How the Autumn Budget impacts people already retired and drawing a pension
For people in retirement, financial stability is what helps you plan and enjoy life with confidence. That’s why changes to the tax system matter; they can influence how much of your pension, savings or investment income ends up in your pocket.
Budget 2025:What it means for you
... as a retiree
with Charlotte Strike
This year’s Autumn Budget introduced several updates that may shape how retirees manage their income. To help make sense of it all, we asked Charlotte Strike, a chartered financial planner at Amber River C&M in Lossiemouth, to share the key things she thinks retirees need to be aware of.
“If you’re receiving pension income, and it’s going up each year with inflation, you may start to notice larger tax deductions from that income."
1. Income Tax thresholds frozen until 2031
Charlotte cuts to the chase: this is the change retirees are most likely to feel over time.
“If you’re receiving pension income, and it’s going up each year with inflation, you may start to notice larger tax deductions from that income,” she explains. “And if you’re not currently paying tax on it, you may find tax begins to be deducted over the coming years as your income rises.”
In other words, even though your pension may be going up, the tax thresholds aren’t. That means the gradual effect of fiscal drag will pull more of your income into taxable territory.
It might happen slowly, you may barely notice it at first, but it builds. Someone who wasn’t paying tax at all may find that position changing, while those already paying tax may see their net income shrink little by little. It’s the kind of shift that can influence how you plan your spending, your withdrawals, and even your long-term approach to retirement income.
2. Higher tax on savings, dividends and rental income from 2026
For many retired people, income doesn’t come solely from a pension. Interest on savings, dividends from investments and rental income can all form part of the picture. From 2026, each of these will be subject to a 2% tax increase.
Charlotte acknowledges that this may catch some people off guard: “For those in retirement who rely on these types of income, you may notice a higher level of tax being applied in future.”
If you’ve enjoyed stronger returns on cash or investments recently, this change means you’ll retain a little less of that income. It doesn’t mean these sources become unviable, but it does make it even more important to think about where your income is coming from, and how tax-efficient it is.
A conversation with a financial planner can help you rebalance things in a way that’s right for your lifestyle and risk profile, so you’re not giving up more income than necessary.
3. A reassuring rise: the State Pension triple lock holds
Among the heavier news, there was a positive note: the State Pension will rise by 4.8% from April 2026.
Charlotte points out that this increase plays an important role: “This rise should help offset some of the additional tax pressures we’ve just discussed.”
The triple lock doesn’t cancel out fiscal drag, but for many retirees it provides welcome reassurance that a core part of their income will keep pace, at least in part, with inflation.
Other Budget measures that may affect retired households
Although Charlotte highlights the three changes above as the most significant, the Budget contained several other measures worth keeping on your radar.
4. High-value property surcharge (‘mansion tax’)
If you live in a property worth more than £2 million, you’ll see a new annual surcharge ranging between £2,500 and £7,500.
This could be particularly challenging for those who are “asset-rich, income-light”, a situation many retirees find themselves in if property values have risen faster than their pension income.
While this won’t force immediate decisions, it may well prompt some longer-term thinking. You might, for example, revisit whether downsizing makes sense, or explore whether equity release plays a role in your plans.
5. ISA allowance reform for under-65s
If you’re retired but under 65, your ability to hold tax-free cash in an ISA will be limited from 2027. Only £12,000 of the ISA allowance can sit in Cash ISAs, with the rest needing to be invested in a Stocks and Shares ISA, or held outside the wrapper.
For people who like the security of keeping a larger cash buffer, often for emergencies or simply peace of mind, this reduces flexibility. And because interest earned outside an ISA will face the new, higher rates of tax on savings income, it may tilt the balance toward investing or restructuring your accounts.
“I know these changes can feel daunting, but you don’t have to work through them on your own. We’re here to help."
6. EV-related taxes
Finally, for retirees who own an electric vehicle (EV), per-mile road charges will be introduced from 2028. On its own, this isn’t a major cost. But if you’re someone who drives longer distances, perhaps to see family, it’s something to be aware of.
A 2025 YouGov survey found that 38% of EV owners in the UK are aged 55 or older, so this isn’t something that only affects a small group.
Making sense of it all
Taken together, these measures may mean that retired households face higher taxes in the coming years, even if your lifestyle doesn’t change. That can feel unsettling, and Charlotte empathises with that feeling:
“I know these changes can feel daunting, but you don’t have to work through them on your own. We’re here to help. Please get in touch with an adviser in your area to explore how these updates may affect your retirement plans.”
An Amber River financial planner can help you:
- Understand how fiscal drag may affect your pension income
- Reassess how you draw and structure income
- Improve tax efficiency across pensions, savings and investments
- Explore property or legacy planning options
- Make confident, long-term decisions that support the retirement you want
Retirement should feel secure and sustainable. With the right advice, even a shifting tax landscape doesn’t have to get in the way of that.
Want clear guidance on what the Autumn Budget means for you?
Visit our Budget Hub for expert insights, predictions and analysis to help you understand how potential changes could affect your financial plans.
Or speak directly with an Amber River adviser for personalised guidance.
