UK Autumn Budget 2025: Every Tax Change You Need to Know

The Autumn Budget 2025, delivered by the Chancellor on 26 November 2025, introduced a comprehensive package of tax measures that will have significant implications for individuals, businesses and property owners. With the overall tax burden forecast to reach 38% of GDP by 2030/31, this represents the highest level in over 70 years. 

The Budget continues the approach adopted by the Autumn Budget 2024, with a clear focus on raising revenue from wealth and assets. The government has sought to narrow the gap between taxation of employment income and income derived from investments, whilst also targeting reliefs that have grown beyond their original scope. 

This article summarises the key tax changes from the UK Autumn Budget 2025. 

1. Personal Tax Thresholds: Extended Freeze

The freeze on personal tax thresholds has been extended for a further three years, from April 2028 to April 2031. This measure alone is projected to raise £8 billion by 2029/30 and remains the single largest revenue raising measure in the Budget.

This policy leverages fiscal drag, where wage inflation pushes earners into higher tax brackets even where their real terms purchasing power has not increased. The effect is compounded over time, with more taxpayers crossing into the basic rate band each year and existing taxpayers being pushed into higher rate territory.

The OBR estimates that by 2029/30, the continued freeze will create approximately 780,000 additional basic rate taxpayers, 920,000 additional higher rate taxpayers and 4,000 additional rate taxpayers. For someone currently earning £50,000, it has been estimated that the three year extension will result in approximately £8,165 of additional tax over the period.

It is also worth noting that the consequences extend beyond income tax. When an individual moves from basic rate to higher rate, their Personal Savings Allowance reduces from £1,000 to £500, their Capital Gains Tax rate increases, and their dividend tax rate rises. Practitioners should consider these knock-on effects when advising clients who are approaching the higher rate threshold.

The freeze also applies to National Insurance thresholds and has been extended to the Inheritance Tax nil rate band for an additional year to April 2031.

2. Increases to Income Tax on Property, Savings & Dividends

The Budget introduces a fundamental shift in the taxation of investment income. The government's stated rationale is that those with property, dividend or savings income currently pay less tax than those whose income comes from employment or self-employment, as they do not pay National Insurance contributions. By increasing the rates on these forms of income, the government aims to narrow this gap.

These measures are expected to raise £2.1 billion in 2029/30. The government has emphasised that the majority of taxpayers and the majority of pensioners have no taxable savings, dividend or property income and will pay no more tax as a result of these changes. Around two thirds of the revenue is expected to come from the top 20% of households.

Existing allowances will continue to provide protection for those with modest amounts of investment income. Interest and dividends received within ISA wrappers will remain entirely tax-free.

Property Income

From April 2027, separate income tax rates will apply to property income in England, Wales and Northern Ireland. This is a notable departure from the current position where property income is simply taxed as part of general income at the standard income tax rates.

The new rates will be 22% at basic rate, 42% at higher rate and 47% at additional rate. This represents a 2 percentage point increase across all bands. For a higher rate taxpayer with net rental income of £20,000, this equates to an additional £400 of tax per annum.

The government has indicated it will engage with the devolved governments of Scotland and Wales to provide them with the ability to set property income rates in line with their existing income tax powers.

Dividend Income

From April 2026, the ordinary and upper rates of dividend tax will increase by 2 percentage points. The basic rate will rise from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%. Notably, the additional rate remains unchanged at 39.35%.

The dividend allowance remains at £500 per annum. For owner managed businesses that rely on dividend extraction as part of their remuneration strategy, this change will increase the effective tax cost of profit extraction. Combined with the existing rates of Corporation Tax, practitioners should review whether current extraction strategies remain optimal.

Savings Income

From April 2027, income tax rates on savings income will increase by 2 percentage points across all bands. The new rates will mirror the property income rates at 22%, 42% and 47% for basic, higher and additional rate taxpayers respectively.

The Personal Savings Allowance remains unchanged at £1,000 for basic rate taxpayers, £500 for higher rate taxpayers and nil for additional rate taxpayers. Over 90% of taxpayers currently pay no savings tax due to the protection offered by this allowance.

3. National Insurance on Salary Sacrificed Pension Contributions

From April 2029, employer and employee National Insurance contributions will be charged on salary sacrificed pension contributions exceeding an annual threshold of £2,000 per employee.

Salary sacrifice into pension schemes has become an increasingly popular arrangement, offering both employees and employers savings on National Insurance. However, the cost of this relief has grown substantially. The government notes that it was forecast to almost treble from £2.8 billion in 2016/17 to £8 billion by 2030/31 without reform, with the largest benefits going to higher earners whilst minimum wage employees are excluded entirely.

Under the new rules, the first £2,000 of salary sacrificed into a pension scheme will remain exempt from NICs in the usual way. However, any amount above this threshold will be subject to both employer NICs at 15% and employee NICs at 8% (or 2% for earnings above the Upper Earnings Limit).

The government states that this cap will protect 74% of basic rate taxpayers currently using salary sacrifice, meaning the impact will be concentrated on those with higher earnings who sacrifice larger amounts.

