London, November 27, 2025
The UK Autumn Budget 2025 introduces key measures impacting savings, electric vehicles, and pensions, aiming to address economic pressures, improve tax fairness, and secure transport funding from 2025 onward.
Savings and ISA Taxation Changes
The government has raised the tax rates on savings income by two percentage points, signaling a shift in the treatment of returns from cash savings. Despite this increase, officials affirm that 90 percent of taxpayers will continue to pay no tax on their savings, protected by current personal savings allowances. This adjustment forms part of an effort to ensure income from assets is taxed more equitably relative to income from work.
Electric Vehicle Mileage Tax and Fuel Duty Freeze
In response to declining fuel duty revenues caused by rising electric vehicle adoption, the Budget introduces a new mileage-based tax (eVED) targeting electric cars. The Office for Budget Responsibility projects this tax will generate approximately £1.4 billion. Simultaneously, the government extended the existing fuel duty freeze for another year, a move estimated to cost £2.4 billion in 2026, offering some relief at the petrol pump as the tax landscape evolves.
Pension Reforms and Living Wage Impact
Pension-related tax reliefs have been reformed, notably affecting salary sacrifice arrangements for pension contributions. Employees using these schemes will see changes in how their contributions are treated for tax purposes. A significant policy closure now prevents expatriates from purchasing concessional access to the UK State Pension. Additionally, the national living wage will rise from £12.21 to £12.71, potentially influencing pension contribution dynamics for lower-income workers and affecting retirement savings outcomes.
Wider Fiscal and Economic Context
The Budget reflects a strategic preference for stealth tax measures rather than direct income tax hikes. For example, the removal of the two-child benefit cap from April 2026 will cost the government approximately £2.3 billion. These fiscal choices occur amid challenging economic indicators, including flat growth, persistent inflation, and rising unemployment rates. The government balances revenue needs with mitigations aimed at minimizing inflationary pressure, such as maintaining the fuel duty freeze.
The Autumn Budget 2025 thus sets a course to recalibrate tax policy on savings and asset income, introduce new charges aligned with greener transport trends, and adjust pension contributions in a way that reflects the evolving labour market and demographic realities. The impacts of these measures will unfold in the medium term as the UK economy navigates both structural shifts and immediate fiscal challenges.