The Chancellor's November 2025 Budget has introduced tax changes that will affect almost everyone, but its implications for the property market and those trying to get on the housing ladder were notably absent from the main discussion. MoneyMagpie Editor and financial expert Vicky Parry warns that this silence speaks volumes, and the detailed measures could significantly impact people saving for their first home.
Key Savings Changes Hitting First-Time Buyers
One of the most significant announcements was the alteration to Individual Savings Accounts (ISAs). While the overall Personal Allowance remains frozen at £20,000, the amount you can save in a Cash ISA has been capped at £12,000 per year for under-65s. This means savers must place at least £8,000 into Stocks and Shares ISAs or other investment vehicles to utilise their full annual allowance.
This presents two major problems for aspiring homeowners. Firstly, it limits the amount of easily accessible, tax-free cash you can accumulate each year for a house deposit. Stocks and Shares ISAs involve greater risk, potential withdrawal delays, and transfer fees, making them less suitable for short-term deposit saving. Secondly, this reduction in cash deposits within building societies could constrain their ability to offer mortgages, potentially affecting the availability and rates of loans for first-time buyers.
Uncertainty Around the Lifetime ISA and Tax Thresholds
The government has cast a shadow of doubt over the popular Lifetime ISA, announcing a consultation in early 2026 that could lead to it being scrapped and replaced. Currently, this account allows savers to deposit up to £4,000 annually and receive a 25% government bonus (a maximum of £1,000 per year). However, the scheme's property price cap has remained at £450,000 since 2017, failing to reflect the dramatic rise in house prices across the UK.
Meanwhile, the freeze on income tax thresholds is a stealthy tax rise. As wages increase with inflation, more people will be pulled into higher tax brackets. This, combined with a new £2,000 cap on pension salary sacrifice schemes, means many will see their take-home pay squeezed, directly reducing the amount they can save for a deposit each month.
Wage Rises and Tax Increases: A Double-Edged Sword
While the increase in the National Minimum Wage from £12.21 to £12.71 per hour for over-21s seems positive, the reality is more complex. This rise comes after previous increases were accompanied by higher National Insurance costs for employers. Businesses facing higher payroll expenses may respond with job losses or by increasing the prices of their goods and services, which could push the cost of living even higher and negate the benefit of a slightly larger pay packet.
Furthermore, a blanket 2% increase in tax on dividends, landlord income, and savings outside of ISAs will have multiple effects. For self-employed individuals, a key demographic of first-time buyers, this means a direct cut in take-home income, which can affect mortgage affordability assessments. For tenants, landlords are likely to pass on their increased tax burden through higher rents, leaving less disposable income to save for a deposit.
Finally, for diligent savers who manage to max out their ISA allowance, any additional savings in standard accounts will now be subject to a higher tax rate on interest earned above the £1,000 Personal Savings Allowance, further eroding the real growth of their hard-saved deposit in the face of inflation.