For employers, this change will increase the cost of providing salary sacrifice pension arrangements for affected employees. Businesses should begin modelling the impact on their employment costs and consider whether adjustments to their pension offering may be necessary.

It is important to note that tax relief on pension contributions remains unchanged. Employees will continue to receive income tax relief on their pension contributions in the normal way. It is only the NICs advantage that is being restricted above the £2,000 threshold.

4. Capital Allowances: Writing Down Allowances

The Budget introduces changes to the main rate of writing down allowances, reducing the rate from 18% to 14% from April 2026. This four-percentage point reduction will slow the rate at which businesses can claim tax relief on qualifying capital expenditure that does not qualify for full expensing or the Annual Investment Allowance.

However, the government has sought to balance this by introducing a new 40% first year allowance for main rate assets from 1 January 2026. This means that businesses will be able to claim 40% of the cost of qualifying expenditure upfront in the year of purchase, with the remaining balance then written down at the reduced 14% rate in subsequent years.

The net effect is to front load tax relief, with a higher deduction in year one but slower relief thereafter. For businesses with significant capital expenditure programmes, this may be beneficial from a cashflow perspective, although the overall quantum of relief over the life of the asset will be reduced in present value terms.

It is important to note that the new 40% first year allowance will not be available for motor cars, second hand assets or assets intended for leasing overseas. For these categories, the reduced 14% writing down allowance will apply without the benefit of the upfront relief.

The special rate pool remains unchanged at 6%, and the Annual Investment Allowance continues at £1,000,000 per annum. Full expensing at 100% for qualifying plant and machinery also remains in place.

This measure is projected to raise £1.5 billion for the Exchequer. Businesses planning significant capital expenditure should review the timing of purchases and the classification of assets in light of these changes.

5. Employee Ownership Trusts: Reduced CGT Relief

The Capital Gains Tax relief available on qualifying disposals to Employee Ownership Trusts has been reduced from 100% to 50%, effective from Budget Day (26 November 2025).

Employee Ownership Trusts were introduced in 2014 as a means of encouraging employee ownership of businesses. The CGT relief allowed business owners to sell their shares to an EOT without paying any Capital Gains Tax on the disposal. This made EOTs an attractive succession planning option, particularly for owners looking to exit their businesses whilst preserving the company's independence and rewarding employees.

However, the cost of the relief has grown substantially beyond original expectations. The government notes that the original 2013 costing suggested the entire EOT tax regime would cost less than £100 million in 2018/19. The cost of the CGT relief alone reached £600 million in 2021/22 and forecasts suggested it could rise to over £2 billion by 2028/29 without action.

The government has stated that around half of the relief was going to the largest 10% of disposals. By reducing the relief to 50%, the government aims to retain a meaningful incentive for employee ownership whilst ensuring that business owners pay a fairer share of tax.

For business owners currently considering an EOT as an exit route, this change significantly alters the calculation. A disposal that would previously have attracted no CGT will now be subject to tax on 50% of the gain. At the current CGT rates of 18% for basic rate taxpayers and 24% for higher rate taxpayers, this represents a material increase in the cost of disposal.

Practitioners advising on business succession should revisit EOT proposals in light of this change and compare the tax position against other exit strategies.

6. Electric Vehicles: New Mileage Based Charge

From April 2028, a new mileage-based charge, referred to as Electric Vehicle Excise Duty (eVED), will be introduced for electric and plug in hybrid vehicles. This represents a fundamental shift in motoring taxation, designed to address the long-term fiscal challenge posed by the transition away from petrol and diesel vehicles.

Currently, drivers of electric vehicles do not pay fuel duty as they do not purchase petrol or diesel. As more drivers switch to electric vehicles, fuel duty receipts are forecast to decline significantly. The OBR has projected that fuel duty receipts will fall to around half of current levels by the 2030s in real terms, approaching zero by 2050.

The new charge will be set at 3p per mile for fully electric vehicles and 1.5p per mile for plug in hybrid vehicles. For an average driver, this equates to approximately £240 per year for an electric vehicle or £120 for a hybrid. This represents around half the fuel duty rate paid by the average petrol or diesel driver, meaning that electric vehicles will retain a cost advantage.

The charge will be payable alongside existing Vehicle Excise Duty and will be based on self reported mileage. The government has confirmed that there will be no requirement to install trackers or to report where and when miles are driven, addressing privacy concerns that had been raised during the consultation period.

Vans, buses, motorcycles, coaches and HGVs are out of scope when the charge is introduced, reflecting the fact that the transition to electric power for these vehicle types is less advanced than for cars.

The revenue generated from eVED will support investment in roads maintenance and EV charging infrastructure. By 2029/30, the government has committed over £2 billion annually for local authorities to repair roads and fix potholes.

Alongside the new charge, the government has announced several supporting measures to maintain the attractiveness of electric vehicles, including an extension of the Electric Car Grant to 2029/30 with additional funding of £1.3 billion, and an increase in the VED Expensive Car Supplement threshold from £40,000 to £50,000 for new EVs from April 2026.

