The 2025 Budget marks a significant shift in the UK’s financial landscape — and the impact will be felt most by the middle-income, hard-working households.

While the government avoided raising income tax, National Insurance or VAT rates, this Budget quietly increases the tax burden through freezes, allowance cuts, and higher taxes on dividends, interest and property.

At the same time, some of the most generous new spending initiatives are directed toward households not currently in work.

Below is a clear breakdown of what matters for our clients.

Income Tax & NI Thresholds Frozen Until 2031

This is the biggest hidden tax rise of the Budget. As wages increase over the next six years, more of your income is dragged into higher tax bands — without any official tax rate changes.

For working people and business owners across Southport, this means a steady increase in tax every year.

Investors and business owners face:

• Higher dividend tax rates
• A lower tax-free dividend allowance
• More dividends taxed at higher rates due to frozen thresholds

This hits limited company directors and long-term investors directly.

Interest Income Taxation

Although interest rates are easing, savers will still pay more tax because:

• The Personal Savings Allowance now covers less in real terms
• More interest is pushed into taxable income

Saving money now attracts a higher tax charge than before.

Cash ISA Allowance Cut

From April 2027:

• Cash ISA allowance drops from £20,000 to £12,000 for under-65s
• Over-65s retain the £20,000 limit

This reduces tax protection on cash savings for working families, first-time buyers, and younger savers.

Landlords and property investors face:

• Higher income tax on rents
• Reduced reliefs on property income
• Less favourable capital gains treatment

The Budget also introduces a council tax surcharge on homes valued over £2m from 2028, signalling a broader shift toward higher property taxation in future.

From 2029, only the first £2,000 of pension salary sacrifice contributions will be exempt from National Insurance.

This removes one of the most efficient long-term planning tools for professionals and small business owners who invest heavily in pensions.

Electric vehicles and hybrids will face new per-mile road charges from 2028, impacting many families who adopted cleaner cars at the government’s recommendation.

One of the most expensive policies in the Budget is the abolition of the two-child benefit cap from April 2026.

This shift primarily benefits:

• Larger families not in work
• Households reliant on benefits
• Those making little or no tax contribution

Working families who limited their family size due to affordability pressures receive no equivalent support.

If you work, save, invest or own property, you will pay more.

If you rely on benefits, you will receive more.

The government’s fiscal approach clearly shifts:

• Away from earners, investors, homeowners and prudent savers
• Toward households reliant on state support

For PWS clients — people who take responsibility for their future — the need for proactive, strategic financial planning is now greater than ever.

We will be focusing on helping clients to:

• Optimise tax efficiency across pensions, investments and allowances
• Navigate higher taxes on dividends, interest and property
• Adjust pension contributions before the salary sacrifice cap arrives
• Restructure investment strategies to preserve long-term tax efficiency
• Forecast multi-year tax impact from frozen thresholds

Our goal is simple:
to protect your wealth and help you stay ahead of these tax increases.