Autumn Budget 2025
This Budget’s measures will touch households, landlords, investors, and businesses in different ways. By breaking down each area, we highlight not just what changed, but how those changes may influence your tax position, cash flow or long-term planning.
beyond traditional accounting
The Autumn Budget 2025 – explained
Our team of highly skilled and experienced accountants have analysed all of the changes that were announced during the Autumn Budget on Wednesday, 26th November 2025, and have summarised what these changes mean for you.
Click on a topic below to learn more.
Personal Tax Thresholds Remain Frozen
Despite no change to tax rates, the Chancellor has confirmed that all income tax and National Insurance thresholds will stay exactly where they are until April 2031, which means that the bands won’t rise in line with inflation or wage growth.
As salaries naturally increase over time, a larger portion of your pay will be pulled into taxation, and more people will gradually move into the higher-rate band, even if their real income hasn’t meaningfully improved. This effect, often called “fiscal drag,” quietly increases the amount of tax people pay without any headline tax rise.
The Office for Budget Responsibility (OBR) estimates that extending the freeze will raise around £23 billion between 2028/29 and 2030/31, making it one of the biggest revenue drivers in the Budget.
“Frozen tax bands mean more of each pay rise will be taxed, even though the tax rates haven’t gone up.”
“I will maintain all income tax and equivalent National Insurance thresholds at their current level for a further three years from 2028.”
“Landlords, savers, and investors will pay more tax on income from assets, bringing it closer to tax on earnings.”
“I will increase the basic and higher rate of tax on property, savings and dividend income by 2 percentage points.”
Higher Tax on Investment, Property, and Savings income
A range of tax increases is being introduced for people who earn income from savings, dividends, or property.
Dividend tax rates will rise by two percentage points from April 2026, affecting both basic and higher-rate investors. Then, from April 2027, the tax charged on savings and rental income also increases by two percentage points across each band.
For most people, existing allowances mean they’ll continue paying little or no tax on straightforward savings, but anyone with sizeable investment portfolios, rental properties or dividend streams will see their tax bills grow.
The intention is to bring the taxation of investment income more in line with the taxation of earnings from work.
ISA Reforms: Some Limits Reduces
The overall annual ISA allowance remains at £20,000, but from April 2027 there will be a significant shift in how that allowance can be used.
Most savers under 65 will only be able to hold up to £12,000 of that allowance in cash, with at least £8,000 required to be placed into stocks and shares or other investment-based ISAs. Older savers retain the full cash flexibility.
The reforms are designed to encourage long-term investment rather than parking large amounts in cash, though this does mean many savers will face choices about investment risk that they may not have encountered before.
“The £20,000 ISA allowance stays, but under-65s lose some cash ISA shelter and are nudged towards investment risk.”
“From April 2027, I will reform our ISA system, keeping the full £20,000 allowance while designating £8,000 of it exclusively for investment.”
“A major welfare shift: the two-child cap goes, with child poverty expected to fall, funded by higher taxes elsewhere.”
“We are lifting 450,000 children out of poverty with the end of the two-child limit.”
Two-Child Universal Credit Limit Cap Scrapped
The Autumn Budget brings a major change to the welfare system with the removal of the two-child limit in Universal Credit and Child Tax Credit.
From its implementation date, families will once again receive support for every child, rather than the first two only, and it marks a significant policy shift aimed at reducing child poverty, with government figures suggesting hundreds of thousands of children will see increased support.
The measure comes at considerable cost to the Treasury, funded largely by tax increases in other parts of the Budget.
Pensions via Salary Sacrifice Will Be Limited
From April 2029, the advantages of using salary sacrifice for pension contributions will be scaled back.
Under the new rules, only the first £2,000 contributed via salary sacrifice each year will continue to attract National Insurance savings for both employees and employers. Any contributions above this level will still receive normal pension tax relief but will no longer benefit from the additional NI advantage.
This will mainly affects higher earners, those contributing larger amounts, and people who use bonus sacrifice strategies to boost their pensions in a tax-efficient way.
“Higher earners lose part of the National Insurance advantage on large salary-sacrifice pension contributions from 2029.”
“I am introducing a £2,000 cap on salary sacrifice into a pension, with contributions above that taxed in the same way as other employee pension contributions.”
“A “mansion-style” surcharge will sit on top of council tax for homes over £2m. ”
“From 2028, I am introducing the High Value Council Tax Surcharge in England; £2,500 for properties worth more than £2m, rising to £7,500 for properties worth more than £5m.”
Council Tax Surcharge for High-Value Properties
A new surcharge is being introduced for owners of high-value properties in England.
From 2028, homes worth between £2 million and £5 million will face an additional annual council tax charge of £2,500, while those valued above £5 million will face a charge of £7,500.
The measure is expected to affect less than one percent of all properties, but it generates several hundred million pounds in additional revenue.
The policy is positioned as a way to rebalance the long-standing mismatch where some average family homes pay proportionally more council tax than very high-value properties.
New Taxes on Electric Vehicles, Online Gambling, and Imports
Several new tax measures are aimed at adapting the tax base in line with the ever-modernising changes to lifestyles.
