Overview
This year’s Budget has been eagerly anticipated, with widespread predictions and speculation in advance.
Following the Budget announcements on Wednesday 26 November, we reflect on the key changes and their impact on employers and employees.
Ahead of delivering her Budget statement, Reeves said she will take "fair and necessary choices" for the economy:
- To cut NHS waiting lists
- To cut the cost of living.
- And to cut debt and borrowing.
The key proposals that you should be aware of:
Salary Sacrifice from April 2029 - The Government has announced that pension contributions above £2,000 per annum made via salary sacrifice will be subject to employer and employee National Insurance (NI) Contributions.
Salary sacrifice has long been a valuable benefit for both employers and employees, enabling individuals to boost their pension savings in a tax-efficient way.
This change, and the general uncertainty around the stability and sustainability of the UK pension system, emphasises the importance of the work of the Pensions Commission and the Pension Schemes Bill.
It is essential to establish a long-term plan for pensions, considering the interaction of minimum contributions to workplace pensions alongside the State Pension. Creating an environment that supports long-term financial security is essential for the future.
We await more detail on this change and will work with you and Government to make sure this is brought in as smoothly as possible.
It is helpful that it will not come in until April 2029 as that will allow time for those discussions.
Lifetime ISA Reform: The Government will publish a consultation in early 2026 on the implementation of a new, simpler ISA product to support first time buyers to buy a home. No further details are available at this stage and we will keep you informed as they emerge.
National Living Wage – The minimum levels will rise above inflation. Workers aged over 21 will see a rise of 4.1% to £12.71 per hour while the minimum wage for workers between 18-20 will get an 8.5% rise to £10.85 per hour from April next year.
Income Tax rates - The thresholds remain frozen, and the freeze has been extended to 2030/31 financial year.
What was left out?
- Pensions tax-free cash: Like last year, in the lead-up to this Autumn Budget, there was fervent debate around whether the Government might further restrict the 25% tax-free cash that can be taken from pensions (currently capped at £268,275). This caused many people to take their tax-free lump sums ahead of the budget. As happened last year the change never materialised.
We will continue to review the full Budget documentation for any further details in the announcements, which were not mentioned in the Chancellor’s speech. We have also updated members about the Budget changes.
Keep an eye out for our next Regulatory Update in January when we will provide further insight on the Budget announcements. If you do have any further questions or need more information, please ask your Relationship Director or your Fidelity contact.