How the Autumn Budget is likely to affect people approaching retirement
If you’re in your late 50s or early 60s, retirement probably isn’t an abstract idea anymore, it’s something you can actually picture. This stage of life brings a mix of feelings: the excitement of having more freedom, and the understandable question of “Will my money last as long as I need it to?”
Budget 2025:What it means for you
... as someone nearing retirement
with Harrison Patton
That’s why Budget week tends to feel a little more personal for people nearing retirement. Any shift in tax, allowances or pension rules has a direct impact on the income you’re planning to rely on.
This year’s Autumn Budget includes several measures that will affect how you draw income, structure your savings and plan the timing of your retirement. To help break it down, we spoke with Harrison Patton, Independent Financial Planner at Amber River SFIA in Maidenhead, who works closely with clients in their late 50s and early 60s.
As Harrison puts it, “Understanding the tax landscape becomes more important the closer you get to retirement. This year’s Budget brings a few key changes that anyone approaching retirement should be aware of.”
Before we explore the details, it’s worth recognising that this group, people aged 55–65, sit at a uniquely sensitive point in the financial journey; old enough to access pensions, young enough to still shape their long-term plan, and close enough to retirement that each Budget can shift the picture.
“People beginning to draw pension benefits in the next five to ten years may pay more tax than they expected.”
1. Income Tax threshold freeze until 2031 - a quiet but significant change
The extension of the Income Tax threshold freeze is a change that will have a real, noticeable effect on people close to retirement.
When tax thresholds stay fixed, but pension withdrawals rise with inflation, more of your income naturally slips into higher tax bands. This “fiscal drag” can increase the tax you pay on your pension even if your real spending doesn’t change.
Harrison sees this play out often with clients who are just starting to think about taking pension benefits. “As pension withdrawals rise with inflation, more of your income can quietly drift into higher tax bands,” he says. “People beginning to draw benefits in the next five to ten years may pay more tax than they expected.”
In practical terms, this may affect flexible drawdown withdrawals, annuity income, defined benefit pensions, and part-time earnings in early retirement. Over time, this quietly reduces net income unless withdrawals are managed carefully.
How to stay ahead of the change
An Amber River financial planner can help you:
- Model your withdrawals to avoid tipping into higher tax bands
- Spread income sources to reduce unnecessary tax
- Use your tax-free cash more strategically
- Examine whether drawing from ISAs first could preserve tax efficiency
Small adjustments at this stage can make a real difference to your income over the years ahead.
2. Tax rises on dividends, savings and rental income (from 2026–2027)
From 2026, Dividend Tax rises by 2%. And from 2027, the same increase applies to savings interest and rental income.
For many people approaching retirement, these are important sources of supplementary income. It’s common to shift money into lower-risk assets, fixed-term accounts or rental properties as work winds down.
But higher tax reduces net income unless these assets are restructured.
Harrison sees a familiar pattern in the years leading up to retirement. “A lot of people shift toward income from savings, dividends or rental property as they approach retirement. Without some restructuring, the tax rises could reduce your take-home income.”
What you can explore
- Whether rental income is held in the most tax-efficient structure (e.g., reviewing personal vs company ownership, or whether the current setup still works for your retirement plans)
- Maximising ISA and pension allowances
- Transferring assets between partners to reduce tax
- Rebalancing portfolios to improve tax efficiency before retiring
3. ISA allowance reform for under-65s (from 2027)
From 2027, anyone under 65 can put only £12,000 of their annual ISA allowance into Cash ISAs. For people who are risk-averse or hoping to build a final cash buffer before retiring, this limits how much can be held in cash tax-free.
Harrison often sees clients trying to build that last pot of easy-access money before stepping back from work, and he says the change will make this more difficult. “The new Cash ISA cap reduces flexibility for anyone trying to build a final tax-free buffer before stepping back from work,” he explains.
Options you might consider
- Reviewing how much cash you realistically need for short-term planning
- Considering a Stocks & Shares ISA for money with a medium-term investment horizon
- Using pensions for tax-efficient accumulation in the final working years
- Looking at alternatives such as money market funds or Premium Bonds
4. Changes to Business Disposal Relief for Employee Ownership Trust sales (Capital Gains Tax relief cut to 50%)
If you’re a business owner planning to sell your company as part of your retirement strategy, this change matters.
Capital Gains Tax (CGT) relief on sales to Employee Ownership Trusts (EOTs) has been reduced to 50%, increasing the tax payable on this type of exit. For some owners, it may still be attractive, but it may no longer be the default option.
Before making decisions, it’s worth reviewing:
- The timing of your sale
- Whether an EOT is still the right exit route
- Alternatives such as a trade sale or management buyout
- How the proceeds fit into your long-term retirement income strategy
5. The ‘mansion tax’ high-value property surcharge (from 2028)
From 2028, properties valued above £2 million will attract an annual charge of £2,500–£7,500. For people nearing retirement, this may influence decisions about downsizing, freeing up equity or reshaping longer-term housing plans.
Because the charge is tied directly to the value of the property, it’s not something that can be avoided through ownership structures or tax planning. The only real way to sidestep it would be to own a home valued below £2 million, which may prompt some people to move earlier than they’d planned.
What many retirees review at this stage
- Whether their current home still suits their long-term lifestyle
- The role that property plays in their retirement income
- Downsizing or gifting property within their inheritance planning
6. Salary sacrifice National Insurance (NI) cap from 2029
Salary sacrifice has long been a key tool for employees wanting to boost their pension just before retirement. But from 2029, NI relief will apply only to the first £2,000 of salary sacrificed. This reduces the value of final, larger pension contributions made through PAYE.
As Harrison says, “Salary sacrifice has been hugely valuable for many clients making final pension contributions. With NI relief capped, it’s even more important to plan ahead rather than waiting until the rules change.”
What you might explore
- Whether to bring forward larger contributions while full relief still applies
- How bonuses or profit shares could be directed into pensions
- Whether employer-funded contributions can be structured more efficiently
“When we model these changes into someone’s plan, it often helps them avoid unnecessary tax and gives real clarity about what their future finances look like.”
7. State Pension triple lock maintained
One of the bright spots in the Budget is the confirmation that the triple lock remains in place, meaning the State Pension will rise by 4.8% in 2026.
This provides valuable certainty for retirement modelling and long-term budgeting.
What this all means, and how to move forward
None of these measures are unmanageable on their own, but taken together, they may mean making a few tweaks to your retirement plan. Things like:
- How and when you draw income
- How your pensions are structured
- How you use ISAs, savings and other assets
- When you choose to retire
- Whether your property or business assets still fit your plans
And the closer you are to retirement, the more important it becomes to understand how these pieces fit together.
As Harrison puts it, “When we model these changes into someone’s plan, it often helps them avoid unnecessary tax and gives real clarity about what their future finances look like.”
The message is simple: a well-structured plan makes all the difference.
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.
