With public finances under intense pressure, the Autumn budget has delivered significant tax changes from a government determined to ensure that ‘the wealthiest are to contribute the most’. Chancellor Rachel Reeves’ 2025 Budget has attempted to stabilise government debt, meet government spending commitments and fund ambitious investment in public services and infrastructure, all while honouring a manifesto pledge not to increase income tax, National Insurance or VAT.

Last year’s Budget and the 2025 Spring Statement introduced measures designed to raise an additional £40bn in revenue to fund the NHS and public services. Higher employer National Insurance Contributions, inheritance taxes on farmers and the new 20% VAT charge on private school fees signalled a shift towards broadening the tax base beyond traditional income taxes.

With public debt standing at almost 95% of GDP, the Treasury has had to look for further revenue sources. After weeks of speculation, the Budget has landed and for wealthier individuals – professionals, landlords, company directors, entrepreneurs and families with inherited wealth – it will bring meaningful change to their tax affairs.

This article explores the five budget measures most relevant to financially successful people and how they may respond. It is written as general commentary, not financial advice. Anyone considering action based on the Budget announcements should speak to their financial and tax advisers.

1. The ‘Mansion’ Tax – increased property tax

What’s changed?

In England, there will be a new annual charge of £2,500 per annum for properties worth more than £2 million. This rises to £7,500 per annum for properties worth over £5 million.

The tax will be levied on owners and collected alongside council tax. The new surcharge is expected to raise over £400 million by 2031.

Possible reactions

This new tax on high-value homes will disproportionately affect owners in London and the South East where property values are highest. The changes may dampen property values in the prime market.

Particularly for those with a significant property asset but without ready access to cash, reactions to the new tax could include:

Turning property into an income-producing asset

Some owners may consider offsetting the charge by:

• Letting spare rooms (tax-free up to the Rent-a-Room limit)
• Creating an annex for short or long-term lets
• Listing the property for film/ TV location hire
• Occasional event or wedding venue use
• Seasonal holiday lets

Downsizing

Some owners may choose to move to smaller properties, to regions with lower housing costs to reduce their future tax exposure.

Reassessing long-term UK residency

Alternatively, there may also be wealthy individuals now exploring relocation to countries with lower tax regimes.

2. Higher Property, Dividend and Savings Taxes

What’s changed?

An additional tax rate of 2% is to be added to income made from assets including property, dividends and savings.

The aim is to bring the taxation of asset-earned income in line with the taxation on income.

Possible reactions

Landlords:

Costs have risen over the years for landlords with mortgage interest relief removed, increased regulations and now an additional tax charge on rental income.

This could lead landlords to:

• Transfer privately held rental properties into limited companies
• Sell parts of their portfolios to reduce their personal exposure
• Shift from residential into commercial property rental
• Move towards higher-yielding strategies, such as holiday lets
• Reassess their levels of borrowing given the high costs and lower yields

Business owners may adjust how they extract income

Existing company directors may choose to draw fewer dividends, leaving more profit invested in their business or contributing to company pension schemes. This could give them more flexibility in managing their personal taxable income over future tax years.

3. Pensions salary-sacrifice limits

What’s changed? A cap will be introduced for pension salary-sacrifice schemes from 2029 when contributions over £2,000 will be subject to tax in the same way as other employee contributions. No other tax changes to pensions have been mooted.

Possible reactions

High-earning individuals using salary-sacrifice schemes will likely explore alternative ways to save and invest for the future, such as:

• Increased use of ISAs
• Investing directly into private businesses or venture opportunities
• Seeking out commercial property opportunities or alternative investments
• More offshore investment structures for internationally mobile families
• Greater diversification into non-pension, long-term savings vehicles

They may also investigate alternative benefits with their employer, such as:

• Company share schemes
• Company-funded benefits (eg health insurance, electric company cars)
• Extended paid leave or sabbaticals

Greater use of trusts and family investment companies

As the tax advantages of pensions are lowered, some individuals may consider:

• Moving investment portfolios or cash and cash-like assets into family trusts
• Creating Family Investment Companies (FICs) to hold and grow wealth

These structures can provide long-term tax advantages but also come with strict regulations and reduced personal control, which both have to be carefully considered.

Offshore planning for internationally connected families

Families, especially those with existing overseas ties, may look to establish offshore trusts, which are entirely legal when correctly structured. With this kind of trust, assets can be held in different jurisdictions for tax efficiency.

4. Tax-band threshold freeze

What’s happened?

National Insurance contributions and income tax thresholds will be frozen for a further three years beyond 2028, effectively pulling an increasing number of earners into higher tax bands.

Possible reactions

The response to these changes could include:

Smarter structuring of remuneration

High-earning employees may ask their employers to restructure pay packages to reduce taxable income while maintaining overall value. Options could include:

• Higher pension contributions
• Salary sacrifice arrangements
• Company share schemes
• Company-funded benefits (eg health insurance, electric company cars)
• Extended paid leave or sabbaticals

Incorporation for multi-source earners

Professionals with multiple income streams – for example, consultants, finance professionals, creatives and doctors combining NHS and private work – may review whether setting up to operate through a limited company could provide:

• A more tax-efficient blend of salary and dividends
• Greater control over the timing of their income
• Access to allowable business expenses (insurance, travel, equipment, office costs, staff support)
• The ability to employ family members who genuinely work for the company

5. Individual Savings Accounts (ISAs)

What’s changed?

The amount of money that the under-65s can put into tax-efficient cash ISAs will be capped at £12,000 a year from April 2027. The remaining £8,000 of the annual £20,000 allowance will now be reserved for investments (stocks and shares ISAs).

Possible reactions

Those looking to save as tax-efficiently as possible are now likely to:

• Maximise ISA allowances every year instead of letting contributions slide
• Use stocks and shares ISAs more heavily
• Explore alternative investment routes, which can also come with tax-efficiencies, such as AIM-listed shares, private markets, or offshore platforms
• Consider corporate or trust-based investment structures

Final thoughts

Although many of the speculated tax changes, such as higher income taxes and changes to existing inheritance tax rules, turned out not to be on the Chancellor’s agenda, the 2025 Budget will have a significant impact on financial planning in the UK.

For higher earners, business owners, landlords and families with substantial assets, the changes may affect not just tax bills, but also longer-term decisions about investment, property, retirement planning and the transfer of intergenerational wealth.

Particularly in the wake of new changes, thoughtful, proactive planning, informed by financial and tax specialists, can deliver better outcomes than last-minute or reactive moves.

If you would like to discuss how the Budget will impact you with a member of our banking team, we would be delighted to help.

Source: www.gov.uk/government/publications/budget-2025-document

The information provided in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax treatment depends on individual circumstances and may change in the future. Readers should seek independent professional advice from a qualified tax advisor before making any decisions. The Bank accepts no liability for actions taken based on this information