26/11/2025
TODAYS UK BUDGET
Here are the headline facts from today’s UK Autumn Budget (26 November 2025): Chancellor Rachel Reeves announced a tax heavy package, including freezes on income tax thresholds, new property and EV charges, and rises in dividend and gambling duties. Some of it doesn't apply or is a devolved power in Scotland.
The Autumn Budget started in an unusual way as the Office for Budget responsibility leaked its report a whole 20 minutes before the chancellor’s speech.
Taxes are up and those with more wealth will pay more.
Here’s a quick summary:
Business Taxes
• Doubling the eligibility for Enterprise Management Incentive Schemes
• Limits to investments in EIS and VCT schemes increased, but income tax relief cut
• Capital Gains Tax relief for disposals to employee benefit trusts will be reduced to 50% immediately
• New 40% first-year capital allowances and a reduction in writing-down allowance from 2026
The Hidden Stuff
These don't grab a lot of the headlines, as usual, there was a huge amount to digest, but the fine print of the Treasury document included:
Details of an MTD soft landing period
Taxpayers joining MTD in April 2026 will not receive penalty points for late submission of their first four quarterly updates.
The DOUBLING of Corporation Tax return late filing penalties
From 1 April 2026, penalties for submitting Corporation Tax returns late will double.
The requirement for agents to register with HMRC from May 2026
From May 2026, all tax advisers dealing with HMRC for clients must legally register with HMRC, must confirm compliance, including anti-money laundering requirements, each year, and meet minimum professional standards.
The Headline Announcements
Cash ISA reforms. For cash savers, savings will be limited to £12,000. To take advantage of the full £20,000 allowance, you will have to invest the rest, £8k. The Chancellor’s aim is to encourage more investment in the stock market, keeping the overall £20,000 ISA allowance. Over 65s will see no change and keep the full £20,000 allowance.
Salary Sacrifice pensions capped. There will be a £2,000 salary sacrifice cap confirmed - the amount of earnings that can be exchanged for pension contributions that benefit from a National Insurance exemption. Will no longer be exempt from National Insurance from 2029
Mansion Tax. Owners of properties worth over £2 million will have to pay a recurring annual charge on top of their current council tax. There will be four price bands with the new ‘High Value Council Tax Surcharge’ rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year. (Scotland? Devo powers)
Tax hike on income from property, dividend, and savings by 2%. The change will affect all taxpayers. Claimed 90% of taxpayers will still pay no tax at all on their savings.
Income tax threshold freeze extended, from 2028 to 2031.
People based abroad will no longer be able to make Class 2 National Insurance contributions.
Two-child benefit cap to be lifted, which Reeves said will help tackle child poverty.
Electric vehicle (EV) grant extended to 2030, but EVs will be subject to new 3p per mile tax.
Energy bills to drop by £150 from April 2026 as green levies cut.
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🔑 Key Tax Measures
• Income tax thresholds frozen until 2030/31, raising an estimated £7.6bn annually by 2029/30.
• New annual tax on homes worth over £2m, effective April 2028, expected to raise £400m. (Scotland?)
• Dividend tax rates increased by 2 percentage points from April 2026:
o Basic rate: 10.75%
o Higher rate: 35.75%.
• Gambling duties increased, forecast to raise £1.1bn by 2029/30.
• Salary sacrifice schemes curtailed, particularly for pensions, raising extra tax/NIC.
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🚗 Transport & Energy
• Fuel duty freeze continues, unchanged since 2011, worth ~£25bn annually.
• New mileage based charge for EVs and plug in hybrids from April 2028, set at ~half the petrol duty rate, raising £1.4bn.
• Concerns raised that this could slow EV adoption and increase fleet costs.
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💷 Personal & Social Measures
• State Pension to rise by 4.8% from April 2026 under the triple lock:
o New State Pension: £241.30/week
o Old State Pension: £184.90/week.
• National Minimum Wage to rise by 4.1% (to £12.71/hour for over 21s) from April 2026.
• Cash ISA limit cut to £12,000, total ISA allowance says at £20k.
• Help to Save scheme made permanent from 2028.
• Rail fares and prescription charges frozen for 2026. (Scotland?)
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🏗️ Growth & Investment (HM Treasury factsheet)
• £120bn public investment this Parliament, plus £250bn private investment secured since July.
• Creation of a National Wealth Fund, already investing £3.8bn to support 20,300 jobs.
• Major infrastructure commitments:
o DLR extension to Thamesmead
o Lower Thames Crossing (£891m)
o Three New Towns this Parliament.
