Autumn Budget 2025: Financial services

While most of the word count in the Chancellor’s Budget speech may have been reserved for the public sector and callbacks to decisions made by the previous government, there was nonetheless a sense that of all years, this was a good one to look at the supporting documents.

What was a little surprising, even allowing for the OBR’s early publishing of their report, is that the FS sector appears to largely be being asked to shoulder its ‘fair share’, and not more as some may argue it has in recent years. The Chancellor couldn’t resist associating the sector with large bonuses being put into pensions through salary sacrifice by employees, but even this appeared to lack some of the depth of feeling mustered in previous Budgets.

So if the sector wasn’t specifically targeted, what are the impacts likely to be? Given the scale and integral nature of the FS sector to the UK economy, in terms of employment, provision of capital, financial infrastructure and tax receipts (not an exhaustive list), those impacts will be broad.

People

The FS sector is global, and human capital remains a significant driver of economic activity and provision of services to customers, even in an increasingly AI-supported world. A thriving UK FS sector needs the UK to be an attractive place to work.

While freezing of income tax bands was expected, there will likely be some relief that changes to income tax on employment income were limited. That being said, it should be kept in mind that not all of those working in the sector are highly paid – increases to the national minimum wage and national living wage should be noted by employers alongside HMRC’s continued and increasing NMW audit activity in the sector.

The cap on relief given to employees in relation to pension salary sacrifice (to £2,000 per year, from April 2029) will hit responsible savers, though other pension limits remain unchanged.

Products

Keeping with the topic of pensions, it will be interesting to see what the impact of the salary sacrifice change will have on regular pension savings. As the Chancellor noted many times in her speech, the cost of living is rising (for everyone) and this change will impact take-home pay for anyone earning say, £40,000 and sacrificing more than 5% of their salary. For those employees that look first at bottom line take-home pay, and adjust benefits like pension savings from there, the change may end up reducing pension savings rather than generate additional tax receipts for the government (estimated to be c£7bn in ‘29/30 and ‘30/31 – one of the largest tax revenue generators over the forecast period). That in turn could increase the cost to the state in the long run – the Chancellor may be hoping that the broader reforms to the UK pensions industry through the Mansion House Accord, the Pensions Schemes Bill, and others, will support and help drive the continued attractiveness of the UK pensions sector.

In a similar vein, but to a lesser extent, the increase in the basic savings rate will impact long-term savings products offered by some life insurers, and consequently how these products stack up against competing products offered by the funds industry.

Speaking of the funds industry, the Chancellor’s decision to mandate at least 40% of the annual ISA allowance be invested in stocks and shares (with limited exceptions, for example those aged over 65) is likely to generate some debate. Not necessarily over whether the arithmetic stacks up over any reasonable length of holding period (that a stocks and shares ISA will likely accrue significantly greater wealth than a cash ISA) but whether this is a decision the government should be taking on behalf of the individual.

All of that together rather gave the feeling that the Chancellor wants the British people to save, just not like that, or like that, but like this. It remains to be seen whether being so directive has the effect of rechannelling savings and long-term investment how the Chancellor wants and expects, and whether that is what’s best for the state, or the individual.

On a separate note, the general insurance sector may be interested in the change in relief for qualifying motor vehicle leasing schemes, albeit apparently quite targeted, it nonetheless represents a contemporaneous change in both VAT and IPT treatment.

Processes

The financial infrastructure that sits behind services many of us take for granted are complex and multi-layered.

The changes to ISAs, pensions and even the basic savings rate will all need to be incorporated into a wide range of systems, processes and controls across the businesses from front to back offices.

It was positive to see that the salary sacrifice changes are proposed for April 2029, explicitly to allow all those involved to properly prepare. And while a niche point the Chancellor could be forgiven for not having front of mind, a number of insurance companies offering long-term savings products may be rapidly figuring out what the impact of the first change in the basic savings rate since c.2008 will have on actuarial and capital forecasts, while being at least a little grateful the rate change won’t come into effect until April 2027,

Pensions administrators will need to be prepared for the changes that will allow personal representatives to direct the scheme administrator to withhold up to 50% of taxable benefits for up to 15 months, and in some cases settle IHT liabilities, from April 2027. Policies and procedures will need to be updated from a regulatory as well as customer service perspective.

FS businesses should also be aware of the proposed changes to SDRT and the consultation on modernising stamp taxes on shares, in particular those involved with operational and execution aspects. Similarly, the potential reforms to transfer pricing, permanent establishment and diverted profits tax should all be monitored, along with additional technical revisions to the UK’s Pillar 2 implementation.

Finally, those with an interest in the Fintech sector, and crypto in particular, should look to the outcome from the consultation on decentralised finance involving the lending and staking of crypto assets.