Retiring in the next decade? 3 ways the 2025 Autumn Budget could affect your plans

As you might have read in our Autumn Budget summary, in November 2025, the chancellor delivered a speech containing several restrictive changes for savers, investors, and retirees. Some are set to come into force over the next few months, while the government plans to roll out others over the coming years.

While these changes will affect everyone differently, pre-retirees – specifically, those seeking to retire in the coming decade – are among those most likely to be affected by the measures.

If you or someone you know falls into this category, here are three Autumn Budget 2025 announcements worth knowing. Plus, find out how bespoke advice could help manage the impact.

1. Frozen thresholds could mean more of your money is subject to tax before and after you retire

Prior to the Budget, Income Tax thresholds were frozen until 2028. In November, Rachel Reeves announced that they will remain frozen for another three years, until 2031.

The earnings thresholds for Income Tax are:

• Personal Allowance: £12,570
• Basic rate (20%): £12,571 – £50,270
• Higher rate (40%): £50,271 – £125,140
• Additional rate (45%): Above £125,140

The extended freeze means that more taxpayers are likely to be dragged into the higher- and additional-rate tax thresholds.

Remember, not only will your earnings be subject to Income Tax while you are working, but some of your retirement income will also likely be taxed at your marginal rate.

This includes your:

• Pension income, except for your tax-free lump sum
• Income from rental properties (more on this later)
• State Pension – these payments are not directly liable for Income Tax but could make up much of your tax-free Personal Allowance in any given year, pushing more of your income over the taxable threshold.

As you approach retirement, it stands to reason that you should pay attention to how much tax you’re paying. The freezing of thresholds contributes to “fiscal drag” – wages rise, while tax rates stay the same – and this can subtly erode the value of your income as you save for the next chapter.

What’s more, once you have retired, you’ll be drawing from a finite pool of resources, so it may be unwelcome news that more of your money could end up with HMRC. Our financial planners can help you mitigate tax where possible by putting together a bespoke retirement income plan suited to your lifestyle and goals.

Read more: Is 50 too late to plan your dream retirement?

2. Income Tax on property income and some dividend earnings is increasing in April 2026

For those taking dividends as part of their remuneration or receiving income from properties, your tax bill is very likely to rise from 6 April 2026. This increase could influence the amount you’re able to save pre-retirement as well as how much you will take home once you’ve retired.

Dividends

Dividend Tax (a form of Income Tax) will go up by two percentage points for basic- and higher-rate taxpayers in April 2026.

At the time of writing and until 6 April, the rates are:

• Basic rate: 8.75%
• Higher rate: 33.75%
• Additional rate: 39.35%

There is a £500 tax-free Dividend Allowance available to use each tax year, but above this threshold, dividends will be combined with your other income and taxed accordingly.

From the start of the 2026/27 tax year, the following rates will apply:

• Basic rate: 10.75%
• Higher rate: 35.75%
• Additional rate: 39.35%

Note that the additional rate remains unchanged.

Property income

Any income you receive from properties you own will usually count towards your Income Tax bill each year. From 6 April 2027, Income Tax on property earnings will increase by two percentage points.

So, your property income will be taxed as follows:

• Basic rate: 22%
• Higher rate: 42%
• Additional rate: 47%

If you intend to rely partially or solely on property income and/or dividends in retirement, be aware that these higher rates of tax will reduce how much you take home each year.

You may already be receiving this type of income pre-retirement, meaning your savings strategy could be affected too – the more tax you pay, the less you may be able to save. Alternatively, you may need to adjust your lifestyle to keep meeting your savings targets as you head towards retirement.

3. Salary sacrifice changes mean your pension contributions may be less efficient from April 2029

According to Pensions Expert, 3.3 million people are using salary sacrifice for pensions (as of January 2026).

Salary sacrifice is an agreement you make with your employer to reduce your take-home salary or bonuses in exchange for an equivalent rise in employer pension contributions.

This allows you to receive relief from National Insurance contributions (NICs) and, usually, pay less Income Tax too.

However, as announced in the Budget, from April 2029 onwards, the NIC-relievable amount you will be able to pay into your pension under salary sacrifice will be limited to £2,000 per tax year. To be clear, you will still be able to pay the same amount into your pension, but contributions above £2,000 will be subject to NI.

If you plan to retire after 2029 and use salary sacrifice between now and when you stop work, your contributions are set to become less tax-efficient.

That being said, the new legislation won’t necessarily scupper your retirement plans entirely. By working with a financial planner, you can determine whether these new salary sacrifice rules will affect you and by how much.

Together, we can form a plan to mitigate the impact and keep your retirement plan on track.

Get in touch with Kellands today

The above points aren’t the only important changes announced in the Budget, and with the Spring Statement set to be delivered on 3 March, there may be further shifts in the UK’s financial landscape soon.

Read more: Under 65? Here’s what the Autumn Budget ISA reforms mean for you

While the new changes might make it harder to manage your wealth tax-efficiently, a Kellands financial planner can help you review your long-term financial plan and meet your future goals.

Email us at hale@kelland.co.uk or call 0161 929 8838.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Your pension income could also be affected by the interest rates at the time you take your benefits. Workplace pensions are regulated by The Pensions Regulator.

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