Autumn Budget 2025 – 26 November 2025

Posted on 27th November 2025 by Steven Burton

Following the recent budget announcements, we have prepared a concise summary of the key points. This document highlights the major changes and initiatives that may be relevant to both individual and business financial planning.

We recommend that you look over any areas that might impact your tax situation, business operations, or financial strategy.

If you have any concerns or questions about how these changes may affect you, please feel free to reach out. We’re here to discuss any potential implications and provide guidance tailored to your specific circumstances.

Thank you, as always, for trusting us with your financial matters.

The Chancellor has delivered her 2025 Budget, and the announcements confirm a significant shift in the shape of personal and business taxation over the next few years. Some measures begin almost immediately while others phase in gradually, although the direction of travel is clear. The Government intends to raise more revenue from wealth, property, investment income and high value activities, while maintaining stability in headline tax rates for companies and expanding selected reliefs for the high street and the creative industries.

Below is an explanation of the changes that will matter most to individuals, landlords, investors and business owners. It is designed as an early overview so that clients can begin to consider the possible impact on their 2025-26 planning as well as longer term decisions.

Income Tax thresholds remain frozen until 2031

One of the most important announcements is the extension of the freeze on personal tax thresholds through to April 2031. The Personal Allowance, the basic rate band and the higher rate threshold will not rise for six more years. National Insurance thresholds that align with these limits will also remain fixed.

This freeze means that the tax system will take a larger share of income each year as wages continue to rise. A growing number of people will drift into the higher rate band even if their pay only increases in line with normal cost of living adjustments. Anyone with salary growth, investment income or rental income should expect a gradual increase in their overall tax burden.

The government is maintaining the income tax Personal Allowance at £12,570 and higher rate threshold at £50,270 from April 2028 to April 2031. The additional rate threshold remains at £125,140 from April 2028 to April 2031.

PLANNING NOTE: Review bonus structures, pension contributions, gift aid contributions and pension withdrawal arrangements to  manage exposure to higher rate tax and to preserve allowances.

Higher tax on dividends

Dividend tax rates will rise by 2% from April 2026. This affects all three dividend bands and will make profit extraction from small companies more costly for owner managers. Many directors take a modest salary and the rest of their remuneration as dividends. This model will still work, although the higher rates will reduce the overall tax advantage.

Increasing the ordinary and upper rates of tax on dividend income by 2% from April 2026. There is no change to the dividend additional rate.

From 2026-27, the ordinary rate will be increased by 2% to 10.75% and the upper rate will be increased by 2% to 35.75%. The additional rate will remain unchanged at 39.35%.

The dividend allowance will continue to provide protection for those with smaller amounts of income, but the overall direction is towards higher taxation of income from wealth rather than work.

PLANNING NOTE: In a blow to owner-managers, dividend tax rates for basic and higher rate taxpayers will increase by 2% from 6 April 2026. If you’re sitting on surplus profits now is the time to consider declaring higher dividends to take advantage of the current rates.

PLANNING NOTE: Owner-managed companies who extract profit via dividends should re-evaluate extraction strategies well ahead of April 2026.

Higher tax on savings and property income

Savings income and property rental profits will also be taxed at rates that are 2% higher from April 2027. This will affect landlords, people with interest from savings and individuals with investment portfolios. The existing allowances, such as the dividend allowance and the personal savings allowance, will continue to provide protection for those with smaller amounts of income, but the overall direction is towards higher taxation of income from wealth rather than work.

The government is creating separate tax rates for property income.  These separate rates mean property income will have its own individual tax rates (as already occurs for the taxation of savings and dividend income). From April 2027, the property basic rate will be 22%, the property higher rate will be 42% and the property additional rate will be 47%. Finance cost relief will be provided at the separate property basic rate (22%).

PLANNING NOTE: Tax free ISA’s will become significantly more valuable, speak to our firm and your Financial Advisor about annual ISA maximisation.

PLANNING NOTE: Larger landlords with (eg with three or more properties) may benefit from forming a limited company, where corporate structures may produce lower effective tax rates, especially where profits are reinvested.

Restriction to pension salary sacrifice benefits

Pensions were thankfully largely left alone. However, the maximum amount that can escape NI charges via salary sacrifice is to be capped at £2,000 from 2029.