• Nuclear expansion: first Small Modular Reactors at Wylfa, Anglesey.
• 1.5m homes target, supported by funding more planners.
• Permanent lower business rates for 750,000 retail/hospitality properties.
• 3,000 more neighbourhood police officers and 250 new NHS neighbourhood health centres.
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📊 Fiscal Context
• Tax rises expected to raise £26.1bn annually by 2029/30.
• Reeves claims to have doubled fiscal headroom to £21.7bn.
• OBR leak revealed measures ahead of the speech, causing market jitters.
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In short: Today’s Budget is dominated by tax freezes and new levies to plug a £20bn fiscal gap, alongside investment in infrastructure, housing, and public services. Pensioners and low income savers gain some protections, but households with high value property, dividend income, or EVs face new charges.
In Detail
INCOME TAX AND NATIONAL INSURANCE
Income tax threshold freeze: The silent tax rise
The most significant revenue-raiser continues to be fiscal drag. The personal allowance (£12,570) and higher rate threshold (£50,270) will now remain frozen until 2030/31 – three additional years beyond the previous 2028 deadline. This measure alone will raise £7.6 billion annually by 2029/30.
Income Tax is a devolved power in Scotland. Budget there awaited.
National insurance contributions (No change)
Self-Assessment Tax Liabilities
From April 2029, the Government will require tax currently paid via self-assessment (e.g. on rental profits and savings income), to be collected via PAYE, provided an individual receives income upon which PAYE can be collected.
Further consultation on this matter is expected in early 2026.
Employer national insurance now sits at 15% on most earnings above £5,000 per employee, following changes that took effect from 6 April 2025. Employee rates remain at 8% on £12,570-£50,270 and 2% above. These changes have already raised payroll costs significantly, with no relief announced.
DIVIDEND, SAVINGS AND PROPERTY TAXATION
Dividend tax increases hit business owners
From 6 April 2026, dividend tax rates will increase by 2 percentage points across the board:
Basic rate: 8.75% becomes 10.75%
Higher rate: 33.75% becomes 35.75%
Additional rate: Remains at 39.35%
With the dividend allowance already slashed to just £500 annually, this creates a double burden for owner-managed businesses taking profits via dividends.
Abolition of dividend tax credit for non-UK residents
From 6 April 2026, the notional dividend tax credit previously available to non-UK residents on UK dividend income will be abolished. Non-residents will now be treated identically to UK residents for dividend tax purposes, subject to the same 10.75%/35.75%/39.35% rates.
New property income tax rates
From 6 April 2027, separate income tax rates for property will be introduced (England, Wales, and Northern Ireland):
Basic rate: 22% (vs 20% on other income)
Higher rate: 42% (vs 40%)
Additional rate: 47% (vs 45%)
The ordering of reliefs is also changing: from 6 April 2027, income tax reliefs and allowances will be applied first to non-property income, then property, followed by savings and dividends.
Savings income tax changes
From 6 April 2027, savings income tax rates will increase by 2 percentage points across all bands. The personal savings allowance (£1,000 for basic rate and £500 for higher rate taxpayers) will be maintained but no longer offset property or dividend income.
INHERITANCE TAX
Major changes to agricultural and business property relief
Effective from 6 April 2026:
Combined £1 million allowance at 100% relief for Agricultural Property Relief (APR) and Business Property Relief (BPR)
Assets exceeding £1m receive only 50% relief (effective 20% IHT rate)
AIM shares: 50% relief only, not covered by the £1m allowance
Payment: Can be spread over 10 years interest-free
The £1m combined allowance will be indexed to CPI from 6 April 2031, and all APR/BPR thresholds remain frozen until 30 April 2031.
Pensions brought into inheritance tax
From 6 April 2027, unused pension funds and death benefits will be brought into an individual's estate for IHT purposes.
IHT thresholds frozen until 2030/31
The nil-rate band remains fixed at £325,000 and the residence nil-rate band at £175,000 until 2030/31, with the taper threshold fixed at £2 million. From 6 April 2031, these will increase in line with CPI.
CAPITAL ALLOWANCES
Writing down allowances: Main rate reduction
From April 2026, the main rate for Writing Down Allowances (WDA) on plant and machinery will be reduced from 18% to 14% on a reducing balance basis. The Special Rate Pool WDA (long-life assets and integral features) remains at 6%.
Introduction of a 40% first-year allowance
From January 2026, a new 40% first-year allowance is introduced for companies investing in qualifying plant and machinery in the main pool. Companies can deduct 40% of eligible costs in year one, with the remaining balance entering the main pool for WDAs at the new 14% rate.
