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The Chancellor of the Exchequer, the Rt Hon. Rachel Reeves MP, delivered Budget 2025 (Strong Foundations, Secure Future) to Parliament on 26 November 2025.

This Budget takes the fair and necessary choices to deliver on the government’s promise of change :-

  • Cutting the cost of living by tackling inflation and taking around £150 off energy bills on average from April next year, and implementing a one-year freeze on regulated train fares and prescriptions charges.
  • Cutting the NHS waiting list in England, supported by 5.2 million more appointments delivered since the start of the Parliament and by creating 250 new Neighbourhood Health Centres.
  • Cutting debt and borrowing, to reduce the amount spent on debt interest rather than public services and to support the Bank of England to get inflation and interest rates down.

 

The key tax policy decisions announced are :-
Income Tax and National Insurance

  • National insurance and income tax thresholds will be frozen for an extra three years beyond 2028. The personal allowance remains at £12,570, basic rate band up to £50,270 and higher rate £125,140. This will raise an additional £12bn by 2031.
  • Tax on savings income will be increased by 2% across all bands, i.e. basic rate will rise from 20% to 22%, the higher rate from 40% to 42%, and additional rate from 45% to 47% from April 27.
  • A new rate will be created on property income. From April 27, the property basic rate will be 22%, higher rate 42% and additional rate 47%. Finance costs will be provided at the separate property basic rate (22%).
  • A cap will be introduced for pension salary sacrifice schemes from 2029 – with contributions above £2,000 subject to tax in the same away as other employee pension contributions (i.e. employer and employee NI will be payable on the sacrificed element).

 

Dividend Taxation

  • Increase tax rates for dividend income by 2%, for both the basic and higher rate bands. Effective from April 2026. The basic rate will increase to 10.75%, and the higher rate will increase to 35.75%.

 

Capital Gains Tax and Inheritance Tax

  • The Capital Gains Tax Relief on qualifying disposals to employee ownership trusts reduced from 100% to 50% from today.
  • As previously announced, Business Asset Disposal Relief will increase from 14% to 18% from April 26.
  • A new application of the anti-avoidance provisions for share exchanges will apply. Where an individual has entered into an arrangement which secures a tax advantage, the reorganisation provisions will simply not apply.
  • As previously announced,from April 2026, IHT Agricultural Property Relief and Business Property Relief at 100% will only apply to the first £1 million of combined value; above that limit, the maximum relief will be 50%.
  • The new £1m allowance for BPR and APR will be transferable between spouses. The nil rate band has been maintained at the same rates until 2031.

 

Investor Incentives

  • EMI – increased eligibility to allow scale-ups, as well as start-ups, to access the scheme from April 2026.
  • VCT – the income tax relief is reduced to 20% from 30%, from 6 April 2026.

 

Corporate Taxation

  • A new package of legislation is being introduced in respect of transfer pricing, permanent establishment and Diverted Profits Tax.
  • Corporation Tax penalties have doubled for the late filing of corporation tax returns.

 

 Capital Allowances and Electric Car Tax

  • Capital allowances – writing down allowances reduced from 18% to 14% with effect from April 2026. There is also a new 40% First Year Allowance available from 1 January 2026.
  • The 100% first year allowance for zero emission cars and charge points is extended to April 2027.
  • A new electric vehicle excise duty will be introduced at 3p per mile for electric cars and 1.5p for plug-in-hybrids.

 

Other changes

  • Increases in National Living Wage and State pension in line with the September 2025 inflation figure (3.8%).
  • The amount under-65s can put into cash ISAs will be capped at £12,000 a year from April 2027, with the rest of the £20,000 allowance reserved for investments.
  • “Mansion Tax” charges will see properties worth more than £2m will be charged £2,500 annually, and properties worth more than £5m charged £7,500.
  • Business rates – lower multipliers for eligible retail, leisure and hospitality.
  • Working from home relief has been abolished from April 2026. This was previously worth £6 per week.
  • Reimbursement of flu vaccines, eye tests and home working equipment will be exempt from income tax from 6 April 26. Previously this was only if the employer paid for the benefit directly.
  • Gambling Duty – increase Remote Gaming Duty to 40% from 1 April 2026, and introduce a new Remote Betting Rate of 25% from 1 April 2027.

 

For a full, in-depth breakdown of the Autumn Budget 2025, view our complete guide here.

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