From April 2028, electric vehicle owners will move onto a new mileage-based system, with fully electric cars paying 3p per mile and plug-in hybrids paying 1.5p. This shifts EV taxation closer to that of conventional vehicles as fuel duty revenue declines.
Online gambling will also become more expensive for operators, with sharp increases in remote gaming and betting duties, while land-based bingo receives supportive changes.
Finally, all imported parcels, regardless of value, will be subject to customs processes once the current £135 duty exemption is removed, which is intended to level the playing field between online marketplaces and UK high-street retailers.
“EV drivers, online gamblers and cross-border shoppers will contribute more, closing gaps in the tax base.”
“I will introduce Electric Vehicle Excise Duty on electric cars; payable at 3p per mile for electric cars and 1.5p for plug-in hybrids. I am alsovincreasing Remote Gaming Duty from 21% to 40%, with duty on online betting increasing from 15% to 25%, and I will stop online firms from undercutting our high street businesses by ensuring customs duty applies on parcels of any value.”
“Capital gains and some reliefs are being tightened further; long-term investors and business owners should review plans.”
“Changes I have made to Capital Gains Tax mean receipts are forecast to rise from £14bn this year to £30bn by 2030.”
Capital Gains Tax, Employee Ownership Trusts, and Wealth Taxes
A suite of future-facing measures will reshape the tax landscape for investors, business owners and wealth holders.
Capital Gains Tax (CGT) is expected to raise dramatically higher revenues over the next decade, reflecting tighter rules and reduced reliefs.
One major move is the reduction of Employee Ownership Trust (EOT) CGT relief from 100% to 50%, following concerns about cost and misuse.
Additional restrictions affecting trusts, inheritance tax reliefs and other wealth-planning mechanisms also indicate a long-term policy direction toward narrowing reliefs and increasing the effective tax burden on significant assets and disposals.
Business Rates Relief and Targeted Sector Support
A substantial package of business rates changes will permanently reduce bills for many retail, hospitality, and leisure businesses from 2026.
These sectors, which have been some of the most affected by previous economic shocks, will see lower core rates and further protection against sudden increases following future revaluations.
To fund this, larger commercial properties and logistics warehouses, particularly those tied to major online retailers, will face higher business rates.
Overall, the reforms are designed to support high-street firms while shifting more of the burden towards large-scale commercial sites.
“High-street sectors get permanent rate cuts funded by higher bills for large logistics and high-value commercial property.”
“For business rates, I will introduce permanently lower tax rates for over 750,000 retail, hospitality, and leisure properties – the lowest tax rates since 1991, paid for through higher rates on properties worth £500,000 or more, like the warehouses used by online giants.”
“Headline corporation tax stays put, but more relief is pushed into upfront investment via a new 40% first-year allowance.”
“I will retain our competitive corporation tax rate, the lowest in the G7, and retain full expensing, and introduce a new 40% first-year allowance so that businesses can write off more of the cost of their investment upfront, while reducing main rate writing down allowances in line with fiscal constraints.”
Corporation Tax, Capital Allowances, and Investment Incentives
The headline corporation tax rate remains unchanged, keeping the UK’s rate competitive internationally. Investment incentives, however, are being reshaped.
Full expensing continues, allowing businesses to claim the full cost of qualifying plant and machinery upfront.
On top of this, a new 40% first-year allowance will allow even more upfront tax relief on certain assets from 2026. To balance these benefits, the standard writing-down allowance for main pool assets will fall from 18% to 14%.
For many companies, especially those investing heavily in equipment, the shift moves more tax relief into the early years, improving cash flow even though long-term relief will be slightly reduced.
Withdrawal of Certain Reliefs and Tighter Anti-Avoidance
The government is taking a closer look at reliefs that have grown costly or are no longer achieving their intended effects.
As a result, several reliefs are being reduced, restructured or removed entirely, including significant changes to EOT relief. Alongside this, HMRC is receiving stronger tools to challenge avoidance schemes, tighten rules around cross-border arrangements and scrutinise complex share transactions.
Businesses and investors using intricate structures or planning strategies should prepare for increased oversight and a higher likelihood of compliance interventions.
“Reliefs that no longer 'earn their keep' are being trimmed, and HMRC is getting more tools to pursue avoidance.”
“Reliefs in our tax system cost the taxpayer billions of pounds a year, but many of them no longer serve their original purpose”
“Online and cross-border business faces more customs and VAT friction, particularly for low-value parcels and EU-linked VAT groups.”
“I will stop online firms from undercutting our high street businesses by ensuring customs duty applies on parcels of any value.”
Changes to Imports, Compliance, and VAT Arrangements
The Autumn Budget introduces new friction points for businesses involved in importing goods or operating across borders.
The removal of the £135 customs relief means all imported parcels will require customs declarations and may attract duties, increasing admin and potentially costs for online sellers. Additionally, VAT rules affecting UK businesses with EU links, such as branches or group structures, will be tightened and clarified.
While some businesses may benefit from reduced ambiguity, many will face more compliance requirements and greater scrutiny from HMRC.
