Chancellor Rachel Reeves has delivered the 2025 Autumn Budget, outlining a package aimed at restoring fiscal stability during a time of weak productivity and sustained high borrowing costs.
Below is a summary of how the Budget is likely to affect you.
Tax Changes
Dividend & Savings Income
From April 2026, dividend tax rates will rise by 2%, therefore 10.75% for basic-rate taxpayers and 35.75% for higher-rate taxpayers. Savings income taxes will increase from April 2027, with rates set at 22% (basic), 42% (higher), and 47% (additional). What to do: It's a good idea to review planned dividend distributions and assess whether salary adjustments or pension contributions may offer more efficient outcomes.
Property Income
A parallel 2% increase applies to property income tax from April 2027, with rates set at 22% (basic), 42% (higher), and 47% (additional). What to do: If you hold rental property, may need to reassess property strategies, especially with commercial valuations already under strain.
National Insurance on Salary Sacrifice Pension Contributions
From April 2029, employer pension contributions over £2,000 per employee will be subject to 15% National Insurance, while employees will pay 8% (or 2% on earnings above £50,270). What to do: You may wish to evaluate current pension schemes to quantify future costs and consider revising benefit structures.
Frozen Income Tax Thresholds
The government will freeze personal income tax thresholds through 2030–31, a move that the OBR estimates will generate significant revenue as it gradually pushes more taxpayers into higher rate bands. What to do: Ensure you make full use of allowable expenses and tax-planning opportunities early in the tax year.
Customs Duties on Parcels
Duties will apply to parcels of any value from April 2026 to address undercutting by online retailers.
Corporate Tax Unchanged
Corporate tax remains largely unchanged, providing some welcome stability, though ongoing scrutiny over remuneration and benefits is expected.
Cost Relief
National Living Wage
The new National Living Wage will rise 4.1% to £12.71 an hour from April next year. While this increases payroll costs, it may help strengthen retention and morale in high-turnover sectors such as retail and care. What to do: Review employee rates prior to April 2026.
Electric Vehicle Mileage Charge
A 3p-per-mile levy for EVs will be introduced from April 2028, generating an estimated annual cost of around £255 per vehicle. What to do: Factor in this charge when assessing the financial case for electrifying fleets.
Energy Support
The Budget includes measures to shift some energy policy costs off household bills and into public spending, a step the Treasury says will maqke a modest impact to reduce bills. IThe government expects to absorb 75% of Renewables Obligation costs until 2029. This is expected to reduce average domestic energy bills by £76 per year and provide associated relief for commercial users. What to do: Revisit energy supply contracts to ensure savings are reflected in pricing.
Fuel Duty Freeze
Fuel duty remains at 52.95p per litre until at least September 2026. Planned increases from 2027, indexed to inflation, reinforce the case for fuel-efficient or hybrid fleets.
Other Reforms and Announcements
- ISA Allowance Changes: Cash ISA contributions for under-65s capped at £12,000 annually, with the remaining £8,000 of the £20,000 total allowance reserved for investments.
- Regional Powers: English mayors will gain authority to impose taxes on overnight hotel and holiday let stays.
- Broader Economic Initiatives: Trade deals with the US, India, and EU; planning reforms; visa system overhaul; and nuclear power deregulation to facilitate investment.
- The OBR forecast: UK GDP growth of 1.5% in 2025, with inflation returning to 2% by 2027.
Summary of Projected Yields 2029-30:
- Freeze personal tax and employer NI thresholds (from 2028–29): £8.0bn#
- Tax on salary-sacrificed pension contributions: £4.7bn
- 2-point increase in dividend, property & savings income taxes: £2.1bn
- Reduced writing-down allowance for corporation tax: £1.5bn
- EV mileage charge (from 2028): £1.4bn
- Gambling taxation reforms: £1.1bn
- Reduced Capital Gains Tax relief for employee ownership trust disposals: £0.9bn
- Council tax surcharge on properties over £2m: £0.4bn
- Enhanced tax administration & compliance: £2.3bn
- Other measures (including Sizewell C levy increase): £4.4bn