26/11/2025
THE BUDGET
Personal tax changes
Frozen tax rates
The Government is continuing the freeze on personal tax thresholds. The thresholds for Income Tax and National Insurance Contributions (NICs) were due to be frozen until March 2028 and then uprated in line with inflation from 2028/29. Instead, the thresholds will now remain frozen from April 2028 through to April 2031.
What this means for you
• The Government is not increasing the headline rates of income tax or NICs. The thresholds at which individuals start to pay tax, or are exposed to higher rates of income tax have been frozen again.
• This freeze acts as a stealth tax and will cause more income to fall into higher rates of income tax.
Higher taxes on investment income
The Government plans to raise taxes on property, dividend and savings income.
Landlords
Landlords in receipt of property income will face an additional 2% income tax rise from April 2027. To achieve this, a separate tax rate for property income will be created. From April 2027, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%.
The change to property income tax rates will apply in England, Wales and Northern Ireland. The Government has promised to engage with the Scottish and Welsh Governments to provide them with the ability to set property income rates.
Individuals in receipt of dividend and savings income
The ordinary and higher rates of tax on dividend income will rise by 2% from 6th April 2026. There is no change to the dividend additional rate.
Currently individuals pay tax on dividends above the dividend allowance. The tax rates will be increased by 2%:
• 8.75% to 10.75% for basic rate taxpayers
• 33.75% to 35.75% for higher rate
• 39.35% for additional rate
The tax rate on savings income will be increased by 2% across all tax bands from 6th April 2027.
The changes to dividend and savings income rates will apply across the UK.
ISAs
From April 2027 the total amount which under 65s may save into a cash Individual Savings Account (ISA) will be capped at £12,000 a year, with the remaining £8,000 (of the total £20,000 annual allowance) reserved for non-cash ISA investments. Over 65s may still save up to £20,000 cash in an ISA per year.
Owners of high value residential properties
A new high value council tax surcharge (HVCTS) will apply from April 2028 for owners of properties identified as being valued at over £2 million by the Valuation Office (in 2026 prices).
Owners will be liable for a recurring annual charge in addition to the existing council tax liability and the owner – rather than the occupier – will be liable to pay the HVCTS.
The new charge will start at £2,500 per year, rising to £7,500 per year for properties valued above £5 million.
Inheritance Tax
In the Budget 2024, it was announced that from April 2026, the existing 100% relief for Business and Agricultural property will only apply to the first £1 million of combined assets, after which only 50% relief would apply.
In a welcome move, it has been confirmed that any unused £1 million allowance for the 100% rate will be transferable between spouses and civil partners. This also includes where the first death was before 6th April 2026.
Business tax changes
The Government introduced several changes that will affect employers and their employees' wages. These include increasing the national living and minimum wage rates, a cap on salary sacrifices pension contributions, a new electric vehicle duty and a freeze on fuel rates.
National living and minimum wage changes
• National living wage increases by 4.1% from 1st April 2026 from £12.21 to £12.71. This equates to an extra cost of £910 per year based on 35 hours per week (plus employer’s national insurance contributions (NICs) and employer pension contributions).
• National minimum wage (NMW) for 18- to 20-year-olds increases by 8.5% from £10.00 to £10.85, and for 16 and 17-year-olds and apprentices NMW increases by 6% from £7.55 to £8 an hour, being extra costs of £1,547 per year and £819 per year respectively for employers.
Electric vehicles (EVs)
The Government has announced changes to the taxation of and subsidies for EVs. The most significant is the introduction from April 2028 of The Electric Vehicle Excise Duty (eVED) a new mileage-based charge on EVs (including plug-in hybrids). This mileage-based charge is in addition to the current vehicle excise duty (VED) charges paid by all vehicles. In 2028/29, the charge will equal £0.03 per mile for battery EVs and £0.015 per mile for plug-in hybrids, increasing annually with the Consumer Price Index (CPI).
The Government also announced an increase to the expensive car supplement (ECS) threshold for battery EVs, from £40,000 to £50,000 in April 2026.
Petrol and diesel cars
For those driving petrol or diesel vehicles, the fuel duty cut of 5p will be extended to August 2026 (an extra five months) and the inflation-based increase in 2026/27 has been scrapped and replaced with fuel duty increases of 1p on 1st September 2026 and 2p on 1st December 2026 and 1 March 2027, and a Retail Price Index (RPI) increase from April 2027.
Pensions
A new £2,000 per year cap on the amount workers can contribute to their employment-based pension scheme under a salary sacrifice scheme free of NICs from 6 April 2029. Salary-sacrificed pension contributions above the new £2,000 cap will be treated as ordinary employee pension contributions and therefore will be subject to both employers and employees’ NICs. Ordinary employer pension contributions will remain exempt from NICs.
As 2029 is a very distant date, we’d anticipate further changes and possible avoidance legislation will be introduced before this date. Either way, 2029 provides a window for employers and employees to adapt to this proposed change.
Employee Ownership Trusts (EOTs)
From midnight on Budget Day (26th November 2025), capital gains tax (CGT) relief on disposals to EOTs will be reduced from 100% to 50%. Previously, company owners who made a qualifying disposal of shares to the trustees of an EOT benefited from 100% CGT relief, but this change means that 50% of gains will now be subject to CGT.
Capital Allowances
At present, in addition to the Annual Investment Allowance available at 100% on the first £1 million of certain capital expenditure, incorporated and unincorporated businesses can claim writing down allowances at 18% on an ongoing basis.
This Budget included a reduction to the writing down allowance (WDA) main rate from 18% to 14% from April 2026.
To counter the reduction in the main rate from 18% to 14%, a new first year allowance of 40% has been announced in the year of purchase although this excludes expenditure on second-hand assets and cars.
Value Added Tax (VAT)
Small businesses not currently registered for VAT will be pleased that the rumours for a reduction in the VAT registration threshold did not materialise in this year’s Budget.
However, from April 2029 the Government will require all VAT invoices to be issued in a specified electronic format. The Government will work with stakeholders to develop an implementation plan to be published at Budget 2026.
Business rates – England only
The Government announced the plan to reduce the multipliers for Retail, Hospitality and Leisure sectors, said to benefit over 750,000 properties including shops and pubs. The RHL multipliers will be 5p below their national equivalents, making the small business RHL multiplier 38.2p and the standard RHL multiplier 43p in 2026-27.
To pay for this, the Government is introducing a higher rate on the most valuable properties with rateable values of £500,000 and above, representing around 1% of properties. Most ratepayers will see no bill increases with just under a quarter seeing their bills go down.
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