Annual Investment Allowance (AIA) and full expensing
The £1 million AIA is retained, providing immediate 100% relief for qualifying expenditure up to this threshold each year. Full expensing also remains available:
100% first-year allowance on qualifying main pool plant and machinery (companies only)
50% first-year allowance on special rate pool assets
PROPERTY TAXES
The "Mansion Tax" on high-value properties
A new annual charge applies to residential properties valued over £2 million from April 2028:
£2m-£2.5m: £2,500 annually
£2.5m-£5m: Graduated up to £5,000
£5m+: Up to £7,500
Properties in council tax bands F, G, and H (approximately 2.4 million) will be revalued to determine liability. The charge can be deferred until sale or death.
SALARY SACRIFICE AND WORKPLACE BENEFITS
Salary sacrifice pension contributions capped
From April 2029, salary sacrifice pension contributions above £2,000 annually will be subject to both employer and employee National Insurance.
How it works:
First £2,000: NI-free as currently
Above £2,000: Subject to 8% employee NI (2% over UEL) and 15% employer NI
Expansion of workplace benefits relief
From 6 April 2026, employers can reimburse employees for eye tests, flu vaccines, and home working equipment with the same tax and National Insurance relief as if providing these items directly. Currently, exemptions only apply to direct provision, creating inconsistency.
Plug-in Hybrid Electric Vehicles (PHEV) benefits-in-kind easement
From 1 January 2025 to 5 April 2028 (retroactively), a temporary easement applies to mitigate PHEV benefit-in-kind tax liabilities due to new emission standards (EU Euro 6e and UN equivalents):
CO2 emission figure for qualifying PHEVs will be deemed to be nominal (value 1) rather than the actual figure on the registration document
Vehicles registered on/after 1 January 2025 with CO2 emissions ≥51 qualify
UMBRELLA COMPANIES AND CONTRACTOR COMPLIANCE
Umbrella company PAYE reforms – from 6 April 2026
Responsibility for PAYE compliance shifts from umbrella companies to either:
The recruitment agency (if one exists in the supply chain), or
The end client (if contracting directly with the umbrella company)
Joint and several liability applies. If the umbrella company fails to pay PAYE/NICs, HMRC can pursue the agency or end client for the full amount.
TAX COMPLIANCE AND ADMINISTRATION
Making Tax Digital soft landing period
The government has introduced legislation in Finance Bill 2025-26 in relation to Making Tax Digital (MTD) for Income Tax and the new penalty reform regime which means that taxpayers joining MTD in April 2026 will not receive penalty points for late submission of their first four quarterly updates.
Corporation tax late-filing penalties doubled
From 1 April 2026, penalties for submitting Corporation Tax returns late will double.
Current penalties for late CT submission are as follows:
Return late - £100 becoming £200
Return more than 3 months late - £200 becoming £400
Three successive failures, return late - £500 becoming £1,000
Three successive failures, return more than 3 months late - £1,000 becoming £2,000
Tax adviser registration to become mandatory
From May 2026, all tax advisers dealing with HMRC for clients must legally register with HMRC and meet minimum professional standards. This change, legislated in the 2025-26 Finance Bill, is designed to raise industry standards and enable HMRC to exclude non-compliant advisers.
Tax advisers will register digitally (with non-digital options for some) and must confirm compliance, including anti-money laundering requirements, each year. Overseas advisers will face slightly higher registration costs due to evidence and translation needs. Advisers who do not comply will be suspended from acting for clients until compliance is restored.
Enhanced HMRC powers: Tackling tax adviser-facilitated non-compliance
New powers enable HMRC to:
Request information from tax advisers where there is reasonable suspicion of deliberate non-compliance facilitation
Issue File Access Notices (FANs) without tribunal approval to expedite information requests
Impose penalties on advisers based on Potential Loss of Revenue (PLR) from deliberate conduct
Publish details of sanctioned advisers (with safeguards against exposing personal risk)
Tax advisers will face closer scrutiny. This creates operational risk for those inadvertently providing inaccurate advice. Targetting deliberate conduct, not one-off errors or genuine legal interpretation differences.
