Today the Chancellor, Rachel Reeves, delivered her 2025 Autumn Budget – not before the OBR accidently published its official forecast early - where a number of changes were announced.
Key Changes
Income tax thresholds frozen into the 2030s
The existing freeze on the personal allowance and higher-rate bands is being extended through to 2030/31. As wages and pensions rise, more people will be dragged into paying tax and into higher bands – a classic “stealth tax” known as fiscal drag.
Higher tax on dividends, savings and rental income
From April 2026, the tax rates on dividends will rise by 2% at basic and higher rate (but not on the additional rate).
From April 2027, the tax rates on property income and savings income will increase by 2% across the board.
This is particularly relevant for company directors extracting profits via dividends, landlords, and those with significant investment portfolios.
Cash ISA allowance cut for under-65s
From April 2027, the annual cash ISA allowance falls from £20,000 to £12,000 for most adults. Those aged 65 and over will retain the full £20,000 allowance.
The £20,000 allowance will remain for stock & shares ISAs.
Pensions and salary sacrifice tightened
From April 2029, salary sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from National Insurance, meaning contributions above the threshold will be subject to both employer and employee NICs.
Benefits, minimum wage and support measures
The two-child benefit limit is being abolished, with the government signalling a major push on reducing child poverty.
The National Living Wage will rise again from April, and there is additional support for apprenticeships in SMEs, funded in part by the wider tax rises.
‘Mansion tax’ via council tax surcharge
From April 2028, homes in England worth over £2m will face a new annual council tax surcharge, with four bands starting at around £2,500 and rising to around £7,500 a year for properties above £5m (based on 2026 valuations).
Fewer than 1% of homes are expected to be affected, but it marks a clear shift towards taxing property wealth.
Investors – VCT and EIS tax relief
From April 2026, the asset and investment limits will double for Venture Capital Trusts (VCT) and Enterprise Investment Scheme (EIS).
The rate of VCT income tax relief will reduce from 30% to 20%.
Enterprise Management Incentives
From April 2026, the asset and employee limits rise for Enterprise Management Incentives (EMI) share options, option limits double to £6m, and exercise periods extend to 15 years (including existing arrangements).
Employee Ownership Trusts
The CGT exemption on sales (which has given a full exemption from CGT when businesses are sold to an EOT) has been reduced to 50% with immediate effect.
Capital Allowances
From April 2026, the main rate of writing down allowances will reduce by 4% to 14%. From 1 January 2026, there will be a new first-year allowance of 40% for main‑rate assets, preserving incentives to invest. Cars, second-hand assets and assets for leasing overseas will not be eligible.
Voluntary NICs for Expats
The current access to voluntary Class 2 NICs for people living abroad (which is significantly cheaper than the standard voluntary Class 3 NICs) is due to be scrapped.
Inheritance Tax APR & BPR Reliefs
The £1m 100% ABR/BPR IHT relief (from April 2026) will be transferrable between spouses, so married farmers can hand down their farms free of IHT up to £2m.
Fuel duty and new EV road charging
From 2028, electric and plug-in hybrid vehicles will face a mileage-based road charge (currently signalled at 3p per mile for fully electric and 1.5p per mile for plug-in hybrids).
Fuel duty on petrol and diesel remains frozen at current rates until April 2026, extending the long-running freeze. The temporary 5p cut in fuel duty will then be unwound from September 2026.
What hasn’t changed
To confirm what hasn’t changed, there will be no changes to:
Capital Gains Tax (CGT) or Inheritance Tax (IHT) rates
Stamp Duty Land Tax (SDLT)
Principal Private Residence (PPR) relief on the sale of your own home
Corporation tax rates
There will also be no new wealth tax, exit tax, or National Insurance contributions (NICs) on LLP partners.
The big picture
The Budget is expected to raise around £26bn a year in extra tax by 2029/30, mainly from wealth, investment income and higher-value property, rather than from headline income tax rates.
The overall tax take is forecast to rise to around 38% of GDP by the end of the Parliament – the highest on record.
At the same time, the Chancellor has committed more funding to the NHS, schools, apprenticeships and regional investment, while also scrapping the controversial two-child benefit cap.
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Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
