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This article is for general guidance only and is not financial or professional advice. Any links are for your own information, and do not constitute any form of recommendation by Saga. You should not solely rely on this information to make any decisions, and consider seeking independent professional advice. All figures and information in this article are correct at the time of publishing, but laws, entitlements, tax treatments and allowances may change in the future.
The latest Budget has rewritten the rules on tax – and it could hit your pocket. From frozen income tax thresholds to new levies on property and savings, millions of people are facing ‘stealth’ tax rises.
But with smart planning, you can minimise the impact of these changes. We’ve rounded up 10 expert-backed moves to protect your money, cut future tax bills and keep your finances on track. Whether you’re thinking about pensions, property or passing on wealth, these steps could save you thousands.
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The chancellor extended the income tax band freeze for three more years, keeping thresholds unchanged until 2031.
This means that as wages rise, you could find yourself in a higher tax bracket, losing more of your pay and facing hidden tax traps. These include the clawback of child benefit for those earning £60,000 or more, and the gradual loss of the personal allowance for those earning over £100,000.
Laura Suter, director of personal finance at AJ Bell, says: “You can dodge these tax traps by contributing money into your pension, to bring your taxable income below the levels. You just need to work out what extra contributions you need to make to reduce your adjusted net income. This will involve a little bit of extra admin, but will still be well worth it when you consider the potential tax savings on offer.”
The freeze on thresholds does not directly apply to most income for people in Scotland, as income tax rates and thresholds are devolved. But the freeze on the personal allowance does apply in Scotland, and the UK thresholds are used for dividend tax and tax on savings interest in Scotland.
The ISA allowance remains at £20,000, with a £12,000 contribution limit on cash ISAs for under-65s from April 2027.
Existing cash ISAs aren’t affected, so current cash balances can stay untouched.
Maximising your ISA each year is a simple way to shield your cash from tax on savings interest, and your investments from dividend and capital gains taxes. This will become even more important as thresholds stay frozen and higher tax rates for savings and dividends take effect.
An extra 2% will be added to tax on savings interest from April 2027 – so 22% for basic-rate taxpayers and 42% for higher-rate taxpayers.
This applies where interest is above the personal savings allowance (£1,000 for basic-rate and £500 for higher-rate taxpayers).
This change also applies in Scotland, and it’s the UK tax thresholds that determine the savings tax rate you pay.
For low-risk savers, cash-style investments within a stocks and shares ISA– such as money market funds, bond funds, or government gilts– can help protect returns from tax while offering a lower level of risk. But the government has said that it will look at restricting ‘cash-like investments’ for under-65s in stocks and shares ISAs, to avoid them being used to get around the lower contribution limit (for under-65s) for cash ISAs. At the moment, it’s not clear what any restriction might look like.
Outside of ISAs, Premium Bonds offer easy access, and you could win monthly tax-free prizes instead of earning interest. But there’s a risk you might win nothing at all (in fact, most Premium Bond holders have never won a prize).
Dividend tax rates will rise from April 2026, with basic-rate taxpayer dividends levied at 10.75% (up from 8.75%) and higher-rate taxpayer dividends taxed at 35.75% (up from 33.75%).The additional-rate taxpayer level of 39.35% remains unchanged. If you live in Scotland, it’s the UK tax thresholds that affect the dividend tax rate you pay.
Dividend tax only applies to investments outside ISAs or pensions. To reduce exposure, you should consider moving existing holdings into a stocks and shares ISA using a ‘bed and ISA’ strategy, taking care not to exceed the £3,000 annual capital gains allowance.
Sarah Coles, head of personal finance at Hargreaves Lansdown, says: “If you’re married or in a civil partnership and your partner pays a lower rate of tax, you can transfer income-producing assets into their name. It means you can both take advantage of your tax allowances. You can also use all the tax-efficient vehicles at your disposal, including your ISAs and pensions, as well as the Junior ISAs and Junior SIPPs of any qualifying children.”
Venture Capital Trusts (VCTs) are investment funds that invest in early-stage unlisted companies. They are only suitable for experienced investors happy to take considerable risk.
Under the current rules, investors in VCTs can claim 30% income tax relief, typically up to £200,000 of investment per tax year – meaning a maximum tax-bill reduction of £60,000 in that year.
But Reeves announced that income tax relief on VCTs will drop from 30% to 20% from April 2026. This means you should act now if you want to take advantage of this tax break.
Another Budget announcement was that the national insurance perks of using salary sacrifice for pensions will be capped at £2,000 per year from April 2029. These changes will apply across the UK. But experts advise against stopping or reducing your pension contributions.
Suter explains: “Despite the national insurance savings being limited, what you pay in will still be exempt from income tax, and workers can still enjoy pension tax relief up to their marginal rate of income tax.
“What’s more, making pension contributions will still reduce your ‘adjusted net income’. This is important as it can pull you out of higher-rate taxes, or one of the tax traps, while also boosting your retirement savings.”
If you own a high-value property in England, there was bad news in the Budget. A new high-value property surcharge will apply from April 2028 to homes worth £2 million or more. It starts at £2,500 a year for properties worth £2-2.5 million, rising to £7,500 for properties over £5 million. The surcharge will be levied on top of standard stamp duty and council tax. If the property is rented out, it will be paid by the landlord rather than the renter.
For some, this ‘mansion tax’will make downsizing sooner rather than later a practical option– but be sure to run the numbers first.
Oliver Loughead, wealth manager at RBC Brewin Dolphin, says: “Start by calculating the expected annual cost of the tax versus the financial and lifestyle impact of moving. In some cases, the tax may be smaller than the stamp duty, selling fees and disruption involved in downsizing.”
From 2027, property income tax will rise by 2%, pushing rates to 22%, 42%, or 47% depending on your band. These changes will apply in England, Wales and Northern Ireland.
Combined with Section 24 mortgage interest limits (which restrict the ability to deduct mortgage interest from income) and HMRC rules about applying reliefs against other income first, landlords will have fewer ways to shelter rental profits.
If you are a buy-to-let landlord, it may be worth buying and owning property through a limited company to avoid the tax hikes – or you may decide to exit the market altogether.
New figures show that the amount of inheritance tax being paid is rising sharply, especially due to reduced business and agricultural property reliefs from 2026. Unspent pension pots will also be liable for inheritance tax thresholds from 2027.
All of this means state planning is getting more complex. Over-50s should act now to manage a future inheritance tax bill – and take professional advice where necessary. Consider annual gifting allowances, life insurance trusts, and gradually passing on wealth. These steps can reduce tax while giving financial clarity for your family.
From April 2028, electric vehicles will face a mileage-based tax charge, of 1.5p per mile for plug-in hybrid or 3p per mile for electric cars. This will be charged on top of the annual vehicle excise duty (car tax), which in most cases is £195.
The Office for Budget Responsibility (OBR) estimates the per-mile charges will add around £255 a year for a driver doing 8,500 miles a year.
Because the charges are based on annual mileage readings, the per-mile charges apply even if you drive your EV outside the UK. Estimate your annual mileage and compare total costs to work out whether a switch to electric is financially worthwhile.
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