Autumn Budget 2025 Summary
On Wednesday, 26 NOVEMBER 2025, the Chancellor gave her AUtumn Budget, whereby she announced various tax RAISING CHANGES COMING INTO FORCE AFFECTING THE pockets of most taxpayers.
One of the headline announcements for taxes was the confirmation of the freezing of income tax thresholds beyond the current planned date in 2028, which will now be extended to 2031. Before 2020 these bands were adjusted to match the Consumer Price Index, however today’s announcement will see the bands stay the same for at least a decade. The thresholds being fixed whilst inflation continues will create a fiscal drag which will affect many people. The fix combined with rising wages/income will result in many more new taxpayers over the coming years and will also see current taxpayers dragged into higher tax brackets. This freeze will fundamentally affect most taxpayers. For instance, the freeze of the personal allowance of £12,570 means more low earners are now paying tax even if only receiving moderate income rises. However, the government intends to ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28 if the new or basic State Pension exceeds the Personal Allowance from that point. The government is exploring the best way to achieve this and will set out more detail next year.
To summarise the thresholds frozen:
The personal allowance of £12,570 to stay frozen until 2031
The basic rate, higher rate and additional thresholds will remain until 2031
The National Insurance rates and thresholds will reaming until 2031
The current Inheritance Tax thresholds and rates to remain until 2031
The current VAT thresholds and rates will remain
The student loan threshold will also be frozen
2. There will be no change or increase to the current rates and thresholds for corporation tax. Although businesses with big capital expenditure can benefit from increased FYA (capital allowances) from January 2026, the main rate WDA will come down from 18% to 14% from April 2026.
3. The rumoured decreases in the allowances for ISAs were not brought in, though the structure of how the current £20,000 annual limit can be used will shift from April 2027. The annual cash ISA allowance will be capped for the under 65s to £12,000 a year, with the balancing £8,000 being reserved for Stocks & Shares ISAs. Those over 65 from April 2027 will be unaffected and able to use the £20,000 annual limit how they like, the same way anyone can currently.
4. In an effort to encourage UK based investment, the Chancellor announced increases to the current gross asset and investment limits for UK companies receiving investment under both the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) regime from April 2026. This will widen the net, supporting more startup businesses to attract investment and scale up.
On an individual investor level however, there is no change to the current EIS regime, where individuals can claim 30% income tax relief on qualifying EIS investments of up to £1m per tax year, rising to £2m if invested in ‘Knowledge Intensive’ companies. For VCTs, individuals can currently claim 30% income tax relief on qualifying investments up to £200,000 per year, though this is being reduced to 20% income tax relief, from April 2026.
A new UK Listings Relief will be introduced giving relief of Stamp Duty Reserve Tax (SDRT) for businesses listing in the UK.
5. The rate of income tax in the basic and higher rates will rise by 2% on dividend income with effect from April 2026. This is a rise from 8.75% to 10.75% in the basic rate and from 33.75% to 35.75% in the higher rate. There is no increase on tax rate for dividends above the additional rate, so high earners earning above the rate will only see added tax on any dividends below the additional rate and no difference in taxes for any dividends above. This is especially significant for individuals whose total income before dividends is already at the additional rate of tax as any dividends then taken will be above the additional rate where the tax rate has not increased and thus have no added tax to pay on any dividend.
The rate of income tax in all tax band thresholds will also raise by 2% on rental property and savings income from April 2027, meaning rises from 20% to 22% in the basic rate band, 40% to 42% in the higher rate band, and 45% to 47% above the additional rate threshold.
6. A new so called ‘mansion tax’ formally titled the High Value Council Tax Surcharge, will be introduced from 2028. From April 2028, properties exceeding £2m in value will be subject to a council tax surcharge. However, unlike council tax, this will be payable by landlords rather than tenants.
