Budget 2025 at a glance

Key Highlights of Budget 2025

Overview of Autumn Budget 2025

Budget 2025 at a glance highlights Rachel Reeves’ wide-ranging tax and policy changes announced on 26 November 2025, following weeks of speculation and early OBR leaks. The Budget focuses on what the Chancellor calls “fair and necessary choices” to deliver economic stability, fund public services, and reshape the UK tax landscape. Key measures include new property taxes, frozen thresholds, higher rates on savings and dividends, and reforms aimed at long-term growth.

Budget highlights

Living Wage Changes from April 2026

Living Wage / Minimum Wage – National Living Wage will increase by 4.1% from April 2026 to £12.71 per hour. National Minimum Wage will increase for 18 to 20 year olds by 8.5% to £10.85 per hour.

NICs and Income Tax – National Insurance Contributions (NICs) and income tax thresholds will be frozen for another three years from 2028.

Dividends – The tax rates applied to dividends income will increase by 2 percentage points.

Property Income – The tax rates applied to property income will increase by 2 percentage points.

Mansion Tax – a high value council tax surcharge, also known as the ‘mansion tax’, will be introduced for high value homes from April 2028, alongside council tax. A £2,500 annual surcharge will incur for properties worth over £2 million and £7,500 for properties worth over £5 million.

Savings Income – The tax rates applied to savings income (Interest) will increase by 2 percentage points.

Salary Sacrifice Scheme – the tax-free amount put into a salary sacrifice scheme will be capped at £2,000 from April 2029.

EOTs and Business Sales – the capital gains tax relief on businesses sold to employee ownership trusts (EOTs) will reduce to 50% from 100%.

Three-Year Stamp Duty Break for Listings

UK Listings Relief – a stamp duty holiday will be granted for three years for new UK stock market listings.

Apprenticeships – training for under 25’s on apprenticeships will be made free for SMEs.

Fuel Duty – the 5p cut in fuel duty will be extended until 2026.

Electric Vehicles – a new vehicle excise duty for electric vehicles will be introduced from April 2028. This is a mileage charge at 3p per mile for electric cars and 1.5p for plug-in hybrids.

Gambling – Remote Gaming Duty will increase from 21% to 40% from April 2026 and Duty on online betting will increase from 15% to 25% from April 2027. Bingo Duty will be abolished from April 2026.

Manufacturing – electricity prices for manufacturing businesses will be cut, more details to follow.

Drinks – the Soft Drinks Industry Levy (SDIL), also known as the ‘sugar tax’, will be extended to pre-packaged, milk-based drinks with added sugar from January 2028.

Director Fraud – HMRC will have new powers to pursue the promoters of tax avoidance schemes, conduct targeted checks and root out fraud.

Personal Tax

Income Tax Thresholds Frozen Until 2031

The government is extending the freeze of the Income Tax Personal Allowance, higher rate threshold and additional rate threshold from April 2028 to April 2031.

Several changes were announced to the rates for property, dividend and savings income:

The government will create separate tax rates for property income. From 2027/28, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%.

From 2026/27, the ordinary and upper rates of taxation on dividends will be increased by 2% to 10.75% and 35.75%. The additional rate for dividend income will remain unchanged at 39.35%.

From 2027/28, all rates applicable to savings income will be increased by 2%. The savings basic rate will become 22%, the savings higher rate will become 42% and the savings additional rate will become 47%. The Starting Rate for Savings will be retained at £5,000 for 2026/27 and will stay at this level until 5 April 2031.

In addition, certain reliefs will now only be applied to property, savings and dividend income after they have been applied to other sources of income. This change will take effect from 6 April 2027.

Cash ISA Annual Limit Set at £12,000

From 6 April 2027, the annual Individual Savings Account (ISA) cash limit will be set at £12,000, within the overall annual ISA limit of £20,000. Savers over the age of 65 will continue to be able to save up to £20,000 in a cash ISA each year. Other limits remain £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2031.

The Primary Threshold, Secondary Threshold, Lower Profits Limit, Upper Earnings Limit (UEL) and Upper Profits Limit for National Insurance contributions (NICs) will be maintained at their current levels until April 2031 as well as other employer NICs relief thresholds aligned with the UEL. The Lower Earnings Limit, Small Profits Threshold and the rates of voluntary Class 2 and Class 3 contributions will be increased by 3.8% from 2026/27. In addition, from 6 April 2026, the government will remove access to pay voluntary Class 2 NICs abroad and increase the initial residency or contributions requirement to pay voluntary NICs outside of the UK to ten years.

Employment

Key Employment and NICs Changes

The government will charge employer and employee NICs on pension contributions above £2,000 per annum made via salary sacrifice. This will take effect from 6 April 2029.

