The Autumn Budget 2025 shaped up as one of the most pivotal in recent years. The focus was on tackling wealth inequality whilst also ensuring the stability of the nation's finances for the bond markets.
Chancellor Rachel Reeves, has unveiled a series of tax rises and changes that will have a significant impact on individuals and businesses alike. In fact, there were £26bn worth of announced tax rises and combined with the measures from last year's budget mean an additional £60.3bn of taxes on British taxpayers by the end of the decade according to the Tax Payers' Alliance. Much of the spending and borrowing by the government is immediate with the tax rises taking place later in this Parliament in part to fund it all.
Ultimately this means the UK tax burden is projected to hit an all time high at 38.3% of GDP! In this blog post we break down the key announcements, and what they're likely to mean for you so that by reading this you'll then be well equipped to understand:
Announced as a solution to a long-standing source of wealth inequality, a High Value Council Tax Surcharge will be applied in England from 2028. If you own a home worth more than £2m you will likely have to pay an annual charge on top of your existing Council Tax bill.
There will be 4 Council Tax bands for the mansion tax and homes will be classified based on 2026 valuations. The lowest band will be for properties in the £2m - £2.5m range incurring a £2,500 annual charge. The highest band will be for homes worth more than £5m and a £7,500 fee each year. The middle bands have not yet been revealed.
The Chancellor stated this charge would apply to less than 1% of all properties. A deferral scheme will be made available if you're unable to pay the charge. This would be particularly relevant to those in circumstances where they've bought homes many years ago that potentially have soared in value since, referred to as people who became asset rich but cash poor.
Planning and consideration: If you suspect your property is worth close to £2m, consider getting a valuation to determine if you fall into the mansion tax category. If you do, consider whether selling, downsizing, or restructuring assets to reduce your property's value could be viable.
This is a shrewd means by which the Chancellor can raise income tax without actually raising the rates at which it is charged. In the past the thresholds for Income Tax and National Insurance Contributions (NICs) have increased in line with CPI inflation, but in 2021 then Chancellor Jeremy Hunt froze them until 2028.
Rachel Reeves has now gone and extended that freeze by another 3 years until the 2030/31 tax year. By doing this, whilst wages continue to rise, more people over time are likely to shift into higher tax bands resulting in them having to pay more. This is referred to as fiscal drag.
That's more tax revenue for the government, increasing the tax take to a projected sum of £60.3bn, of which £13bn comes from this latest extended freeze. Below is a table of the Income Tax bands as they currently stand and what the Office for Budget Responsibility (OBR) calculates they would've been had they been adjusted for inflation.
You can see the impact on your potential exposure to taxation is likely to be considerable.
| Income Tax band comparison | ||
| Existing tax bands |
Tax rate |
OBR Hypothetical inflation adjusted tax bands by 2030/31 |
|
Personal allowance Income up to £12,570 |
0% | Up to £17,470 |
|
Basic-rate Income of £12,571 - £50,270 |
20% | £17,471 - £70,370 |
|
Higher-rate £50,271 - £125,140 |
40% | £70,371 - £145,240 |
|
Additional-rate > £125,140 |
45% | >£145,240 |
Planning and consideration: The effect of this can be subtle and felt over a matter of years. If you're in the higher-rate bracket then look at how close you are to earning £100,000. At this level your personal allowance is cut by £1 for every £2 of income above it, which can result in an effective tax rate of 60% (or even higher)! By £125,140 you lose the allowance entirely meaning you could pay Income Tax on all of your income!
Tax planning strategies such as making pension contributions or delaying bonuses may help you stay below these thresholds. It's also worth revisiting your financial goals and adjusting income streams accordingly, if and where feasible.
Employees have been able to decide how much of their salary to give up in order to increase their contributions to their pensions through salary sacrifice schemes. The benefit of this was both workers and employers paid no Income Tax or NICs on those pension payments.
However, from April 2029 contributions you make through salary sacrifice will only be exempt from NICs up to £2,000 per year. Anything above that will then be subject to both employer and employee NICs. This is charged at 8% for earnings under £50,270 and 2% over that level for employees. The rate for employers is 15%.
Planning and consideration: Review your pension contributions early to maximise the benefits of salary sacrifice before April 2029, particularly if you’re a higher earner, and to avoid paying additional NICs. Consider also whether it’s worth increasing your contributions now to get the full benefit before the cap is introduced.
The rates of tax on savings, dividends, and property income will increase by 2% from April 2027. That's except for the additional rate for dividends which remains unchanged. Also, the starting rate for your savings income of £5,000 will be frozen until April 2031.
