be frozen until April 2031 – this is an extension for a further three years having already been frozen until 2028. There are also no headline rate changes to National Insurance Contributions with employer NIC thresholds frozen until 2031.

Whilst this suggests that the rates in which tax is paid is not increasing, it does however mean that individuals will likely pay more in tax as wages increase.

How does this impact P?

The announcement is likely to impact clients who employ carers, as it may create upward pressure on wages over time which will need to be considered when planning future budgets. Individuals in employment may also find that a larger proportion of their income becomes taxable.

Of course, should carers wages increase in the future, the indexation of periodical payments will incorporate this.

Dividend, Savings and Property Income Tax

The income tax rate for dividend, savings and property tax will increase by 2%. The new rates will be as follows:

Dividend rate increases will apply from April 2026:

• Basic Rate will increase to 10.75% (up from 8.75%)
• Higher Rate will increase to 35.75% (up from 33.75%)
• Additional Rate will remain at 39.35%

Savings tax rate will apply from April 2027.

• Basic Rate will rise to 22% (up from 20%)
• Higher Rate will rise to 42% (up from 40%)
• Additional Rate will rise to 47% (up from 45%)

Property tax rate will apply from April 2027.

A new separate tax rate for property income will be introduced:

• Basic Rate will rise to 22% (up from 20%)
• Higher Rate will rise to 42% (up from 40%)
• Additional Rate will rise to 47% (up from 45%)

The government will engage with the devolved governments of Scotland and Wales to provide them with the ability to set property income rates in line with their current income tax powers in their fiscal frameworks.

The changes to dividend and savings income rates will apply UK-wide.

What does this mean and what impact will this have?

The increase in rates for both dividends and savings income only focuses the mind further on the need for tax planning. Utilising the various allowances available to P is imperative to reduce the tax liability moving forward. It is also worth noting that increases in these rates further open the door to careful consideration of other financial wrappers such as ISAs and Investment Bonds. For the avoidance of doubt, seek independent financial advice to ensure that P’s finances are in an optimal position prior to these changes coming into effect.

The increase in tax payable is likely to affect long-term investment returns. As a result, it may be necessary to keep under close review the sustainability of the financial planning in place. This may lead to a review of the core parameters of the planning.

With these future increases in tax, this may raise further discussions during litigation regarding the use of Periodical Payments. This highlights the importance of obtaining in-depth analysis comparing settlement options.

A point that is often raised during financial planning discussions is the potential purchase of a buy to let property, this being something that is often attractive to P and the wider family. The challenging environment for buy to let investors has only been increased following this budget.

Outside of the budget, The Renters’ Rights Act which comes into practical effect from 1st May 2026, will cause greater challenges for Landlords. Overall, the outlook for property as an investment for P is looking less appealing.

Individual Savings Account Reform

From April 2027, the annual cash ISA allowance will fall from £20,000 to £12,000 for individuals under 65. Whilst the overall ISA allowance is unchanged at £20,000, for anyone making a maximum contribution of £20,000, £8,000 must be invested in stocks and shares for under-65s. Those aged 65 and over will retain the £20,000 cash ISA limit.

How does this affect P?

A large proportion of financial plans utilise the ISA allowance in full within an investment portfolio and as such this will have little impact. It is of course worth noting that for individuals where investment portfolios are not suitable, the change will impact the proportion of assets that can be moved into a tax-efficient wrapper each tax year.

For those Deputies managing the affairs of P in the later years (namely 65 and above), it is pleasing to note that no changes have occurred to the levels which can be held within a Cash ISA.

In summary, the above changes will require Deputies to further consider planning options for P, both existing and new. The increase in taxes has only further amplified the need for a robust financial plan which considers various areas of tax planning and the use of different tax wrappers. It will also make considerations regarding the structure of settlements greater.

Please see below a table detailing the changes mentioned and the effective date:

Measure	Effective Date
Dividend tax increase	Apr 2026
National Living and Minimum Wage increases	Apr 2026
Cash ISA allowance cut	Apr 2027
Council tax surcharge on £2m+ properties	Apr 2028
Pension salary sacrifice NIC cap	Apr 2029
Income tax threshold freeze extension	Until 2031

Welfare Changes

Two-Child limit – Universal Credit

The two-child limit was introduced in April 2017 and restricted families claiming Universal Credit (and previously Child Tax Credit) so that they could only receive the child element for their first two children. Any third or subsequent child born on or after 6 April 2017 was excluded, except in certain exceptional circumstances such as multiple births, adoption from care, or non-consensual conception. Importantly, parents could still receive the disabled child element for children excluded from the standard child element.

The Government has announced that the two-child limit will be abolished from April 2026.

What this means for P?

This means families will be able to claim the child element for all their children, and the change will be applied automatically. However, some parents may not have reported the births of children for whom they previously received no payment (third or subsequent children), so it is advisable to work with families to ensure all children are listed on their Universal Credit claim before April 2026.

This reform is expected to lift approximately 450,000 children out of poverty by 2029/30 and has been widely welcomed, as the two-child limit has long been criticised as a major driver of child poverty.

As a side note, if a child receives Disability Living Allowance (DLA) or Personal Independence Payment (PIP), they are automatically entitled to the disabled child element of £158.76 per month. If the child is in receipt of the enhanced rate of daily living under PIP or the highest care component of DLA, the higher disabled child element applies, which is £495.87 per month.

High Value Council Tax Surcharge (HVCTS)

The Government announced the introduction of the ‘mansion tax’, officially High Value Council Tax Surcharge (HVCTS).

This new charge will apply to all residential properties in England that are valued over £2 million, starting in 2028. This will be on top of the existing Council Tax liability for the property. The charge will range from £2,500 up to £7,500.

Property Value Annual Surcharge

• £2 million – £2.5 million £2,500
• £2.5 million – £3.5 million £3,500
• £3.5 million – £5 million £5,000
• £5 million and above £7,500

The charge will be based on 2026 property valuations and will increase with inflation from 2029/2030.

It is currently unknown as to how this will impact P.

Full details are pending a public consultation in 2026, but the Government has indicated that there will be support schemes and deferral options (eg for people with high value homes but low incomes).

Reliefs and exemptions may also be considered for properties with complex ownership structures (held in trust, company ownership etc).

The consultation will also look at hardship provisions like Council Tax Reduction which already exists for council tax liabilities.

Additional comments

The Government have also proposed that they are to be increasing compliance checks, so it is more important than ever before that Deputies ensure they report change of circumstances to the welfare benefits agencies in a timely manner so to prevent any potential overpayment.

More Universal Credit and ESA claimants will require face-to-face assessments, but they will give longer gaps between reviews for those with long-term health conditions.

Practical Steps for Deputies

• Review all client UC claims to confirm children are correctly listed.
• Prepare for potential HVCTS liabilities for clients with high-value properties.
• Maintain accurate records and report changes promptly to welfare benefit agencies.
• Advise families on upcoming reforms and their financial implications.

Written by Sam Francis, Independent Financial Adviser Chase de Vere Personal Injury and Court of Protection Team & Adam Booth Welfare Benefits Adviser Chase de Vere Personal Injury and Court of Protection Team.

“The information contained within this document is for guidance only and does not constitute financial advice”