The government will extend the employer NICs relief for employers hiring veterans in their first civilian role to April 2028.

From 1 April 2026, the National Living Wage will increase by 4.1% to £12.71 per hour. The National Minimum Wage for 18-20 year olds will also increase by 8.5% to £10.85 per hour and for 16-17 year olds and apprentices by 6.0% to £8.00 per hour.

In terms of benefits, the government will increase the Van Benefit Charge and Car and Van Fuel Benefit Charges by CPI from 6 April 2026. The government will delay changes to benefit in kind rules for Employee Car Ownership Schemes until 6 April 2030.

Capital Taxes

IHT Thresholds Frozen Until 2031

The Inheritance Tax nil rate bands are already set at current levels until April 2030 and will stay fixed at these levels for a further year until April 2031.

The forthcoming combined allowance for the 100% rate of agricultural property relief and business property relief will also be fixed at £1 million for a further year until 5 April 2031. Any unused £1 million allowance will be transferable between spouses and civil partners from 6 April 2026, including if the first death was before 6 April 2026.

The government will reduce the Capital Gains Tax relief available on qualifying disposals to Employee Ownership Trusts from 100% of the gain to 50%. This will take effect from 26 November 2025.

Employment

New 40% First-Year Allowance Explained

The government will introduce a new 40% First Year Allowance (FYA) for main rate expenditure (including most expenditure on assets for leasing and expenditure by unincorporated businesses) from 1 January 2026. From 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax, main rate writing down allowances will reduce from 18% to 14%.

The government will extend for a further year the 100% FYA for qualifying expenditure on zero emission cars and electric vehicle (EV) chargepoints until 31 March 2027 for corporation tax purposes and 5 April 2027 for Income Tax purposes.

Eligibility of companies for the EMI scheme will be expanded. The government will increase the employee limit to 500, the gross assets test to £120 million, and the company share option limit to £6 million from April 2026.

Access to the Venture Capital Trust (VCT) and Enterprise Investment Schemes (EIS) will also be extended to more companies. The government will increase the VCT and EIS company investment limit to £10 million (£20 million for Knowledge Intensive Companies (KICs)) and increase the lifetime company investment limit to £24 million, and £40 million for KICs. The gross assets test will increase to £30 million before share issue, and £35 million after, from April 2026. However, the rate of VCT Income Tax relief will decrease to 20% from 30%

A new UK Listing Relief will be introduced which provides a three-year exemption from Stamp Duty Reserve Tax for companies listing in the UK, effective from 27 November 2025

Other matters

High-Value Council Tax Surcharge

The government will introduce the High Value Council Tax Surcharge, a new charge on owners of residential property in England worth £2 million or more, starting in 2028/29.

The government will extend the temporary 5p fuel duty cut for a further five months, with the cut being reversed in three stages from September 2026.

The two-child limit in the Universal Credit Child Element will be removed from April 2026.

The government will strengthen HMRC powers to tackle fraud within the Construction Industry Scheme, increase the rewards paid to informants of high-value tax fraud and introduce new powers to tackle promoters of marketed tax avoidance.

However, following consultation, the government will not regulate tax advisers and will work in partnership with the sector to raise standards in the tax advice market.

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10 FAQs for Budget 2025 at a glance

Budget 2025 introduces widespread tax reforms including frozen thresholds, higher rates on savings, dividends, and property income, a new mansion tax, and changes to salary sacrifice, NICs, and capital gains reliefs.

The government has extended the freeze on income tax and NICs thresholds until April 2031, pulling more taxpayers into higher bands over time.

A High Value Council Tax Surcharge applies from April 2028: £2,500 annually for properties over £2 million and £7,500 for properties over £5 million.

From 2026/27, ordinary dividend rates rise to 10.75% and upper rates to 35.75%, with the additional rate remaining at 39.35%.

From 2027/28, property income will have separate tax bands: 22% basic rate, 42% higher rate, and 47% additional rate.

Savings income tax rates will rise by 2 percentage points from 2027/28, and the cash ISA limit will drop to £12,000 from April 2027 (with over-65s retaining a £20,000 limit).

From April 2029, only the first £2,000 of pension contributions via salary sacrifice will be exempt from employer and employee NICs

The Budget introduces a new 40% First Year Allowance, reduced writing-down allowances, extended EV allowances, expanded EMI, EIS and VCT limits, and a three-year stamp duty exemption for new UK stock market listings.

National Living Wage and Minimum Wage rates will rise significantly from April 2026, NICs apply to salary sacrifice above £2,000 from 2029, and benefit-in-kind thresholds will increase with CPI.

Additional changes include fuel duty extensions, removal of the two-child Universal Credit limit, new HMRC anti-fraud powers, wider manufacturing energy support, and expansion of the sugar tax to milk-based drinks.