The rates therefore will look as follows:
| Band | Dividend tax | Savings tax | Property tax |
| Tax-free allowance | Up to £500 |
Varies depending on your tax band: Basic-rate: £1,000Higher-rate: £500 Additional-rate: £0 |
Up to £1,000 (unless claiming for actual expenditure incurred) |
|
Basic-rate £12,571 - £50,270 |
10.75% | 22% | 22% |
|
Higher-rate £50,271 - £125,140 |
35.75% | 42% | 42% |
|
Additional rate > £125,140 |
39.35% | 47% | 47% |
Planning and consideration: The future 2% tax increase on savings, dividends, and rental profits could likely impact your returns. Review your investment strategy, especially if you rely on these income sources and consider other potential tax-efficient options like ISAs or pensions.
If you own rental properties, assess the potential impact on your profits and consider restructuring your portfolio where possible to minimise tax exposure before the increase takes effect.
From April 2027, the cash ISA allowance is in effect reduced by £8,000 to £12,000 for those under 65 years old. However, the overall ISA subscription limit remains at the current £20,000 if £8,000 is invested in a stocks and shares ISA.
Planning and consideration: Before April 2027, consider using and maximising your cash ISA allowance. Work with your Independent Financial Adviser (IFA), where relevant, to help you determine the best strategy for utilising this allowance before and after it decreases.
A new mileage-based tax will be introduced from April 2028 to help fill a potential £40bn budget black hole created by the switch to battery powered cars. It will apply to electric and plug-in hybrid vehicles and work as follows:
If you drive such cars you will have to report your predicted mileage and then pay your fee based on that projection. Overestimate and the money you pay will be carried over as a credit into the next year. Exceed your predicted amount and you'll have to top up your original payment to the government.
Planning and consideration: Both rates are set to rise annually in line with CPI inflation. Consider how this tax could impact your long-term vehicle costs, particularly if you are thinking of purchasing an electric or hybrid vehicle in the next few years. It may be worthwhile assessing your driving habits to estimate the future potential costs.
For employers footing the wage bill and relevant staff earning the wage, the National Minimum Wage will increase from April 2026 as follows:
Planning and consideration: If you’re a business owner, be prepared for the additional cost to your payroll of higher wages. Be sure to factor these increases into your business budget forecasts for 2026. Then explore ways to improve staff productivity so that you can absorb these cost increases through rising turnover and profitability.
The tax free allowance of £325,000 for Inheritance Tax (IHT) known as the nil-rate band (NRB) remains frozen at £325,000 until 2030/31. This is also the case for the residence nil-rate band (RNRB) of £175,000 and the £2m taper where the RNRB is cut by a rate of £1 for every £2 above the £2m threshold. The main nil-rate band threshold has been frozen at this level since April 2009!
Spouses and civil partners will be able to transfer to a surviving spouse any unused portion of the £1m allowance through Agricultural Property Relief (APR) or Business Property Relief (BPR) qualifying for 100% IHT relief from April 2026.
Planning and consideration: Given the freeze on the inheritance tax thresholds, it's critical to consider strategies available to you for estate planning, now! Making use of gifting could be a route to help you minimise any future IHT liability on your estate.
From April 2026, the government is increasing the investment limits for Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS). These support investment in high-growth, start-up businesses by offering tax reliefs that can benefit investors looking to back innovative organisations.
The changes include:
It is also worth noting, that the tax credit available if you invest under the VCT scheme will reduce from the current rate of 30% to 20% from April 2026.
Planning and consideration: VCTs and EISs offer significant tax benefits for those investing in high-risk businesses. If you qualify, consider increasing your investments to take advantage of the higher limits commencing in 2026/27 tax year. Investors should also consider the timing of any investments made given the change in tax credit from April 2026 and consider bringing any planned investments forward.
Starting in April 2026, the Enterprise Management Incentive (EMI) scheme, which helps businesses attract and retain key employees through tax-advantaged share options, will have higher limits. The changes are as follows:
Then from April 2027:
Planning and consideration: Tech, start-up, and scale-up businesses should consider taking advantage of the new higher limits where possible as such tax advantages can help you attract and retain key talent.
Planning and consideration: If your business is planning significant investments in new machinery or vehicles, take advantage of the enhanced capital allowances to help reduce your tax burden.
Other personal tax changes announced included:
Planning and consideration: If you’re a pensioner with income close to the £35,000 threshold, be mindful of the new winter fuel payment restrictions and opt out if necessary. If you’re in the PAYE system and MTD ITSA applies to you, start preparing for the changes and make sure you understand how this will affect your tax payments and cash flow.
These substantial changes come into effect over the next few years. This means it’s very important to stay informed and plan ahead. Whether you're a homeowner, investor, or business owner, it would be advisable to review your financial circumstances with a professional advisor. Doing so can help you explore the most effective strategies to help reduce your exposure to a rising UK tax burden!
The content of this post was created on 27/11/2025 and updated on 28/11/2025.
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