Salary sacrifice has been widely used to boost pension saving in a tax efficient way. The Budget introduces a new limit so that from April 2029 only the first £2,000 of salary sacrifice pension contributions each year will remain exempt from National Insurance. Amounts above this limit will attract NICs. The impact will be felt most by higher earners and by individuals making large regular contributions. Employers may also see some increased costs in workplace pension arrangements.

Employees who contribute up to £2,000 into their pension each year via salary sacrifice can continue to benefit in full, but employee and employer NICs will be charged in the usual way on the amount above £2,000.

The government also confirmed that employees who use salary sacrifice to access Tax-Free Childcare or Child Benefit can continue to do so, but any pension contributions above the £2,000 cap will now be subject to NICs.

PLANNING NOTE: High earning individuals should begin planning pension contributions for the 2026 to 2027 year now, particularly where they use sacrifice to manage tax bands.

MTD Making Tax Digital

Making Tax Digital (MTD) for Income Tax will be extended to sole traders and landlords with income over £20,000 by the end of this Parliament. This expands the rollout of MTD for Income Tax, which is April 2026 for sole traders and landlords with income over £50,000 and April 2027 for those with income over £30,000.

PLANNING NOTE: A key element of MTD ITSA is converting accounting records into a digital format that can “talk” to government servers. As we approach the April 2026 deadline, it is imperative that affected traders and landlords have converted to the use of MTD approved software. If you are an affected sole trader or landlord and you have not yet converted your record keeping to an approved format, please get in touch. We can help you choose an appropriate software product and assist with training. If required we can also organise bookkeeping for you.

More timely payment for self-assessment

From April 2029, the government will require Income Tax Self Assessment (ITSA) taxpayers who also have PAYE income to pay more of their tax payments through the year via the PAYE system. This will help spread the taxpayer’s ITSA liability across the year. Taxpayers with both ITSA and PAYE income will pay some of their forecast ITSA tax through their employer or pension provider, deducting their ITSA tax via the normal PAYE process. These payments will be based on their previous ITSA liability.

The government will consult in early 2026 on detailed design options, and on options for timelier tax payment for those with self-assessment income only.

These proposals take steps to ensure income tax self-assessment taxpayers pay tax automatically via regular payments throughout the year, moving taxpayers away from having to pay unexpected bills and reducing the number of falling into tax debt. No one will pay more tax than they do under the rules today, the only change is when the tax is paid.

New council tax surcharge for high value homes

A separate measure worth noting is the introduction of a High Value Council Tax Surcharge from April 2028. This surcharge will apply to homes valued at more than £2m, with higher charges for properties of greater value. The surcharge will be collected alongside normal council tax, but the revenue will flow to central government. For households within this bracket, the extra annual charge may be substantial.

The charge will range from £2,500 to £7,500, and will be payable alongside the existing council tax.

PLANNING NOTE: Estate agents, advisers and families considering gifts of high value homes should factor the surcharge into future planning.

Mileage based tax for electric vehicles

Electric vehicles and plug in hybrids will face a new per mile levy from April 2028. This is intended to replace some of the fuel duty revenue that has been lost as petrol and diesel vehicles decline. Electric vehicle running costs will rise and the long term cost difference between electric and petrol or diesel cars will narrow. The levy is 3p for wholly-electric vehicles and 1.5p for hybrids.

Company Car Tax

As previously announced, the government set company car tax rates (benefits-in-kind) for tax years 2028/29 and 2029/30, with further details to be published.

Appropriate percentages for zero emission and electric vehicles will increase by 2% per year in 2028/29 and 2029/30, rising to an appropriate percentage of 9% in tax year 2029/30.

Appropriate percentages for all cars with emissions of 1 to 50g of CO2 per kilometre, including hybrid vehicles, will rise to 18% in tax year 2028/29 and 19% in tax year 2029/30.

Appropriate percentages for all other vehicle bands will increase by 1% per year in tax years 2028/29 and 2029/30. This will be to a maximum appropriate percentage of 38% for tax year 2028/29 and 39% for tax year 2029/30.

Employees

From 6 April 2026 the deduction from income tax for non-reimbursed home working expenses will be removed. Employers can still reimburse employees for these costs where eligible without deducting Income Tax and NI.

