On 26 November, the UK chancellor Rachel Reeves delivered the Autumn Budget for 2025.
While there were no shock headline rises or major changes, there is certainly plenty to consider in respect of some of the detailed announcements.
If you’re an Australian expat in the UK, it’s important to understand the changes and how they could affect your cross-border financial plans and general day-to-day finances.
Much of the pre-Budget speculation was unfounded
Prior to the Budget speech, there was an unprecedented level of speculation, conjecture, and rumour about potential changes circulating in the media.
The pension Annual Allowance, tax-free cash, Stamp Duty Land Tax, and Income Tax were all highlighted as items that were likely to be subject to amendment.
Pertinently for Australian expats, there was also the suggestion of a possible exit tax on your assets on leaving the UK.
In the event, none of these changes were actually announced.
This underlines the importance of tuning out external distractions, and avoiding making any decisions related to your finances based on rumour and speculation.
For example, Money Marketing reported that many people were taking their tax-free cash entitlement from their pension fund in the weeks before the Budget. They could now face charges, such as Capital Gains Tax (CGT), that they may not have faced previously.
Overseas access to Class 2 National Insurance contributions for State Pension entitlement has been removed
If you are a non-UK resident individual living in Australia, you have been able to build a UK State Pension entitlement through cheaper rates via Class 2 voluntary NI contributions (NICs).
However, from April 2026, you will need to use the Class 3 option, which is more expensive.
Furthermore, you will need to meet a 10-year residency test, rather than the current 3-year contributions test.
Action you should take now: If you are currently taking advantage of Class 2 voluntary NICs, you should look to maximise this facility between now and April 2026. This is also a timely prompt to review your cross-border retirement income strategy.
Income Tax thresholds have been frozen until 2031
While the chancellor did not announce any changes to Income Tax rates, she did confirm that Income Tax thresholds will remain frozen until 2030/31.
This means that, as your income goes up each year, a greater proportion of your earnings will be subject to higher rates of tax. This is known as “fiscal drag”.
If you’re an Australian expat living and working in the UK, it’s likely that you will pay an increased amount of Income Tax in the coming years.
Action you should take now: Review your income strategy and consider how you can mitigate the effect of more of your income being taxed at higher rates, such as by making additional pension contributions.
You’ll pay more tax on dividends, savings, and property income
If you derive an income in the UK from share dividends, you are likely to pay more tax on this from April 2026.
Basic and higher-rate tax on dividends will increase by two percentage points to 10.75% and 35.75%, respectively.
Meanwhile, the tax on income from savings and property will also increase from April 2026, with all rates increasing by two percentage points:
- Basic rate: 22% (previously 20%)
- Higher rate: 42% (previously 40%)
- Additional rate: 47% (previously 45%)
The changes suggest that rather than increasing the rate of Income Tax, the government is looking to raise more tax revenue from non-salary income sources.
Action you should take now: Look at your current and future income strategies and consider how you can mitigate the effect of these increases.
If you are under 65, the amount you can pay into a Cash ISA is reducing
Because you don’t pay CGT or Income Tax on the income you draw from your ISA accounts, they are generally considered a highly tax-efficient way to save and invest your money.
In the 2025/26 tax year you can contribute £20,000 across your ISAs, including Cash ISAs and Stocks and Shares ISAs, each tax year.
However, in her Budget statement, the chancellor confirmed that from April 2027, the
ISA allowance will change if you are under 65.
While you will still be able to make contributions of up to £20,000, you will only be able to pay a maximum of £12,000 into a Cash ISA, with the remaining £8,000 reserved for a Stocks and Shares ISA.
If you are 65 or over, you will continue to be able to save up to £20,000 in a Cash ISA each year.
Action you should take now: Review your ISA strategy and how these changes could affect you after April 2027, especially if you are under 65.
Please note, once you become a permanent resident for tax purposes in Australia, ISA’s no longer become tax efficient wrappers to hold UK monies and therefore we recommend reviewing this ahead of time.
Salary sacrifice on pension contributions will be capped at £2,000 from 2029
The chancellor has put a cap on the tax efficiency of pension contributions made under salary sacrifice.
The government will charge employer and employee National Insurance (NI) on contributions made via salary sacrifice above £2,000 a year. This will take effect from 6 April 2029.
Action you should take now: While these changes do not come into effect until 2029, you should review your retirement savings arrangements, particularly if you have earnings in both the UK and Australia.
A new “mansion tax” could affect you if your property is worth more than £2 million
One pre-Budget rumour that was actually announced was the introduction of a High Value Council Tax Surcharge, commonly referred to as a “mansion tax”, from April 2028.
There will be four price bands starting with £2,500 for a property valued between £2 million and £2.5 million. For properties valued more than £5 million, the levy will be £7,500.
As yet, the government has not announced how the charge will be applied.
Action you should take now: If you or any of your relatives own a property in the UK worth in excess of £2 million, you may want to consider how this change could affect you and them, and start planning ahead.
Business owners may be uniquely affected by some of the changes announced
In addition to the increase in tax rates on dividends and savings, the 2025 UK Budget included a range of measures that could affect you if you own a business in the UK. These include:
- Increases to the National Living Wage (NLW) and National Minimum Wage (NMW), which could increase your staffing costs
- Lower business rates in the hospitality sector
- New capital allowances providing the ability to deduct 40% of expenditure on plant, machinery, and other assets upfront in 2026.
These are just three of a range of measures announced. We would recommend that you get expert advice in respect of all the changes to see how you may be affected.
Action you should take now: If you run a business, you should consider how these changes could affect your long-term decision-making and wider financial planning arrangements.
Get in touch
The best way to mitigate the effect of any of the changes announced is through proactive planning based on expert advice from an experienced financial planner.
At bdhSterling, we have a wealth of experience in helping clients assess how Budget statements can affect them, and the changes they should consider making to their plans.
Get in touch to find out how we can help you.
Please note
This article is for information only, it does not take into account your personal objectives, financial situation, or needs.
Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
All contents are based on our understanding of HMRC and ATO legislation, which is subject to change. Changes announced in the Budget are subject to legislation.