“The Chancellor’s decision to cut salary sacrifice will reverberate across workplaces”

 
Mark Futcher, Partner and Head of DC Pensions at Barnett Waddingham (BW), said: “The Chancellor’s decision to cut salary sacrifice will reverberate across workplaces. While it may raise extra NI revenue, it removes one of the most effective ways people boost their pension savings. With adequacy levels already worryingly low, this change will hit average earners hardest and increase cost pressures for employers at a time when budgets are stretched. It also runs against the aims of the new Pension Commission, which is focused on strengthening long term saving, not undermining it.
 

“And salary sacrifice goes beyond pensions. Parents use it to retain access to child benefits and funded childcare when they or a partner is deciding whether to stay in or return to work. This could present a significant barrier to people re-entering the workforce after periods of leave, worsening gender pay and pensions gaps.

 

“Sudden tax and insurance changes like these only create a lose-lose scenario for employers and employees – which we’re seeing play out in the employment data across the UK. We can only hope the Government recognises the damage this could cause and turns her attention to policies that make it easier for ordinary working people to build a secure retirement, not harder.”

Following the Chancellor’s introduction of a ‘mansion tax’ on properties worth over £2 million from April 2028, Simon Main, Partner at Cripps, a top 100 UK law firm, said:

 

“It is clear that the government’s ‘mansion tax’ will have a significant impact on the pricing, liquidity, and long-term ownership strategies in the prime central London market.

“From a legal perspective, much remains uncertain. Key questions, such as how properties will be valued, who will carry out the valuations, and who will bear the costs, suggest the application of any such levy will be fraught with difficulties.”

 

Tradu CEO on Budget: Tinkering with stamp duty won’t fix UK investment crisis

 
“The Chancellor’s measures to make up the shortfall in public funds have neglected the urgent need to revitalise domestic investment.

“Increasing the dividend tax at a time when retail ownership is historically low will only push households even further out of the market. Why would retail investors choose our market when US equities already enjoy stronger corporate earnings growth? More than half of retail investors believe US stocks are more attractive than UK stocks due to lower tax obligations. This move only serves to widen that gap.

“Freezing the income tax allowance risks hurting Britain further. Without any incentives to drive people’s hard-earned money into domestic equities, the Chancellor will struggle to unlock dormant capital.

“The reduction of the cash ISA allowance to £12,000 is a further half measure that won’t succeed in reigniting interest in domestic equities by itself. Penalising savers won’t turn them into investors. If the government genuinely wants to channel more capital into UK equities, then the priority must be to remove cultural and structural barriers, and not simply restrict savers’ options.

“Though the move to offer stamp duty holidays for new listings is a step in the right direction, the failure to abolish the share tax altogether and enhance financial literacy means we’re leaving up to £740bn on the table. Tinkering around the edges isn’t working, and it will not be surprising if the government remains in the same place come the next Budget.”

 

‘this reduction in the allowance will impact a substantial proportion of savers’ – Moneybox react to ISA announcement at Budget

 

Brian Byrnes, Head of Personal Finance at Moneybox, commented: “The Cash ISA is the UK’s most popular savings vehicle, so today’s cut to the annual tax-free limit will understandably cause concern for many. In fact, in the 24/25 tax year, two-fifths of Moneybox Cash ISA customers deposited more than £12,000, indicating that this reduction in the allowance will impact a substantial proportion of savers.”

“It is vital that the government recognises that cash savings remain the bedrock of financial confidence and a cornerstone of financial resilience. A strong cash buffer is what ultimately gives people the confidence to invest over time. At Moneybox, we see more than a million people — many on modest incomes — relying on tax-wrapped accounts to build security and plan for the future. Sudden changes to allowances risk undermining that confidence.

“We support the government’s ambition to encourage more people to invest for stronger long-term returns but it is widely accepted that cutting the Cash ISA allowance alone will not create an investing culture. Real change requires policy stability, a clear long-term savings and investment strategy, and meaningful support for those who are less confident about investing.”
 

 

“The government’s cut to salary sacrifice relief confirms a move away from supporting private retirement saving and towards short-term fiscal balancing. While not presented as a direct hit on savers, the impact is clear. Legal & General’s actuarial analysis already shows nine in ten people are failing to meet their retirement goals, and removing one of the few remaining incentives for disciplined long-term saving will only worsen outcomes.

“Stripping away NI efficiency removes the core advantage of salary sacrifice, narrowing the gap with SIPP funding and shifting more responsibility back onto individuals. This continues a pattern advisers see every day—later retirement ages, more volatile outcomes and growing recognition that the system no longer supports the retirement futures people were promised.

“Reducing the ability to save efficiently, limiting flexibility and diluting incentives effectively hard-wires later retirement into the economy. For many under 50, working well into their 70s will become a financial necessity. Meanwhile, public sector workers remain insulated within defined benefit schemes, widening the divide between those with guaranteed pensions and those without.

