Autumn Budget 2025: Key Changes at a Glance

Today’s Autumn Budget arrives as the UK economy struggles to regain momentum. Growth has slowed through the summer, inflation remains persistent and consumer spending has weakened all of which have weighed on the country’s near-term outlook.

With official forecasters reassessing both productivity and long-term economic potential, Chancellor Rachel Reeves faces the dual challenge of restoring confidence while managing tighter fiscal space. Against this backdrop, the Budget introduces a range of measures affecting taxes, pensions, property, business allowances, and household finances.

The following outlines the main announcements, their impact, and what they mean for businesses, workers, and families across the UK.

Income Tax & NI Thresholds Frozen Until 2031

Chancellor Rachel Reeves has announced that Income Tax and National Insurance thresholds will remain frozen at current levels until 2031. She acknowledged the measure will affect working people, calling it a contribution from everyone.

The freeze extends a policy first introduced by the previous government in 2021, now running for nearly a decade. By 2029/30, the Office for Budget Responsibility expects around 780,000 additional people to pay Income Tax as a result.

Dividend, Property & Savings Tax Rates to Rise by 2%

Chancellor has announced that tax rates on dividends, property income and savings will increase by 2 percentage points.

From April 2026, Dividend Tax for basic rate taxpayers will rise to 10.75% (from 8.75%) and for higher rate taxpayers to 35.75% (from 33.75%).

From April 2027, the basic, higher and additional rates on savings and property income will increase by 2 percentage points, reaching 22%, 42% and 47%, respectively. These changes are expected to raise £1.2bn from dividends and £0.5bn each from savings and property income per year.

£2,000 Cap on Pension Salary Sacrifice Contributions

The Chancellor has confirmed a new £2,000 annual cap on pension contributions made through pension salary sacrifice schemes. The change affects workers who exchange part of their salary for equivalent employer pension payments.

She describes this as a "pragmatic step" and says these changes will come into effect in 2029.

Salary sacrifice is widely used, covering about a third of private sector employees and around 10% in the public sector. The current structure allows both workers and employers to reduce their National Insurance costs.

Impact of the New Pension Salary Cap

Under the confirmed limit, employees will still receive Income Tax relief, but higher earners who contribute more than £2,000 through salary sacrifice will lose some of their National Insurance advantages. The Treasury expects the measure to increase revenue and narrow what it viewed as an uneven tax benefit.

For employers, the cap may raise contribution costs and could lead some businesses to scale back support for staff pension saving. This could reduce incentives for long-term retirement planning, particularly for workers who rely heavily on salary sacrifice to boost their pension pot.

Mansion Tax on High-Value Homes

Chancellor has announced a new annual charge on high-value properties in England. Homes worth more than £2 million will pay £2,500, while properties over £5 million will incur a £7,500 charge. The levy will be collected alongside Council Tax.

Impact

The surcharge is expected to raise over £400 million by 2031, affecting fewer than 1% of the most expensive homes. It targets the wealthiest property owners while leaving the vast majority of homeowners unaffected.

Writing Down Allowances for Businesses Changes

The Autumn Budget announces a reduction in the main Writing Down Allowance (WDA) rate from 18% to 14% from April 2026, alongside a new 40% first-year allowance from January 2026.

Impact

The changes affect capital allowance rates for companies and unincorporated businesses claiming self-assessment, targeting assets not eligible for full expensing, such as leased assets, second-hand assets, and cars. Only leased assets qualify for the new first-year allowance. The measure is expected to raise £1.5 billion by 2029/30.

Minimum Wage Rises to £12.71 for Over-21s from April

The National Living Wage for workers aged over 21 will rise to £12.71 an hour from April, giving 2.7 million people a pay boost. Younger workers will also see significant increases, with rates for 18–20-year-olds rising to £10.85 and under-18s and apprentices increasing to £8.

Chancellor said the move is aimed at easing the cost-of-living pressures and ensuring wages better reflect economic realities. The uplift follows last year's above-inflation rises and forms part of the government’s broader plan to support low-income workers.

ISA Reform

Chancellor has announced major reforms to the ISA system, confirming that the overall annual allowance will remain at £20,000, but with a new restriction: the £8,000 must be allocated to investments, only £12,000 of this can now be held in cash.

However, savers aged 65 and over will keep full access to a £20,000 cash ISA allowance, exempting them from the new split rules.

Impact

The reforms aim to push younger savers toward long-term investing, boosting capital markets and reducing reliance on low-yield cash savings. For many households, the change means less flexibility, especially for those who prefer cash for security or short-term access.

For over-65s, retaining the full cash allowance provides welcome protection for those relying on savings rather than investments, ensuring they are not forced into market risk late in life.

Tax Rate Cuts for 750,000 Retail & Hospitality Properties

Chancellor has confirmed that more than 750,000 retail, hospitality and leisure properties will benefit from permanently lower tax rates.

Impact

The reduction will be funded by higher rates on properties valued over £500,000, including warehouses used by large online retailers. The measure aims to support smaller businesses while targeting larger commercial properties to balance revenue.

Introduction of New Excise Duty for Electric Vehicles

Reeves has announced a new annual excise duty for electric vehicles. The levy will be 3p per mile for electric cars and 1.5p per mile for plug-in hybrids, collected alongside standard vehicle excise duty.

Impact

The revenue will allow the government to double road maintenance funding in England and provide an additional £200 million to expand EV charging infrastructure, supporting the shift toward greener transport.

Chancellor Scraps Two-Child Benefit Limit

Reeves has also announced the full removal of the two-child benefit cap, effective from April. The policy means parents will no longer be limited to claiming universal credit or tax credits for only their first two children.

Impact

The change is aimed at reducing child poverty and providing families with greater financial support. Labour says it marks the largest reduction in child poverty in a Parliament since records began, while critics have voiced opposition.