7. High Value Council Tax Surcharge

A new annual surcharge on high value residential properties, colloquially referred to as the "Mansion Tax", will be introduced from April 2028. This charge will apply to residential properties in England valued at £2 million or more.

The government's rationale for this measure is that the current Council Tax system falls disproportionately on those in less expensive properties. As the Budget document notes, the typical family home across England currently pays more Council Tax per year than a £10 million property in Mayfair. The High Value Council Tax Surcharge is intended to address this imbalance by asking those owning the most valuable properties to contribute more.

The charge will be applied in bands. Properties valued between £2 million and £2.5 million will pay £2,500 per year. The charge increases through further bands, with properties valued above £5 million paying £7,500 per year. The precise banding structure for properties between £2.5 million and £5 million is to be confirmed following consultation.

Importantly, the charge will be levied on property owners rather than occupiers. This differs from Council Tax, which is paid by the occupier. New valuations will be conducted to identify properties above the threshold.

Fewer than 1% of residential properties in England will be in scope of the surcharge. Local authorities will collect the revenue on behalf of central government and will be fully compensated for the additional costs of administering the charge.

The government has indicated that it will consult on detailed implementation in the new year, including provisions for those who may need additional support to pay the charge. There is also likely to be provision for deferral of the charge until sale or death in certain circumstances, which should prevent a rush of forced sales.

For those advising high net worth clients, this adds a recurring annual cost to ownership of higher value residential property and may influence decisions around property holding structures, timing of disposals and long term estate planning.

8. Stamp Duty: UK Listing Relief

In a measure designed to support the UK capital markets, a new Stamp Duty Reserve Tax holiday has been introduced for companies newly listing on the London Stock Exchange. The relief will be available for three years from Budget Day.

This measure responds to concerns about the declining attractiveness of the London Stock Exchange as a listing venue, with a number of high profile companies choosing to list overseas in recent years. By removing the stamp duty cost for new listings, the government aims to encourage more companies to list in London.

While this measure is primarily relevant to corporate finance rather than day to day property and accountancy work, it reflects a broader policy intent to make the UK a more attractive place to do business and may be of interest to clients with interests in listed securities or those considering listing as part of a growth strategy.

9. Individual Savings Accounts: Reduced Cash ISA Allowance

The annual allowance for Cash ISAs has been reduced from £20,000 to £12,000 for savers under the age of 65. Savers aged 65 and over will retain the full £20,000 Cash ISA allowance.

The government's stated policy objective is to encourage individuals to move savings from cash into stocks and shares ISAs. Only around 8% of the UK's total wealth is invested in stocks and shares, compared with 33% in the United States and 25% in Canada. Encouraging greater investment could provide capital for British companies and support economic growth.

The overall ISA allowance remains at £20,000, meaning that savers can still shelter this amount from tax each year. However, those under 65 who wish to use the full allowance will need to invest at least £8,000 in a stocks and shares ISA or other ISA products rather than holding everything in cash.

For those advising on personal financial planning, this is an important change to communicate to clients. Those who have relied on the full Cash ISA allowance will need to reconsider their savings strategy, particularly if they are risk-averse or have a short investment horizon.

10. Two Child Benefit Cap

The Autumn Budget 2025 confirmed the removal of the two child limit on the Child Element in Universal Credit from April 2026. Under the current rules, introduced in 2017, families can only claim the Child Element for their first two children. The third child and any subsequent children do not attract additional support, subject to limited exceptions. From April 2026, this restriction will be lifted entirely.

The financial impact of this change is substantial. The government estimates that approximately 560,000 families will benefit, receiving an average of £5,310 per year in additional support. The measure is projected to cost around £3 billion by 2029/30.

From a tax and accounting perspective, practitioners should note that this change will affect household income calculations for clients receiving Universal Credit. The additional income may have implications for other means tested support and could affect overall household tax positions where income thresholds are relevant. Advisers working with families on financial planning should factor in the increased household income when reviewing budgets and cashflow projections from April 2026 onwards.

The measure is being funded through a combination of tax measures announced in the Budget, including reforms to Motability tax reliefs, increased HMRC compliance activity and action on fraud and error in the tax and benefits systems. This reflects the government's approach of funding welfare expenditure through targeted tax changes rather than general taxation increases.

Summary: Key Autumn Budget Dates

Conclusion

The Autumn Budget 2025 represents a significant shift in the UK tax landscape. The combination of frozen thresholds, increased rates on investment income and new charges on property and vehicles will result in a materially higher tax burden for many individuals, particularly those with property portfolios or investment income.

For businesses, the changes to capital allowances and the new treatment of salary-sacrificed pension contributions will require careful planning. The reduction in EOT relief will affect succession strategies for owner managed businesses.

Practitioners should review client portfolios and business structures in light of these changes, with particular attention to the staggered implementation dates. There are planning opportunities in the period before certain measures take effect, and clients should be advised accordingly.

As always, the detail will matter. Secondary legislation and HMRC guidance will follow over the coming months, and we will need to stay alert to how these measures are implemented in practice.