The thresholds for April 2028 are:
Property value (£m) = Annual surcharge (£)
£2m-£2.5m = £2,500
£2.5m-£3.5m = £3,500
£3.5m-£5m = £5,000
£5m+ = £7,500
Property revaluations will then be required every 5 years and the surcharges will be increased in line with inflation from April 2029.
As this is effectively a dry tax charge, a consultation is expected in the new year to discuss the implementation of a scheme to assist those who may struggle to pay the charge.
7. Another key change is the introduction of a £2,000 cap on National Insurance savings on salary sacrifice for pension contributions from April 2029. This means that a salary sacrifice set up for circa £5k per year will suffer National Insurance on £3k at the same level as if it was income. For example, currently, if you sacrifice £5,000 of your salary into your pension, you save National Insurance (NI) on the full amount. At today’s rate of 8% for income in the basic rate, that’s a saving of £400. Under the new rules, only the first £2,000 will be NI free, and the remaining £3,000 will have NI deducted, costing £240 extra. Income tax relief on pensions remains unchanged meaning that pension contribution through salary sacrifice still will be considered as exempt from income tax, but this move reduces the NI advantage for those making larger contributions. While most employees won’t notice much difference, those who use salary sacrifice heavily as a way to contribute more for their retirement and pay less on NI will see their savings shrink. This could discourage people from putting extra money into pensions, as the financial benefit of doing so will be smaller. The government says it’s about fairness, but critics worry it may impact long-term retirement planning. Similarly employers will also lose the NI saving, as they would have to pay it at 15% compared to employees 8%, which would cost employers £450 based on the above amount.
8. There will be an increase in the National Living and Minimum Wages for all ages with effect from April 2026. For those over 21 there will be an increase of 50p to £12.71 per hour, and those aged 18-20 will rise by 85p to £10.85. As these continue to increase, employers will need to budget for the increase in their costs.
9. From April 2028 Electric vehicle drivers will suffer a new road charge surcharge of 3 pence per mile driven, as an addition on their annual excise duty. For context, an electric vehicle driven for 5,000 miles per mile per annum will see an increased yearly cost of £150. Hybrid cars drives will pay 1.5 pence per mile.
10. The two child child benefit cap will be lifted for those with more than two children from April 2026. It does mean that higher earners who claim the additional child benefit need to remember they may have to repay some or all of it back to HMRC anyway under the High Income Child Benefit Charge.
11. Business rates for Retail, Hospitality and Leisure will have a permanent reduction in that the multiplier applied to the rateable value will be 5p less than the national equivalent. There will be a higher multiplier for properties with a rateable value in excess of £500,000, which will be 2.8p higher than the national standard multiplier.
12. Business owners selling their shares to an employee ownership trust (EOT) could previously benefit from 100% capital gains tax relief, meaning no tax was due on the disposal. This relief has now changed, effective immediately (26 November 2025) to the following structure:
50% of the gain on disposal to EOT trustees is now a chargeable for capital gains tax for the business owner selling the shares
50% of the gain is held over and deducted from the acquisition cost of the trustees. Ultimately this will become chargeable on the EOT trustees upon their subsequent future disposal of the shares
If the shares also qualify for business asset disposal relief (BADR), that is ignored, preserving the £1m lifetime limit of the taxpayer.
13. There will be a change to the dividend tax credits for non-residents. Under the current rules, non-resident shareholders of UK companies receive a notional tax credit of 8.75% when receiving a dividend, often resulting in no further tax being due on this income. The tax credit is not refundable but is perceived to be unfair to those UK based shareholders who are not granted this notional tax credit. In an effort to bring more fairness to the tax system, this notional tax credit for non-residents will be abolished from 6 April 2026.
These changes do not impact the current disregarded income rules themselves, meaning a comparative calculation will still be required for non-residents receiving UK dividends on top of other UK sourced income to ascertain the most beneficial treatment. It will however, result in more UK tax being due on dividends paid to non-residents.
There will be lots more detail to come, so we’ll be updating this as we discover more.
FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.