From 6 April 2026 the income tax and NI exemption for employer-provided benefits will be extended to cover reimbursements for eye tests, home working equipment, and flu vaccinations.

At Autumn Budget 2024, the government announced it would bring employee car ownership schemes into scope of the Benefit in Kind rules from 6 April 2026.  Implementation will now be delayed to 6 April 2030, with transitional arrangements until April 2031.

State Pension

The basic and new State Pension will be increase by 4.8% from April 2026. 

ISA

The cash ISA allowance will be cut to £12,000 as rumoured, but the full £20,000 will still be available by ringfencing £8,000 for stocks and shares.

The amount under 65’s can save into a cash ISA will also be capped at £12,000 from April 2027, whilst the overall ISA allowance will remain at £20,000. This means you will need to invest in stocks and shares to get the benefit of the full ISA allowance.

PLANNING NOTE: If you are concerned by this change please speak to you Financial Advisor so that you can consider your options.

Inheritance Tax

The inheritance tax nil-rate bands are already set at current levels until April 2030 and will stay frozen at these levels for a further year until April 2031.

As previously announced, unused pension funds and death benefits will be included in estates from April 2027.

Finally, something for the farmers. In respect of agricultural property relief and business property relief, any unused allowance for the 100% rate of relief to be transferable between spouses and civil partners from 6 April 2026. The unused allowance can be transferred even if one spouse died before 6 April 2026, which is a significant change to the previously announced policy.

PLANNING NOTE: If you are concerned by this change please call asap so we can consider your options.

Student Loans

The threshold at which student loans under Plan 2 are repaid will be frozen for three years from 6 April 2027.

Capital gains tax

From 6 April 2025, the rate for Business Asset Disposal Relief and Investors’ Relief increased from 10% to 14%. From April 2026, this will further rise from 14% to 18%. The Investors’ Relief lifetime limit was reduced from £10m to £1m for qualifying disposals made on or after 30 October 2024.

From 26 November 2025, capital gains tax relief on qualifying disposals to employee ownership trusts is reduced from 100% to 50%.

The government will “modernise” the anti-avoidance provisions that apply to share exchanges and company reorganisations. We have no further information on this as yet, despite it taking immediate effect.

The government will introduce a requirement for taxpayers to actively claim incorporation relief for transfers of a business to a company on or after 6 April 2026. Currently the relief applies automatically.

PLANNING NOTE: If you are considering disposals of assets affected by CGT please call so we can consider your options.

Investment incentives

The government will increase the VCT and EIS company investment limits.  Alongside this, the VCT income tax relief will decrease to 20% (currently 30%).

PLANNING NOTE: If you are concerned by this change please speak to you Financial Advisor so that you can consider your options.

Support for the high street and hospitality sector

The Budget provides welcome news for retail, hospitality and leisure businesses. Business rates relief for more than seven hundred and fifty thousand properties will be made permanent from April 2026. There will also be a cap on business rate increases following the 2026 revaluation. These measures are intended to protect high street businesses from sharp rises in fixed costs and to support continued trading during a period of economic adjustment.

Film studios will continue to benefit from a forty percent business rates reduction until 2034. This confirms the long term support available to the UK’s creative industries and should attract further investment in large scale productions.

Corporation Tax stability and changes to capital allowances

The main Corporation Tax rate will remain at 25% for the entire Parliament. This provides a degree of certainty for businesses planning future investment.

Increases to Corporation Tax late filing penalties – The government will double the penalty for taxpayers submitting a Corporation Tax return late from 1 April 2026.

Capital Allowances

Writing down allowances for assets that do not qualify for full expensing will be reduced from April 2026.  The main rate writing-down allowance will be reduced from 18% to 14% from April 2026 and a new 40% first-year allowance will be introduced from 1 January 2026

This means that some types of plant and machinery will receive slightly lower tax relief over time. The aim is to encourage use of the full expensing regime where possible since full expensing provides immediate tax relief and is more generous than writing down allowances.

The government will maintain key features of the capital allowances regime, including full expensing with a 100% first-year allowance for qualifying new main rate plant and machinery, and a 50% first-year allowance for special rate machinery, making the UK the only major economy with permanent full expensing.