Minimum Wage Changes
The National Living Wage and youth rates will see another increase from April 2026.
Millions of lower-paid workers will benefit from higher guaranteed hourly rates, with the living wage rising above £12.70 and the 18–20 rate climbing to £10.85.
While this provides valuable income support during a period of high living costs, it also raises payroll expenses for employers, particularly in sectors that rely on large numbers of lower-paid staff such as hospitality, retail and social care.
“The National Living Wage and youth rates rise again; good for low-paid workers, but higher payroll costs for employers.”
“I am increasing the minimum wage for 18–20 year-olds from £10 to £10.85 per hour, and the living wage from £12.21 to £12.71 per hour.”
What this means for taxpayers
Middle-income employees (PAYE, some savings)
- More tax via frozen thresholds means that you’re more likely to drift into basic or higher-rate tax even if your real pay only just keeps up with inflation.
- If you have taxable savings or dividends outside ISAs, expect slightly higher tax from 2026/27 onwards.
- Cash ISA flexibility reduces (for under-65s), so you may need to decide how much risk you’re comfortable taking with investments.
Higher earners
- Hit by a double effect: fiscal drag plus higher rates on property, savings and dividends.
- From 2029, the £2,000 cap on salary-sacrifice NI relief makes large bonus-to-pension strategies less attractive.
- Wealth-focused measures (CGT, trust caps, mansion-style surcharge) all point to higher long-term effective rates on significant assets.
Property owners & landlords
- Landlords face higher tax on rental profits via the new property-income rates from 2027, on top of previous restrictions to interest relief.
- Owners of £2m+ homes will pay an additional annual surcharge from 2028.
- Anyone planning a sale should revisit CGT and relief assumptions, especially around business or EOT structures.
Investors
- Outside ISAs and pensions, dividend and savings tax rises mean the tax “drag” on portfolios increases. Wrappers and asset location become more important.
- ISA changes push more money towards equities and funds; long-term investors may benefit, but short-term savers may feel uncomfortable with the extra risk.
- Frequent EV drivers will need to factor in the 3p-per-mile charge into future running-cost calculations.
What this means for businesses
Small businesses (incl. high-street firms)
- Business rates: many retail, hospitality and leisure businesses gain from permanently lower rates and additional relief packages, but this varies by location and valuation.
- Minimum wage rises add to payroll costs, particularly in hospitality, retail and care, where margins may already be thin.
- Online sellers importing stock or shipping from overseas will feel the removal of low-value customs relief and tightened VAT rules.
Growing and mid-market companies
- Investment-heavy firms benefit from full expensing plus the new 40% FYA, which improve early-year cash flow on capital spend.
- Reduced writing-down allowances mean the overall profile of relief changes which is worth modelling before committing to big capex plans.
- Corporate groups with complex structures, cross-border operations or share reorganisations should be prepared for more anti-avoidance rules and HMRC data-gathering.
Investors, funds and corporate owners
- Higher tax on dividends, savings and property-income, plus CGT measures, will influence how you structure returns (salary vs dividend vs gains).
- EOT and other relief changes mean succession and exit plans may need to be revisited in the next 1–3 years.
- Some sectors (EV infrastructure, film studios, certain regional projects) benefit from targeted reliefs and long-term business rates support.
Broader context & likely economic impact
The Autumn Budget raises around £26bn a year in extra tax by the end of the parliament, pushing the overall tax burden to roughly 38% of GDP which is a post-war high.
The OBR still expects the economy to grow by around 1.5% a year on average, but has downgraded productivity expectations, which is why so much emphasis is on investment incentives.
Fiscal drag on income tax and higher taxes on wealth and assets do the heavy lifting on revenue, which will aid to fund:
- abolition of the two-child limit,
- higher welfare and public-service spending, and
- targeted support for infrastructure, EVs and green investment.
Distributionally, independent analysis suggests the Budget is progressive at the very top and very bottom, but squeezes middle and upper-middle earners, especially two-earner households with some assets but limited tax planning.
What to keep an eye on
- Inflation, wages and the thresholds freeze: If wage growth stays high while thresholds are frozen to 2031, more clients will move into higher tax bands faster than expected.
- Implementation details for EV mileage tax (eVED): Consultations will set the practical rules for mileage reporting, enforcement and exemptions (fleets, business travel, etc.). Clients buying EVs may want clarity before committing.
- ISA market response: Platforms are likely to launch new products and “UK growth” hubs; you’ll want to see how charges, risk profiles and UK-content requirements evolve before recommending changes.
- Secondary legislation and anti-avoidance rules: Many measures (customs on low-value imports, VAT grouping reforms, share-exchange anti-avoidance, eVED, gambling tax) will be fleshed out in Finance Bills and HMRC guidance.
- Behavioural responses from landlords and investors: Higher property, savings and dividend tax rates, plus wealth-focused measures, may drive changes in incorporation, gearing, holding structures and portfolio mix. This is an area for proactive planning discussions.
- Future tinkering with reliefs: The Budget clearly frames reliefs as something that must “justify their cost”. Further changes to pensions, inheritance tax and business reliefs over the next 2–3 years feel likely.