No one was expecting what used to be fondly referred to as a “Giveaway Budget”, but neither did some of the doom-laden prognostications being made ahead of the day come to pass. Here is a round of the biggest changes (and non-changes) to pensions and investments, together with commentary from three experts.

First the big decisions:

1          No extension to the income tax freeze

There will be no additional freeze in the income tax thresholds. It means from 2028/29 they’ll be uprated with inflation. It will bring an end to the rapid escalation of people paying more tax at higher rates.

2          Tax on some inherited pensions

Says Helen Morrissey, head of retirement analysis, Hargreaves Lansdown: “The generous treatment of pension death benefits set it apart from other savings and investments and has long been considered low hanging fruit for a government in search of cash. It’s a move that could prove complex and will need changes to trust law, which is why it’s not set to take place until April 2027. It will upturn many people’s plans as we will see many more people being dragged into paying inheritance tax because their DC pension is now counted as part of their estate.

3            The state pension will rise 4.1% in April 2025.

There was good news for pensioners who can look forward to a 4.1% increase in their state pension from next year. However, the rise will be largely wiped out by the government’s decision to restrict the Winter Fuel payment to pensioners on Pension Credit.

4          Pensions tax relief and tax-free cash untouched

The Chancellor’s decision not to tinker with tax free cash has been greeted with a huge sigh of relief. This is a hugely popular part of the pensions system and any move to reduce it would have severely undermined people’s trust. The absence of any changes to tax relief will also be welcomed by higher and additional rate taxpayers, who were worried about having this this important government top up reduced.

5         Capital gains tax on stocks and shares rose

Says HL’s Sarah Coles: “This could have been worse, with suggestions of a doubling of the rate, but it’s scant consolation for anyone hit with a bigger tax bill. This doesn’t just affect those who pay more tax, it also makes investment less attractive for newcomers who don’t want to have to get to grips with a new tax risk. For existing investors, there’s a danger this will drive investor behaviour, and people will focus on tax considerations, rather than the investments that make the most sense for their circumstances.”

6          The inheritance tax threshold frozen to 2030, and tax break on AIM halved

While only 6% of the UK population is affected by IHT, that figure is on the rise. It’s only going to keep increasing now that inheritance tax thresholds have been frozen for another two years. It means heftier tax bills as the value of estates – including property – continues to climb. Business property relief has been an incredibly valuable tax break for AIM investors over the years, who could hold qualifying investments for two years and see them fall out of their estate for inheritance tax purposes.

7          The stamp duty surcharge on investment property will rise

For landlords, this Budget gave with one hand and took away with the other. There was good news on capital gains tax, which didn’t move for residential property, but there was a hike in the stamp duty surcharge.

8.          UK ISA scrapped, other ISA allowances guaranteed until 2030 

Rumours before the announcement led investors to fear the worst, so they’ll be breathing a sigh of relief now. The downside of this certainty is that over time, the allowance will continue to drop in real terms, and become less valuable. The £20,000 allowance was introduced back in 2017 and hasn’t moved since. Given the level of inflation we’ve seen since, this has eaten into the real value of the allowance.

Filling the black hole

Paresh Raja, CEO of Market Financial Solutions, said: “Unlike previous budgets – think Kwarteng’s mini-budget – Reeves opted for a more measured approach, refraining from pulling any proverbial rabbits out of the hat – although the increase to Stamp Duty surcharge on second homes was unexpected. This approach should calm the lending and property markets, easing some of the uncertainty that has lingered in the lead-up to this announcement.

“In general, the clarity offered today is certainly welcome, though we’ll need to see how these policies translate practically. While certain regulatory and tax reforms may require careful consideration from investors and brokers alike, I anticipate the market will soon shift back to ‘business as usual’ – particularly as some of the tax increases were less substantial than many were expecting.

“Some of today’s announcements – such as the rise in Capital Gains Tax (CGT) and the Stamp Duty surcharge on second homes – will undoubtedly put a slight dampener on investors’ moods. As such, it’s up to lenders and brokers to work together to provide financial products that can help them navigate the evolving market conditions with confidence in the months ahead.

Looking ahead…

Lily Megson, Policy Director at My Pension Expert said, “Even though drastic pension tax changes didn’t materialise in today’s Budget, the damage has already been done. Weeks of speculation and rumoured sweeping reforms left savers anxious, causing many to rethink carefully planned retirement strategies.

“The government now has an opportunity to rebuild trust by focusing on initiatives that genuinely support savers. Finally prioritising comprehensive financial education and tools like the long-delayed pension dashboard will empower people to make informed decisions and feel confident in their retirement planning. What’s more, the second half of their pension review must deliver more than just lip service – savers need real, actionable reforms that encourage greater contributions and improve outcomes for retirement planning across the board.”