1. The Looming Tax Trap for Individuals and Savers

The most impactful measures for Worcestershire employees and private investors are those that quietly increase the tax burden year after year:

The Deepening Freeze (Fiscal Drag)

The Income Tax Personal Allowance (£12,570) and the Higher Rate Threshold (£50,270) remain frozen, a policy now set to continue until 2030-31. This long-term freeze ensures that as wages increase, more people are dragged into paying tax for the first time, and more middle-earners are pulled into the 40% Higher Rate tax bracket.

For a family in Worcester, an expected pay rise designed to help with living costs may simply result in a larger tax bill, effectively eroding their real disposable income. This highlights the importance of reviewing how available tax shelters can be used.

Targeted Increases on Investment Income

Savers and investors must immediately take note of three critical tax hikes, all of which will disproportionately affect those with diversified wealth:

1. Dividend Tax Rises (from April 2026): The basic and higher rates of tax on dividends will increase by two percentage points each, taking the Basic Rate to 10.75% and the Higher Rate to 35.75%. This significantly increases the cost of extracting profits from a limited company for business owners.
2. Savings Tax Hike (from April 2027): The tax rate on savings income will rise by 2 percentage points across all bands.
3. Property Income Tax (from April 2027): New, separate tax bands will be created for property rental income, with the basic rate set at 22% and the higher rate at 42%.

These changes underscore the crucial importance of maxing out tax-efficient wrappers such as Pensions and ISAs before the rates take effect.

A Blow to Cash Savings: The ISA Cap

In a significant move, the annual subscription limit for Cash ISAs will be cut from £20,000 to £12,000 from April 2027. While the overall £20,000 ISA limit remains, this forces a reconsideration of where clients hold their tax-free capital, pushing more funds towards stocks and shares. For those with a low-risk profile or specific near-term saving goals, this reduction in the Cash ISA allowance could require a completely new savings strategy to ensure efficient use of tax relief while maintaining liquidity.

2. Navigating the Minefield for Worcestershire Business Owners

The Autumn Budget 2025 presents a double challenge for limited company owners and self-employed individuals in our community: increased taxation on personal profits and stricter compliance requirements.

The Remuneration Strategy Crisis

The combination of frozen thresholds and the two-percentage-point rise in Dividend Tax from April 2026 creates an immediate need for all business owners to review their remuneration strategy. The traditional salary-and-dividend split used to maximize tax efficiency must be reassessed against the overall tax burden. This is a complex area where bespoke advice is vital to ensure you are drawing income in the most tax-efficient manner possible under the new rules.

Capital Gains Tax (CGT) Changes

Entrepreneurs will be disappointed by the announcement that the Capital Gains Tax Business Asset Disposal Relief (BADR) rate will increase from 14% to 18% from April 2026. This relief is crucial for founders and owners selling their businesses, allowing them to pay a lower rate of CGT on lifetime gains up to £1 million. This forthcoming tax increase creates a clear incentive for those planning a business exit in the near future to accelerate their succession planning.

Compliance and Penalties

Business owners must also note the new focus on compliance. The penalty for late submission of a Corporation Tax return will double from April 2026. Furthermore, the full rollout of Making Tax Digital (MTD) for Income Tax Self Assessment begins from April 2026 for those with income over £50,000, and from April 2027 for those over £30,000. These measures demand tighter accounting practices and professional support to avoid costly fines.

3. Rethinking Retirement and Inheritance Planning

The Budget contained significant proposals that could fundamentally alter the landscape of wealth transfer:

• Salary Sacrifice Cap: From 2029, salary-sacrificed pension contributions above £2,000 will be subject to tax exemption limits. This removes some of the advantage of this popular and tax-efficient workplace scheme, prompting a review of the total remuneration packages for higher earners.
• Inheritance Tax (IHT) on Pensions: Last year the government confirmed plans, subject to future legislation, to bring undrawn pension pots into the estate for IHT purposes from April 2027. Currently, pensions are often a highly effective way to pass wealth tax-efficiently to the next generation. If this change goes ahead, it will create an additional 40% tax charge on this asset class, necessitating an urgent overhaul of all existing Inheritance Tax planning strategies.

For my clients in Worcestershire, this IHT proposal is a warning shot. We must act now to review Wills, Trusts, and the designation of pension beneficiaries to protect inter-generational wealth from potential future taxation.