Autumn Budget 2025 – Key changes you need to know

The Autumn Budget 2025 introduces a range of tax reforms and extended freezes that will shape the financial landscape for individuals, employees, landlords, and business owners over the coming years. With many changes phased in up to 2031, strategic planning will be essential to minimise tax exposure.

Income Tax & Personal Allowance – Continuing the Freeze

The Government has confirmed that the Personal Allowance will remain at £12,570, while the Higher Rate and Additional Rate thresholds will stay at £50,270 and £125,140 respectively until 2031.

Key impact:

• More income will be pulled into higher tax bands over time due to wage increases

• The basic rate band remains at £37,700

NIC thresholds remain aligned with these frozen limits. Scottish income tax rates will continue to differ for non-savings income and will be confirmed annually.

Additionally, from April 2027, Personal Allowance will automatically be set off against earned or pension income first—reducing flexibility for tax planning on investments.

National Living Wage & Employment Costs

The rates change on 1 April every year.

Year	21 and over	18 to 20	Under 18	Apprentice
April 2025	£12.21	£10	£7.55	£7.55
April 2026	£12.71	£10.85	£8	£8

Increased Tax Burden on Investment Income

Several major reforms will affect landlords and investors:

• Property income tax rates increase from April 2027 to 22%, 42%, and 47%

• Dividend tax rates rise by 2% in April 2026 for basic and higher rate taxpayers

• Savings income tax increases by 2% from April 2027

Dividend Allowance

The dividend allowance remains limited to £500 annually.

Pensions – Salary Sacrifice NICs Introduced While annual and lifetime pension allowances remain unchanged, a significant change arrives in April 2029:

• Salary sacrifice pension contributions above £2,000 per year will be subject to employer and employee NIC

Higher earners using salary exchange will need to revise pension strategies.

ISA Rules – Shift Toward Investment Over Cash

ISA allowances remain frozen until 2031. However, from April 2027:

• The Cash ISA cap reduces to £12,000 for those under 65

• The remaining £8,000 must be invested in Stocks & Shares ISAs

This change incentivises longer-term investment exposure.

Company Cars and Electric Vehicles

• Company car benefit-in-kind rates increase by 1% from 2026/27

• Zero-emission vehicles taxed at 4%

• A temporary easement for plug-in hybrids applies until 2028

• Vehicle Excise Duty for EVs begins in 2028, based on mileage

Businesses should reassess future fleet and employee benefit policies.

High Value Council Tax Surcharge (Mansion Tax)

From April 2028, a new surcharge will apply to residential property worth over £2 million in England:

• Annual charges starting at £2,500, rising up to £7,500 for homes above £5 million

Those owning high-value property, particularly in major cities, should prepare for increased annual liabilities.

Business Growth Incentives – Expanded Funding Reliefs

The Budget provides valuable support for innovative and high-growth companies:

• EIS & VCT qualifying company limits almost doubled

• EMI scheme eligibility expanded significantly

• EMI option value limit rises to £6m, with a 15-year exercise period

However, VCT income tax relief reduces from 30% to 20%.

Fast-growing companies will benefit from enhanced access to investment, though investors will see reduced upfront tax relief.

Capital Gains, Business Transfers & Ownership Changes

• Employee Ownership Trust relief reduced immediately to 50%

• CGT annual exemption remains £3,000

• Business Asset Disposal Relief rate rises to 18% from April 2026

• Incorporation Relief will require a formal claim from 2026

Succession plans and restructuring strategies should be reviewed promptly.

Inheritance Tax & Estate Planning

• IHT nil-rate bands frozen until 2031

• Pension funds included in estates from April 2027 (with death-in-service excluded)

• Agricultural & Business Property Relief capped at £1m per person from 2026, with 50% relief on excess

• Unused relief transferable to spouse/civil partner

Inheritance strategies should be updated to protect assets effectively.

Making Tax Digital – Mandatory Digital Reporting

From April 2026, landlords and self-employed individuals with income above £50,000 will be required to:

• Maintain digital bookkeeping

• Report quarterly to HMRC

This will extend to lower income brackets thereafter.

Businesses and landlords should ensure accounting software readiness now.

What This Budget Means Overall

The Autumn Budget 2025 continues the trend of:

• Frozen thresholds leading to higher personal tax liabilities

• Increased taxation on investment-based income

• Reduced generosity on reliefs for wealth preservation and succession

Effective tax planning is more important than ever. Those impacted should seek proactive advice to remain compliant and tax efficient.

Our specialist accountants ensure you stay ahead of every change in the tax system.

To discuss how these reforms affect you or your business, please contact A to Z Finance Solutions Ltd.

Connect with us