British Chancellor of the Exchequer Rachel Reeves tabled her long-awaited autumn budget on Wednesday, which included wide-ranging tax increases that would affect most British citizens. CNBC summarized the headline announcements for investors and told market watchers about the impact on UK assets. Stocks and bonds Among the raft of measures announced on Wednesday was a three-year exemption from stamp duty, a 0.5% tax that investors pay when buying British shares, on shares in newly listed companies. David Smith, portfolio manager at Henderson High Income, said the move was welcome, but the government “could be more ambitious to increase the attractiveness of the UK market”. “The UK’s current 0.5% stamp duty is an outlier among major global financial centers such as New York and Frankfurt,” he said. “This is a cost for UK-listed companies that not only reduces the value of their savings but also increases their cost of equity, potentially leading to lower valuations.”However, the overall policy mix announced on Wednesday left many investors feeling optimistic about the outlook for UK tradeable assets. Benjamin Jones, Invesco’s global head of research, insisted there were currently “rich opportunities” in UK equities. “Relative to other regional stock markets, UK equities continue to trade at lower multiples, meaning there is still far less optimism priced into UK domestic share prices,” he said. “Budget is not fun, but it is not Armageddon. It doesn’t change much in the way we should think about investing, but it does remove some of the uncertainty that seems to be holding back household spending and investment, business investment and hiring.”Budget is not happy, but it is not Armageddon.Benjamin Jones, Global Head of Research, Invesco Evangelia Geka, senior fixed income strategy analyst at Morningstar, said the budget reinforced a “cautious but constructive” outlook for investors when it comes to British bonds (known as gilts). Gold yields rose and fell on Wednesday after the contents of the budget were accidentally leaked early by the Office for Budget Responsibility. Benchmark 10-year government bond yields were last trading 5 basis points higher at 4.479%, but Mr Gkeka maintained that yields were “on the big picture” moving slowly around the budget. “This stability is positive for investors, reflecting a more predictable market environment and providing an attractive entry point for long-term exposure to rising real yields,” he said. Savings and Investment Tax relief on savings has also been reformed to encourage investment in the UK market. Currently, savers in the UK can save up to £20,000 ($26,441) a year in an ISA (a type of bank account) without paying tax on the interest. The allowance will be cut to £12,000 for under-65s from April 2027, in a bid to encourage young people to invest rather than save. Sally Conway, a savings expert at Shawbrook, a British financial firm that floated on the London market last month, said the cuts to ISA cash limits would hit many savers. “For those focused on building financial resilience and cash nest eggs, reducing the tax-free allowance they have to save will make that job more difficult,” she said. “It will be more important than ever for people to review how their money is allocated between cash ISAs, standard savings accounts and, where appropriate, investment ISAs. Mixing products and ensuring emergency savings are placed in the most appropriate account will help cushion the impact of this change.” Reeves also announced Wednesday that the existing tax on savings interest will increase by 2 percentage points in 2027. The majority of UK taxpayers do not pay savings tax, but for those who do, the income tax on savings income is 22%, the higher rate is 42% and the additional rate is 47%. Meanwhile, taxes on dividends will be raised in April next year. Investors in the basic income tax and upper income tax brackets will see their tax on dividends increase by 2 percentage points to 8.75% and 35.75%, respectively. Real Estate The government is creating a new separate tax rate on real estate income, which is already subject to income tax. From April 2027, the basic property tax rate will be 22%, the top tax rate will be 42%, and the additional rate will be 47%. In the UK, in addition to increasing taxes on real estate income, a so-called “mansion tax” is scheduled to be introduced from 2028. Homes costing more than £2 million will face a new surcharge of between £2,500 and £7,500 a year, depending on the rateable value of the property. According to Fidelity, an estimated 150,000 households will be affected by the condominium tax. Oliver Looghead, wealth manager at RBC Brewin Dolphin, advised those who may be affected by condominium tax to weigh their options carefully. “Downsizing may be a more realistic option, but it should still not be an automatic decision,” he said. “Start by calculating your expected annual tax bill and the financial and livelihood impact of your move. In some cases, the tax may be less than stamp duty, sales charges, and the disruption that comes with downsizing. Downsizing can save you a lot of money in the long term if you’re looking to free up capital or want to free up capital.”Meanwhile, Nick Mann, private client property partner at law firm Collyer Bristow, warned that the new tax could have unintended consequences for the UK’s wider property market. He said: “It is likely to deter some buyers looking to buy for less than £2m, thus creating a two-tier market of above and below £2m.” “While markets below[the threshold]will be booming, there will be a significant impact on the slowdown in property markets for values above £2 million, particularly in London and the South East[of England].” Pensions Private pensions are also subject to the tax increase, with tax relief on salary sacrifice pension contributions due to be reduced from 2029. Currently, workers on salary sacrifice pension schemes are able to pay part of their income into a private pension before tax is deducted from their salary, leaving less of their salary subject to tax. Once the changes are introduced, salary sacrifice pension contributions of more than £2,000 a year will become a liability to National Insurance, a type of tax on income. Charlene Young, senior pensions and savings expert at AJ Bell, said the bigger hit would be on employers. Businesses have already seen a rise in National Insurance contributions in last year’s autumn budget, which they warn will weigh on the labor market. “Currently, salary sacrifice can save workers up to 8% on pension contributions, but the savings for employers are even greater,” Young said in the memo. “Employer NI has no cap, so if you exceed the £2,000 limit you will be charged a 15% fee on the full amount of contributions sacrificed. Some generous employers have traditionally rewarded employees by giving them all or part of their savings. Francis Lee, founder and director of London-based Biscuit Recruitment, said the changes to pension savings would be “a blow for mid-career professionals”. “Now they face a difficult choice: save for the future or protect their take-home pay. We may start to see employees reduce their pension contributions just to make ends meet from month to month,” she said. “Professionals earning between £45,000 and £55,000 will find that a promotion will only make them marginally better off once tax, NI and pension restrictions are taken into account. That is already shaping the way some candidates approach career decisions.”
