2025 Autumn Budget - Headline Announcements

Chancellor delivers Budget to ‘drive economic growth’

Rachel Reeves today delivered her 2025 Autumn Budget in which she announced her ‘right choices’ for a fairer, stronger and more secure Britain.

The measures introduced by the Chancellor are expected to raise an additional £26 billion by April 2030, with the view of cutting the cost of living and Government borrowing whilst improving public services.

Read all the headline announcements to see what this could mean for you and your business.

Income Tax & NIC

The previously announced freeze on income tax and National Insurance thresholds, including the personal allowance, is set to remain in place and are not scheduled to change until April 2031. This follows eight years without an increase. Keeping the thresholds unchanged contributes to fiscal drag, where inflation-led rises in income gradually move individuals into higher tax bands.

From 6 April 2026, basic rate and higher rate income tax on dividends will increase by 2% to 10.75% and 35.75% respectively.

From 6 April 2027, the basic, higher and additional rates of income tax for savings and property income will increase by 2% to 22%, 42% and 47% respectively with the formal introduction of a new property income tax rate.  

Effective from 6 April 2026, the government will abolish the notional tax credit currently available to non-UK residents who receive UK dividend income alongside UK rental or partnership income. This removes a provision that allowed non-UK residents to claim a dividend tax credit with the intention of aligning the treatment of dividends for non-UK residents with that of UK residents.

ISAs

The annual ISA allowance will be maintained at £20,000. However, from 6 April 2027, individuals under the age of 65 will be subject to a cap of £12,000 to the extent that the funds are held as cash, therefore requiring that at least £8,000 of the £20,000 allowance is invested in stocks and shares.

Changes to Salary-Sacrifice Pension Arrangements

From 6 April 2029, the Chancellor announced that only the first £2,000 of salary sacrificed in exchange for pension contributions (per employee, per tax year) will be exempt from National Insurance Contributions (NICs). This will result in both the employee and employer being subject to NICs on any salary sacrificed above this amount.

Currently, there is no limit on the amount of salary that can be sacrificed for pension contributions, provided the employee continues to receive at least the National Minimum Wage. The main advantage of the arrangement is that both the employer and employee are not liable for NICs on the sacrificed salary and this benefit will continue until the changes come into effect.

Council Tax Surcharge

From April 2028, owners of properties valued at over £2 million will be subject to an annual surcharge, payable in addition to their existing council tax. 

The High Value Council Tax Surcharge charge will start at £2,500 for properties valued at £2 million up to a maximum of £7,500 for properties valued at £5 million or more, with the charge scaled up between those property values.

National Minimum Wage

From 1 April 2026, the National Living Wage will increase by 4.1% to £12.71 per hour with the National Minimum Wage for 18 to 20 year olds increasing by 8.5% to £10.85 per hour and 16 to 17 year olds and apprentices by 6% to £8 per hour.

Child Benefit

The 2-child benefit cap will be lifted from April 2026.  

EV & Plug-In Hybrid Vehicles 

From April 2028, a new vehicle excise duty will be introduced for both electric and plug-in hybrid vehicles. Drivers will pay for their mileage on a per-mile basis alongside their Vehicle Excise Duty at a rate of 3p per mile for electric vehicles and 1.5p per mile for plug-in hybrids.  

Enterprise Management Incentive (EMI) Schemes

The Government is due to significantly increase the eligibility limits for the EMI Scheme which will allow more employers to access the scheme. The maximum gross assets of a company in order to qualify will increase from £30 million to £120 million with the maximum number of full-time equivalent employees increasing from 250 to 500. Similarly, the maximum value of shares under option will increase from £3 million to £6 million.

Venture Capital 

It was announced that income tax relief upon investment in Venture Capital Trusts will be reduced from 30% to 20% from 6 April 2026. However, the Government will also increase Venture Capital Trust and Enterprise Investment Scheme limits to allow investors to follow-on as companies grow beyond the start-up phase.

Inheritance Tax

The Government have confirmed that any unused £1m ‘Business Property Relief’ (BPR) / ‘Agricultural Property Relief’ (APR) allowance will now be transferable between spouses and civil partners. This includes first deaths before 6 April 2026 when the new BPR / APR rules come into effect. 

There is also a freeze on IHT-free allowances, including the £1m BPR / APR allowance, for a further year to April 2031.

Following changes to the IHT treatment of unused pension funds and death benefits, personal representatives will be able to direct pension scheme administrators to withhold 50% of taxable benefits for up to 15 months and pay IHT due in certain circumstances. 

A cap will be introduced on relevant property trust IHT charges for trusts which held excluded property at 30 October 2024, with the charges being capped at £5m over each 10 year period. The cap applies to settled property which was excluded property at 30 October 2024, and that is situated outside the UK at the time of the relevant charge.

Payments made under the Infected Blood Compensation Scheme and Infected Blood Interim Compensation Payment Scheme will be eligible for IHT relief in specific circumstances.

Further anti-avoidance legislation will be introduced to prevent tax avoidance through certain loopholes including ensuring UK agricultural property held via non-UK entities is treated as UK-situated, addressing changes in status of trust assets before an IHT exit charge and restricting charity exemptions to direct gifts to UK charities and clubs.

Corporation Tax

There were no reported changes to the rates of corporation tax.

Capital Allowances

A new first-year allowance of 40% for main‑rate assets will be available from 1 January 2026. Cars, second-hand assets and assets for leasing overseas will not be eligible.

However, from April 2026, the government will decrease the main rate of writing down allowances to 14% (a reduction from 18% that is now). No changes have been noted to the £1m Annual Investment Allowance which remains available.

100% First Year Allowances for qualifying expenditure on zero emission cars and electric vehicle charge points has been further extended to 31 March 2027. In addition, a new 10-year 100% business rates relief for eligible electric vehicle (‘EV’) charge points and EV-only forecourts has been introduced.

Capital Gains Tax

Employee Ownership Trusts 

Capital Gains Tax relief available on qualifying disposals to Employee Ownership Trusts will be reduced from 100% of the gain to 50% with immediate effect.

In an unusual move from the Government, both Business Asset Disposal Relief and Investors’ Relief will not be available on disposals where the relief has been claimed.

The remaining 50% of the gain on disposal will be held over and deducted from the trustees’ acquisition cost such that it will come into charge on any subsequent disposal or deemed disposal of the shares by the trustees.

VAT

From July 2026, vehicles leased through the Motability Scheme, or any equivalent qualifying schemes, will be subject to 20% VAT on any top-up payments made in addition to the eligible welfare payments made for ‘luxury vehicles’ on the scheme. Tax changes will not apply to vehicles designed for, or substantially and permanently adapted for, wheelchair or stretcher users.

A new VAT relief will be introduced from 1 April 2026 for business donations of goods to charity for distribution to those in need or use in the delivery of their charitable services.

Suppliers of private hire vehicle and taxi services will be excluded from the scope of the Tour Operators’ Margin Scheme from 2 January 2026, except where these are supplied in conjunction with certain other travel services. This will ensure fairness for all operators, meaning from 2 January 2026, nationally they will all pay VAT in the same way.

The government will require all VAT invoices to be issued in a specified electronic format from April 2029.

If you would like to discuss any of these matters or talk to us about your tax affairs in general, please contact our Tax Experts at tax@teamjs.co.uk.