The Annual Investment Allowance will continue to offer 100% first-year relief for plant and machinery investments up to £1m for all businesses, including unincorporated ones.

Writing down allowances will remain flexible, allowing businesses to choose which allowances to claim for main and special rate machinery.

From 1 January 2026 a new First-Year Allowance of 40% for main-rate assets is introduced. The relief will be applying to certain assets beyond the current availability of full expensing and the AIA. This will enable the leasing sector, which is currently excluded, to now be eligible for first year allowances. Cars, second-hand assets and assets for leasing overseas will not be eligible.

From 1 April 2026 for corporation tax and 6 April for Income Tax, main rate writing-down allowances will reduce from 18% to 14%.

VAT Thresholds

There have been no announcements to the VAT thresholds and registration/deregistration limits or rates applicable to various products and services.

Employee Ownership Trusts (EOT) and anti-avoidance rules

From 26 November 2025, the relief for capital gains on disposals to Employee Ownership Trusts will reduce from one hundred percent to fifty percent. This change lowers the tax advantage of using an EOT for succession planning. Owners considering an EOT sale may wish to review their timetable.

The Budget also includes a range of technical anti avoidance measures. These relate to the treatment of certain liabilities, reorganisations and offshore structures. The rules will mainly affect complex planning arrangements rather than everyday business activity.

Changes for non-residents and former non domiciled individuals

From 6 April 2026 the government will abolish the dividend tax credit for non-UK residents with UK income, aligning their treatment with UK residents.

The non-resident capital gains tax rules will also be amended, closing loopholes for protected companies and clarifying legislation for investors. Changes apply with immediate effect, with further administrative reforms from 6 April 2026.

From 6 April 2026 individuals living abroad will not be able to increase their entitlement to the UK state pension by making Class 2 NI contributions.

From 6 April 2026 the post departure trade profits provisions will be removed from the temporary non-residence anti-avoidance legislation so that all dividends received during a period of temporary non-residence are chargeable to UK tax.

There are reforms to Capital Gains Tax for non-residents and adjustments to share reorganisation rules. These changes continue the movement towards equal treatment of residents and non-residents. In addition, former non domiciled individuals with offshore trusts may face new inheritance related charges from 2026.

Fuel Duty

The government will extend the temporary 5p fuel duty cut for a further five months, with the cut being reversed in three stages: 1p on 1 September 2026, 2p on 1 December 2026 and 2p on 1 March 2027. This will return rates to pre-March 2022 levels. The planned inflation increase for 2026-27 will not take place, with the government uprating fuel duty rates by Retail Prices Index from April 2027.

Employers and HR

National Living Wage jumps from April 2026.

From April 2026, workers aged 21 and over will see a minimum wage rise to £12.71 an hour, up from £12.21.  For those aged 18, 19 or 20, minimum wage will rise to £10.85 an hour, up from £10. For 16 and 17 year olds, it will rise to £8 an hour, up from £7.55.

There will be stricter enforcement through the new Fair Work Agency.

Most business owners we work with want to do the right thing, but this Budget will make the next two years more expensive and far less forgiving for employers.

PLANNING NOTE: If you are concerned on the impact of this change on your employee costs, please call asap so we can budget for the change and consider your options.

PLANNING NOTE: Get good HR advice to protect your business.

We can help

This latest government announcement means that now is the time to ensure you have a tight grip on your numbers and a clear financial plan. 

Please call if you need more information on any of the announcements made, or to learn more about how Steven Burton & Co can help you to better understand your business finances & tax affairs.

All of the above comments are made prior to seeing the draft legislation that will enact the various changes. The large government majority in Parliament will probably mean that the changes will go ahead as planned.  However, readers are advised to take professional advice before making any changes to their personal or business affairs based on the above commentary.

This material has been prepared for informational guidance purposes only.  Whilst every effort has been made to ensure the contents are accurate, information contained may not be comprehensive.  Furthermore it is not intended to provide, and should not be relied on for, tax or accounting advice.  Steven Burton & Co Limited can not accept any liability for any errors or omission or for any person acting on or refraining from acting on the information provided

Source:

You can read the full UK Autumn budget on the GOV website.

https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html