The 2025 Budget – Autumn
The Chancellor delivered her 2025 Budget on Wednesday 26 November amongst a flurry of wild fandango after the OBR accidentally released the report online before tye Chancellor took to the floor.
The announcements in the 2025 Budget confirm a significant shift in the shape of personal and business taxation over the next few years.
Some measures announced in the 2025 Budget begin almost immediately while others phase in gradually, although the direction of travel is clear. The Government intends to raise more revenue from wealth, property, investment income and high value activities, while maintaining stability in headline tax rates for companies and expanding selected reliefs for the high street and the creative industries.
Below is an explanation of the changes that will matter most to individuals, landlords, investors and business owners. It is designed as an early overview so that clients can begin to consider the possible impact on their 2025-26 planning as well as longer term decisions.
2025 Budget – Income Tax thresholds remain frozen until 2031
One of the most important announcements is the extension of the freeze on personal tax thresholds through to April 2031. The Personal Allowance, the basic rate band and the higher rate threshold will not rise for six more years. National Insurance thresholds that align with these limits will also remain fixed.
This freeze means that the tax system will take a larger share of income each year as wages continue to rise. A growing number of people will drift into the higher rate band even if their pay only increases in line with normal cost of living adjustments. Anyone with salary growth, investment income or rental income should expect a gradual increase in their overall tax burden.
Higher tax on dividends, savings and property income
Dividend tax rates will rise by two percentage points from April 2026. This affects all three dividend bands and will make profit extraction from small companies more costly for owner managers. Many directors take a modest salary and the rest of their remuneration as dividends. This model will still work, although the higher rates will reduce the overall tax advantage.
Savings income and property rental profits will also be taxed at rates that are two percentage points higher from April 2026. This will affect landlords, people with interest from savings and individuals with investment portfolios. The existing allowances, such as the dividend allowance and the personal savings allowance, will continue to provide protection for those with smaller amounts of income, but the overall direction is towards higher taxation of income from wealth rather than work.
Restriction to pension salary sacrifice benefits in the 2025 Budget
Salary sacrifice has been widely used to boost pension saving in a tax efficient way. The Budget introduces a new limit so that from April 2029 only the first £2,000 of salary sacrifice pension contributions each year will remain exempt from National Insurance. Amounts above this limit will attract NICs. The impact will be felt most by higher earners and by individuals making large regular contributions. Employers may also see some increased costs in workplace pension arrangements.
New council tax surcharge for high value homes
A separate measure worth noting is the introduction of a High Value Council Tax Surcharge from April 2028. This surcharge will apply to homes valued at more than two million pounds, with higher charges for properties of greater value. The surcharge will be collected alongside normal council tax, but the revenue will flow to central government. For households within this bracket, the extra annual charge may be substantial. Estate agents, advisers and families considering gifts of high value homes should factor the surcharge into future planning.
Mileage based tax for electric vehicles
Electric vehicles and plug in hybrids will face a new per mile levy from April 2028. This is intended to replace some of the fuel duty revenue that has been lost as petrol and diesel vehicles decline. Electric vehicle running costs will rise and the long term cost difference between electric and petrol or diesel cars will narrow.
Changes to import duty rules and VAT arrangements
The Budget confirms the intention to remove the customs duty exemption for imported goods worth £135 or less. This will affect many online purchases from overseas retailers. The change is designed to protect high street businesses that face competition from low cost imports. Prices for small, imported items are likely to rise once the exemption is withdrawn.
There is also a reform to VAT rules for ride sharing platforms. These platforms will no longer be able to use a scheme that was originally created for tour operators. The change is expected to increase the VAT cost for some operators and may affect fares or driver commissions.
2025 Budget and Gambling tax adjustments
Online gambling and betting companies will experience changes to the way their activities are taxed. The exact impact will vary by operator, but the overall effect is an increase in tax collected from the sector.
Support for the high street and hospitality sector
The Budget provides welcome news for retail, hospitality and leisure businesses. Business rates relief for more than seven hundred and fifty thousand properties will be made permanent from April 2026. There will also be a cap on business rate increases following the 2026 revaluation. These measures are intended to protect high street businesses from sharp rises in fixed costs and to support continued trading during a period of economic adjustment.
Film studios will continue to benefit from a forty percent business rates reduction until 2034. This confirms the long term support available to the UK’s creative industries and should attract further investment in large scale productions.
Corporation Tax stability and changes to capital allowances
The main Corporation Tax rate will remain at twenty five percent for the entire Parliament. This provides a degree of certainty for businesses planning future investment.
However, writing down allowances for assets that do not qualify for full expensing will be reduced from April 2026. This means that some types of plant and machinery will receive slightly lower tax relief over time. The aim is to encourage use of the full expensing regime where possible since full expensing provides immediate tax relief and is more generous than writing down allowances.
Employee Ownership Trusts (EOT) and anti-avoidance rules
From 26 November 2025, the relief for capital gains on disposals to Employee Ownership Trusts will reduce from one hundred percent to fifty percent. This change lowers the tax advantage of using an EOT for succession planning. Owners considering an EOT sale may wish to review their timetable.
The Budget also includes a range of technical anti avoidance measures. These relate to the treatment of certain liabilities, reorganisations and offshore structures. The rules will mainly affect complex planning arrangements rather than everyday business activity.
Changes for non-residents and former non domiciled individuals
There are reforms to Capital Gains Tax for non-residents and adjustments to share reorganisation rules. These changes continue the movement towards equal treatment of residents and non-residents. In addition, former non domiciled individuals with offshore trusts may face new inheritance related charges from 2026.
2025 Budget – Actions to take
The team at RPGCC are now busy digesting the content of the 2025 Budget, there are a lot of pages of OBR report for us to digest.  But one point is clear if you plan now and review your income structure, remuneration strategy, pension contributions and property ownership plans you will be better prepared!
From the initial findings in the 2025 Budget It is looking likely that landlords and those the investment portfolios will face higher tax bills, and business owners should factor in the impact of capital allowance adjustments and new business rate measures.
If you would like to download our full 2025 Budget report you can do that here.
If you would like to speak to a member of our team about anything announced in the 2025 Budget, please contact us today or call us on 020 870 9050Â where a member of our team is waiting to assist.