“Advisers will now need to recalibrate strategies and place greater emphasis on SIPP funding to provide control and resilience as employer-based advantages erode. The industry must also be clear: raising revenue today at the expense of long-term retirement security is not sustainable. Restricting saving incentives will mean more people working longer, facing greater financial insecurity in later life and ultimately relying more heavily on the state. Working people deserve a retirement system that supports, rather than penalises, those who save for their future.” says James Floyd, managing director of Alltrust Services Limited

 

Comments from Simon Merchant, CEO of [www.flagstoneim.com]Flagstone, the UK’s £18bn savings platform on today’s Budget announcements:

 

On the Cash ISA reduction 

 

The £12,000 threshold for cash savings is more palatable than the lower caps touted previously, but it is still a blow to younger savers and won’t yield the sorts of results the Treasury and City want to see.

This policy doesn’t speak to the millions of younger people who rely on Cash ISAs to develop good savings habits, helping them plan for the future and rely less on the state for later life financial support.

Savers should move what they can into their current £20,000 Cash ISA allocation before the threshold is reduced in April 2027.

 

On including UK stocks in your stocks & shares ISA

 

Reinvigorating the UK stock market is an honourable ambition, but this feels more like holding younger savers to ransom than enacting progressive policy change.

The idea that a lower Cash ISA allowance will magically turn cautious savers into confident investors is deeply flawed.

Our latest data* shows that cutting Cash ISA limits won’t drive people into investing, it will simply create confusion. 35% of Flagstone savers say they ‘don’t know yet’ how they would respond, which tells you they’re hesitant, not eager to take on more risk. A further 24% say outright they’re unlikely to shift into Stocks & Shares ISAs.

Savers want protection and autonomy, not pressure or paternalism. 53% of Flagstone savers say they would be concerned about any requirement to invest in the UK market.

Their financial advisers agree. According to Flagstone’s pre-Budget poll of financial advisers** 68% of advisers say reducing the Cash ISA limit won’t encourage more investment in UK equities. Only 20% say they’re seeing more UK equities that are undervalued and attractively priced. And 32% say they have not recommended UK-focused funds to clients for three or more years.

* Survey of 450 Flagstone savers, November 2025

** Survey of 103 UK financial advisers, November 2025

 

On capping salary sacrifice in pensions

 

This is a startling and scary step to creating a less affluent, more dependent later-life population.

There is a real risk that, as workers’ take-home pay decreases as a result of the salary sacrifice cap, they will start to change their saving behaviours – and not for the better. One of those shifts will be to pay less into pensions.

Saving directly from your salary into your pension is one of the most tax-efficient ways to save for later life. Reducing your contributions can put pressure on your financial health in retirement, particularly when you are younger and at the accumulation phase of pension saving.

For those who do reduce pension contributions to mitigate this cap, it’s hugely important to establish good habits around excess take-home pay to ensure that savings are continuing to accumulate – both inside the pension and out.

Saving into your cash ISA is always a good first port of call, since every penny of interest you earn will be tax-free; and then actively move savings into high-interest, long-term savings accounts. These funds can help to preserve their value, stay safe and can be used to top up your retirement income later, reducing your reliance on your pension alone.

 

On income tax threshold freeze

 

While the big headline rumour that the Treasury would increase income tax by 2p never came to pass, a failure to raise income tax bands may prove just as detrimental to savers anyway.

A failure to act on income tax bands is a stealth tax in (poor) disguise.

Maintaining the same income tax bands for a fifth year means that more people than ever will be pushed into higher tax bands and pay more tax on their income. This disproportionately impacts those aged 65 and over. The Institute for Fiscal Studies says that almost two thirds of 65yo+ will pay income tax this year – more than those aged 16-64.

Saving for your pension knowing that you will pay considerable income tax on whatever you withdraw from it is a bitter pill to swallow.

It’s particularly hard for those nearing pensionable age for whom the chances that income tax bands will increase before they need them to look very slim.

Saving for your pension will continue to remain one of the most tax efficient ways to save for retirement, regardless of these frozen bands. But if the thought of being pushed to pay tax in retirement is unappealing, it can be worthwhile amassing savings with your take-home pay outside of a pension too. Saving into your cash ISA is always a good first port of call, since every penny of interest you earn will be tax-free; and then actively move savings into high-interest, long-term savings accounts. These funds can help to preserve their value, stay safe and can be used to top up your retirement income later, reducing your reliance on pension withdrawals.

 

Finn Houlihan, Managing Director at Independent Financial Advisory firm, AAF Financial comments on the budget:

 
Chasing cash while driving wealth away? “You cannot tax wealth that has already left the building.“
 
The Chancellor’s latest address was less of a rallying cry for growth and more of a starting gun for an exodus.

By freezing allowances, slashing tax breaks, and tightening residency rules, the Government has engineered a dangerous paradox: they are desperate to fill an immediate multi-billion pound black hole, yet are seemingly actively dismantling the incentives required to generate that wealth.
Instead of stimulating the innovation andproductivity needed to revive the economy, these decisions offer zero clarity and dangerously low motivation for entrepreneurs and investors to stay put. The government is hunting for immediate liquidity, but their discouraging words are simply shrinking the tax base they intend to harvest.
People are already voting with their feet. Over the last 12months, enquiries from clients seeking to leave the UK have hit record highs for us,driven by a desire to escape a stifling fiscal environment for dynamic hubslike Dubai, Portugal, and Ireland.
It isn’t just the wealthy using the newnon-dom changes to exit. We are witnessing a massive increase in enquiries fromambitious young professionals and teachers seeking higher pay and lower taxes
abroad because they want to be able to save money, something the UK regimemakes incresingly impossible to do.