Tax shift in the UK changes the economics of pensions dividends and succession

Arbuthnot Banking Group

The Autumn Budget 2025 has redrawn the lines for how wealth is taxed in the UK. The freeze on income tax thresholds until 2030 extends a form of stealth taxation that hits higher earners hardest. As salaries rise with inflation, more income is dragged into higher bands, increasing the tax bill without any formal announcement. This is especially relevant for those drawing large dividends or income through company structures.

National Insurance changes are also on the way. From April 2029, pension salary sacrifice will lose much of its appeal. Contributions above £2,000 a year will attract both employee and employer National Insurance, removing a long-used incentive for high earners.

From April 2026, dividend tax will rise by two percentage points for all bands, and tax on savings and property income will increase too. The result is a meaningful reduction in net income for anyone relying on yield from outside tax shelters. Combined with frozen allowances, this effectively lowers the return on cash, bonds, buy-to-let and even quoted equity for those holding assets in personal names.

Business succession planning has taken a hit. Owners selling their company to an Employee Ownership Trust previously paid no capital gains tax. That relief has now been halved to 50%, immediately reducing the after-tax value of many exit strategies.

Property has not escaped either. From April 2028, owners of UK residential property worth over £2 million will face a new annual surcharge. While unlikely to trigger widespread sales, it adds another layer of cost to holding prime real estate and signals further pressure on higher-value assets.

Arbuthnot Banking Group PLC (LON:ARBB), operating as Arbuthnot Latham, offers private and commercial banking products and services in the United Kingdom. Established in 1833, Arbuthnot Banking is headquartered in London, United Kingdom.

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