Autumn Budget 2025: Key Tax Changes
- Baldwin's Accountancy Services
- Nov 27
- 4 min read
The Chancellor’s Autumn Budget on 26 November 2025 introduced a number of tax and policy changes aimed at raising additional revenue without increasing the main income tax rates. While presented as a budget that supports “working people”, many of the measures will have the greatest impact on individuals with investment income, landlords and owners of small to medium-sized businesses.
Below is a clear and accessible summary of the key announcements most likely to affect you, your household or your business.
Income Tax and National Insurance
The Government has extended the freeze on major tax thresholds until April 2031, meaning:
Personal Allowance remains £12,570
Higher-rate threshold remains £50,270
Additional-rate threshold remains £125,140
Employer NIC secondary threshold remains £5,000
With wages rising over time, more individuals will gradually move into higher tax bands - a continued effect of “fiscal drag”.
The Budget also removes voluntary Class 2 NIC for individuals living overseas. Those wishing to maintain their UK State Pension record will need to rely on Class 3 contributions, which cost more. This may increase long-term pension planning costs for British nationals working or living abroad.
Higher Taxes on Dividends, Savings and Property Income
A major theme this year is the shift towards taxing income from assets.
Dividend tax rises (from April 2026)
Rates increase by 2 percentage points:
Basic rate: 10.75%
Higher rate: 35.75%
Additional rate: 39.35% (unchanged)
Affects anyone taking company dividends or receiving share income outside ISAs/pensions.
Savings & property income rises (from April 2027)
The basic, higher and additional rates for these income types increase to:
22% (basic)
42% (higher)
47% (additional)
Landlords will also see mortgage interest relief given at 22% instead of 20%.
From April 2027, allowances and reliefs will be applied to these income types after employment or trading income, which may subtly increase tax bills for those with mixed income sources.
ISA Allowances
From April 2027:
Under-65s: Cash ISA limit reduces from £20,000 → £12,000
Over-65s: Retain the full £20,000 cash ISA allowance
Overall ISA limit remains £20,000
This change may encourage more savers to consider Stocks & Shares ISAs.
National Minimum Wage Increase
From 1 April 2026, the National Minimum Wage will increase as follows:
£12.71 per hour for workers aged 21 and over
Increase of 50p (+4.1%)
£10.85 per hour for 18–20 year-olds
Increase of 85p (+8.5%)
£8.00 per hour for 16–17 year-olds and apprentices
Increase of 45p (+6.0%)
These rises are significant, particularly for younger workers and apprentices, and will increase wage costs for many small businesses, especially in sectors such as hospitality, retail, leisure and care.
Pensions and Salary Sacrifice
From April 2029, the NIC advantages of pension salary sacrifice will be capped:
Only the first £2,000 sacrificed each year is free of NIC
Above this:
2% employee NIC
15% employer NIC
This will reduce the efficiency of higher-value pension sacrifice arrangements used by many directors and senior employees.
Homeworking Expenses Relief Removed
From April 2026, employees will no longer be able to claim tax relief on unreimbursed homeworking expenses.
Employers may still reimburse allowable costs if they choose.
Capital Gains Tax and Business Structuring
Employee Ownership Trusts (EOTs)
For disposals from 26 November 2025, the CGT relief reduces from 100% → 50%.
Incorporation Relief
From April 2026, incorporation relief will no longer be automatic.
It must be actively claimed, with additional information required on the tax return.
This will affect sole traders and partnerships considering incorporation.
Capital Allowances
The capital allowances system continues to evolve:
Full Expensing remains available to qualifying companies
From January 2026, a new 40% First-Year Allowance applies to assets not eligible for full expensing (including leased assets and those bought by unincorporated businesses)
The main pool writing-down allowance falls from 18% → 14%
Business Rates
From April 2026:
Retail, hospitality and leisure properties benefit from lower multipliers
Other commercial properties face higher multipliers
The Small Business Rates Relief grace period extends from 1 year → 3 years, helping growing businesses avoid sudden rate increases when taking on an additional property.
Inheritance Tax
The Inheritance Tax nil-rate band and residence nil-rate band will remain frozen.
With rising property values, more estates may become taxable over time.
Those with growing asset values may wish to review their estate planning or gifting strategy.
Property and Transport Measures
High Value Council Tax Surcharge (from April 2028)
Applies to properties worth £2m+ in England:
Starting charge: £2,500
Top band (properties £5m+): £7,500
Electric Vehicle Pay-Per-Mile Charge (from April 2028)
EVs: 3p per mile
Plug-in hybrids: 1.5p per mile
Indexed annually by inflation
VCTs, EIS and Investment Reliefs
The Budget introduced several changes to tax-advantaged investment schemes:
Venture Capital Trusts (VCTs)
From April 2026:
Income tax relief reduced from 30% → 20%
The change applies to new VCT subscriptions from that date
Enterprise Investment Scheme (EIS)
Annual and lifetime investment limits will be increased, particularly for investments into knowledge-intensive companies
Designed to channel more support towards high-growth, innovative businesses
Overall impact
VCTs become less tax-efficient for investors seeking upfront tax relief
EIS becomes potentially more attractive for higher-risk investors
These measures reshape how the Government targets incentives without increasing headline tax rates
Other Personal Finance Measures
The Budget also included:
£150 reduction in average energy bills (from April 2026)
4.8% State Pension increase (from April 2026)
Removal of the two-child limit in Universal Credit
Freeze on regulated rail fares until March 2027
Lifetime ISA closed to new savers (existing accounts remain open)
Help to Save scheme extended
In Summary
Although income tax rates remain unchanged, this Budget introduces significant increases to taxes on dividends, savings and property income, alongside long-term freezes to key thresholds. Combined, these measures will gradually increase the tax burden for many individuals, landlords and small business owners.
If you would like personalised advice on how these changes may affect you, your business or your future tax planning, please feel free to contact us.
