A clear guide to the costs that shape retirement – and simple ways to sense check what you might need.
Article last updated 2 December 2025.
If you’re in your 30s or 40s, juggling a career, raising young kids and steadily building your wealth, the Autumn Budget probably matters more than you think. On the surface, nothing too dramatic was unveiled. There were no big tax hikes, no shock announcements. But dig a little deeper, and you’ll see a steadily growing burden on higher earners and those looking to grow their wealth.
Income tax
Chancellor Rachel Reeves didn’t raise income tax rates, but she didn’t need to. By freezing tax thresholds until 2031, the Treasury will pull more of your income will be into higher bands as your salary grows. Fiscal drag is no longer a new phenomenon; it’s a stealthy way of increasing tax without changing the headline numbers.
People aiming for six-figure salaries should be aware of the £100,000 tax trap. Once your income exceeds £100,000, your personal allowance starts to taper away, at £1 for every £2 earned above the threshold. If you earn above £125,140 you lose your personal allowance altogether. This creates an effective marginal tax rate of 60%. Once you add in national insurance, that’s closer to 62%. And if you have children, you ‘ll no longer qualify for the 30 hours of free childcare.
You’ll want to keep an eye on how close you are to the higher and additional-rate bands, and maximise your pension contributions via salary sacrifice, if that’s an option available to you. Although Reeves announced a £2,000 cap on salary sacrifice contributions to pensions, this won’t take effect until April 2029. You have time to build this into your long-term financial plan. The longer your money is invested, the greater the potential for it to grow.
Cash ISAs
From 2027, the cash ISA limit will drop from £20,000 to £12,000, unless you’re over the age of 65. Over-65s will still be able to save the full £20,000 in a cash ISA. The overall ISA allowance will remain at £20,000, however, so you can still invest the rest in stocks and shares ISAs. But if you’ve been leaning on cash for safety or saving for your next big purchase, that tax shelter will be shrinking.
Dividend and mansion tax
Dividend tax rates are slated to rise in 2026. Basic-rate taxpayers will now pay 10.75%, while higher-rate taxpayers will pay 35.75%. The additional rate of dividend tax will remain at 39.35%. If you own a high-value property, you can expect an annual levy from 2028. Properties valued at more than £2mn will pay an annual charge of £2,500, while homes worth over £5mn will pay an additional £7,500 or more every year. For people building wealth through investments or property, the cost of ownership is rising.
