UK Budget 2025: A Turning Point for British Expats?

Steve Thompson
5 days ago
6 min read

Today’s UK Autumn Budget wasn’t dramatic.

Today’s UK Autumn Budget wasn’t dramatic for its policies, but it certainly had an unusual start. The Chancellor’s speech was briefly overshadowed by an unprecedented error, when the Office for Budget Responsibility’s analysis was accidentally published early, prompting the Shadow Chancellor to call it “outrageous.” A “pre-Budget Budget” unfolded online before a word was spoken in Parliament, with journalists scrambling to digest the numbers ahead of the speech itself.

Once the formal announcement began, however, the tone quickly settled. There were no panic headlines, no theatrical moments in the chamber, and no single policy that dominated the news cycle.

But don’t be fooled.

This was one of the clearest directional Budgets we’ve seen in years.

Not because of what was loudly announced… …but because of what was quietly confirmed.

For British professionals, retirees, and business owners, especially those considering Portugal or already living here, today’s Budget provided something far more valuable than headlines:

Clarity.

And for many, it will quietly accelerate a question that has already been forming for years:

“Is the UK still the right place to build, protect, and pass on my wealth?”

The big picture: higher taxes by design, not accident

Rachel Reeves framed this Budget around “choices”.

No return to austerity. More public investment. More funding for the NHS. More support for families.

All laudable goals.

But the underpinning reality is this:

The UK is now funding its recovery primarily through taxation, not growth.

And when growth underperforms (as the OBR expects it to), taxes do the heavy lifting.

This Budget didn’t change the structure of the tax system.

It cemented it.

Even the new milkshake tax feels personal. One minute it’s a treat, the next it’s classified as a financial asset with “excess exposure to dairy risk.” Apparently my caramel latte now needs its own tax wrapper and exit strategy...

Frozen tax bands until 2031 — the silent tax rise few will notice (until it’s too late)

One of the least dramatic announcements may prove the most expensive.

Income tax and National Insurance thresholds will now remain frozen until 2031.

By then, tax bands will have been frozen for nearly a decade.

This is known as fiscal drag, and it’s one of the most effective ways governments raise revenue without ever increasing tax rates.

On paper, nothing changes.

In reality:

• Pay rises push you into higher tax bands

• Your allowance quietly shrinks in real terms

• Pension income becomes more exposed

• Benefits are clawed back without explanation

• Your tax bill grows — even if your lifestyle doesn’t

The Office for Budget Responsibility estimates that 780,000 additional people will be pulled

into paying income tax as a result of these freezes alone.

And if you earn between £100,000 and £125,140, your personal allowance is withdrawn at £1 for every £2 earned — creating a hidden 60% tax rate.

This isn’t a short-term policy. It’s now baked into the system for the rest of the decade.

Pension tax privileges, quietly being redefined

Pensions

From 2029, pension contributions made via salary sacrifice above £2,000 will once again attract National Insurance.

A third of private sector employees and a tenth of public sector workers use a salary sacrifice scheme for their pension savings.

These workers give up a portion of their salary in return for their employer paying the equivalent amount into their pension. The benefit to both employer and employee is that they make savings in national insurance.

A £2,000-a-year cap on the amount that can be put into pensions through this salary sacrifice arrangement will be in place from April 2029. More can be put in, but it will be taxed.

Removing tax benefits from salary-sacrifice pension schemes is forecast to raise £4.7bn, the OBR says.

This is not just a technical change.

It sends a very clear signal:

UK pensions are no longer politically untouchable.

With inheritance tax plans already confirmed for 2027, bringing more unused pensions into the IHT net, it’s now clear that pensions are being repositioned as:

Taxable assets… not protected shelters.

For people approaching retirement, and for those already drawing income, the idea that pensions exist safely outside political reach is no longer realistic.

Property wealth now has a price tag - The 'Mansion Tax'

Anyone who lives in a home valued at £2m or more in England will face a council tax surcharge from April 2028.

There will be four price bands with the surcharge rising from £2,500 for a property valued in the £2m to £2.5m band, to £7,500 for a property valued in the highest band of £5m or more

While known as a mansion tax, it may also capture homes in expensive areas, and will be levied on about 100,000 properties, primarily in London and south east England.

The move will require the valuation of homes in the top council tax bands - F, G and H - for the first time since 1991.

This is in addition to existing council tax.

The government expects this to affect fewer than 1% of properties, brining in £400m. Some would say, why bother?

But history tells us one thing:

Once a wealth tax enters the system… …thresholds rarely rise. And scope rarely shrinks.

Savings, ISAs and investment income — quietly squeezed

From April 2027, there will be a two percentage point increase to the basic, higher and additional rates of savings income tax, increasing them to 22%, 42% and 47% respectively.

Most people do not save enough to fall into paying income tax on their savings, but it does make the system more complicated.

The amount of money that can be saved tax-free each year in a cash ISA (Individual Savings Account) will also be reduced from £20,000 to £12,000 a year for the under 65s.Tax on savings, dividends and property income is rising.

For expats, ISAs already lose their tax-free status once you become non-UK resident. If Lifetime ISAs are now being phased out entirely, that removes not just a savings product, but a planning window many people were relying on for first homes or retirement.

This confirms the direction of travel:

Wealth that sits passively will now be taxed harder than money that is structured properly.

For UK residents, the squeeze is coming from all sides:

• Income

• Assets

• Investments

• Inheritance

• Liquidity

And for those who relocate to Portugal without restructuring?

They often end up taxed twice instead of once. Lower growth. Higher taxes. That gap has to be filled.

The UK economy has been downgraded over the years ahead. And when growth softens, governments turn to two tools:

• Borrowing

• Taxation

Borrowing has limits. Tax doesn’t.

Which makes today’s Budget not a culmination…but a starting point.

Why Portugal is still attractive, but only if it’s done properly

Portugal remains one of Europe’s most appealing destinations for British families.

Lifestyle, climate, healthcare, safety. community.

But tax mythology is dangerous.

NHR is no longer a magic solution. Portugal doesn’t ignore foreign pensions. Estate laws are fundamentally different to the UK. Poor UK structures become Portuguese problems.

Moving country does not equal tax efficiency.

Planning does.

The people who benefit most won’t be:

“Those who moved.”

They will be:

“Those who planned correctly before — and after — moving.”

The real choice isn’t political. It’s personal.

This Budget didn’t shout.

It whispered.

And its message was simple:

The UK is shifting from opportunity… towards containment.

For some, the answer will be: Stay and adapt.

For others, it will be: Restructure and relocate.

But nobody should sleepwalk through it.

For anyone considering a move to Portugal, the real choice highlighted by this Budget isn’t political, it’s personal. The UK is quietly shifting from an environment built around opportunity to one shaped increasingly by containment. For some, staying and adapting will make sense. For others, restructuring their finances and relocating will offer a clearer, more flexible future. What’s certain is that no one should drift through these changes blindly. Thoughtful planning now will define your options later.