Tackling promoters of marketed tax avoidance
New measures strengthen the Disclosure of Tax Avoidance Schemes (DOTAS) regime through:
Universal Stop Notices (USNs): HMRC can stop promoters using certain channels or financial infrastructure
Promoter Action Notices (PANs): Restrict information sharing and supply chains
Connected Parties Information Notices (CPINs): Gather information on those linked to promoters
Promoter Financial Information Notices (PFINs): Access to promoter finances
Expanded scope: DOTAS now covers more schemes
Targeted criminal penalties: On legal professionals designing/contributing to avoidance schemes
Loan Charge settlement opportunity
The government has accepted recommendations from an independent review of the loan charge (which affects approximately 32,000 individuals who used disguised remuneration tax avoidance schemes). A new settlement opportunity, legislated in Finance Bill 2025-26, will substantially reduce outstanding liabilities. Most individuals could see at least 50% reductions, with an estimated 30% able to settle for nothing.
Key features include recalculating amounts based on tax rates when loans were made, applying promoter fee discounts (up to £10,000 per year), adding a flat £5,000 reduction, waiving late payment interest, writing off inheritance tax, and allowing five-year payment plans. The maximum reduction per person is capped at £70,000.
ENTERPRISE AND INVESTMENT RELIEF SCHEMES
Enterprise Management Incentive (EMI) scheme expanded
From 6 April 2026, the EMI scheme limits will expand to allow larger companies and scale-ups to participate. Key changes include increasing the company options limit from £3 million to £6 million, gross assets threshold from £30 million to £120 million, employee count from 250 to 500, and the exercise period from 10 to 15 years.
EIS/VCT Investment Limits Increased
Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) changes:
Company investment limit: Increased from £5m to £10m (£20m for Knowledge-Intensive Companies)
Lifetime company limit: Increased from £12m to £24m (£40m for KICs)
EIS annual investment limit: Remains £1m per investor (£2m if £1m+ in KICs)
VCT annual limit: Remains £200,000
VCT income tax relief: Reduced from 30% to 20% (but deferral relief improves)
Reinvestment relief: Extended to 5 April 2035
VAT MATTERS
VAT relief for business donations of goods to charities
VAT relief on donated goods is being extended from April 2026 to cover goods donated for charitable use (not just resale).
VAT treatment of Private Hire Vehicles (PHVs)
In response to a 2024 consultation, the government will not amend VAT legislation to allow PHV operators to act as agents for tax purposes in all cases, nor will it introduce a new margin scheme or reduced rate for the sector.
The government will legislate to exclude suppliers of private hire vehicle and taxi services from the Tour Operators’ Margin Scheme, except where these are supplied in conjunction with certain other travel services.
CONSTRUCTION INDUSTRY SCHEME
Enhanced HMRC powers to tackle CIS fraud
HMRC has enhanced powers to combat Construction Industry Scheme fraud:
Direct amendment of CIS deduction claims on Employer Payment Summary (EPS) where fraud suspected
Material materials cost eligibility test: Only direct purchasers of materials can claim deductions (tightened rules)
Rolling 12-month expenditure threshold: £3m threshold for deemed contractors
Failure to prevent fraud offence: New mandatory compliance obligation (similar to criminal finances offences)
Corporation Tax
Capital Allowances
The 100% First-Year Allowance (FYA) for qualifying expenditure on zero emission cars and qualifying plant and machinery for electric vehicles has been extended for another year and will remain in place until 31 March 2027.
Businesses should consider the timing of such purchases, where planned, to maximise the extension of this relief.
A new 40% FYA will be introduced from 1 January 2026 for main rate expenditure. There will be reduced restrictions compared to other FYAs and it will be available for items such as assets bought for leasing. It may also extend to background plant for landlords incurred by unincorporated businesses.
From 1 April 2026, main rate writing down allowances will reduce from 18% to 14%.
Businesses with significant capital expenditure should seek professional advice on how these changes might impact them.
CAPITAL GAINS TAX
Capital Gains Tax incorporation relief
From 6 April 2026, individuals, partners, and trustees transferring a business to a company in exchange for shares must claim incorporation relief through their Self Assessment tax return for the year of transfer. The claim will require details of the transaction, tax computations, and business type.
BADR rate increase
As previously announced, Business Asset Disposal Relief (BADR, formerly Entrepreneurs' Relief) CGT rate increases from 14% to 18% on the first £1m of qualifying gains from 6 April 2026.
ELECTRIC VEHICLES AND MOTORING
EV mileage tax announced
From April 2028, electric vehicles (battery EV and plug-in hybrid EVs) will face a pay-per-mile tax:
Battery EV: 3 pence per mile
Plug-in Hybrid: 1.5 pence per mile
Implementation details (collection mechanism, exemptions) still under consultation.
First-Year Allowances for zero-emission cars and EV chargepoints
First-year allowances maintained for qualifying EV chargepoints
Zero-emission cars eligible for enhanced relief
Full expensing relief available for qualifying infrastructure
