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Autumn Budget 2025

Income Tax

  • The Income Tax personal allowance remains £12,570, the basic rate band remains £37,700, and the higher-rate threshold stays at £50,270. The additional-rate threshold remains £125,140. These bands are now frozen until April 2031.
  • Your personal allowance is still reduced by £1 for every £2 of income over £100,000 – so it is fully lost once income reaches £125,140.
  • Headline income tax rates on employment and pension income are unchanged at 20% / 40% / 45%. Only the thresholds are frozen (the “stealth tax”).

ISAs & Tax-Free Savings

  • For 2026/27, the general allowances remain:
    • Overall ISA allowance: £20,000
    • Junior ISA (JISA): £9,000
    • Child Trust Fund: £9,000
    • Lifetime ISA: £4,000 (excluding the government bonus); a consultation is planned on a replacement first-time buyer product, but no immediate changes to existing LISAs).
  • Cash ISA changes from April 2027.
    • Overall £20,000 ISA limit remains.
    • For those aged under 65, the maximum that can go into a cash ISA each year will fall to £12,000.
    • The remaining £8,000 (if you use the full £20,000) will need to go into stocks & shares and/or innovative finance ISAs.
    • For those aged 65 or over within the tax year of subscription, the £20,000 cash ISA allowance is preserved.
    • These rules apply only to new contributions from April 2027, not to money already in ISAs.
    • Transfers from stocks & shares / innovative finance ISAs into cash ISAs will no longer be permitted (cash-to-cash transfers remain allowed), and cash held inside non-cash ISAs may be subject to a new tax charge if parked indefinitely.

Pensions

  • State Pension
    • The government has re-committed to the triple lock for this Parliament.
    • Both the new and basic State Pension will rise by 4.8% from April 2026 (driven by earnings growth).
    • The Chancellor has also confirmed that people whose only income is the State Pension will not be brought into income tax during this Parliament, even as the State Pension edges above the frozen personal allowance.
  • Private pensions – allowances & salary sacrifice
    • The Annual Allowance remains at £60,000 and the threshold income for tapering remains at £200,000. 
    • From April 2029, a new £2,000 cap on National Insurance-free salary sacrifice into pensions will apply:
      • Salary sacrifice pension contributions above £2,000 per year will attract both employer and employee NI, collected via payroll.
      • Contributions made via sacrifice will still count towards reducing “adjusted net income”, so they can continue to help with things like restoring Child Benefit or the Personal Allowance.
  • Pensions and Inheritance Tax (IHT) from April 2027
    • From 6 April 2027, most unused pension funds and pension death benefits will fall within the taxable estate for IHT purposes, even where trustees/administrators have discretion.
    • Death-in-service benefits from registered schemes will remain outside the estate.
    • Personal representatives will be able to ask scheme administrators to withhold up to 50% of taxable pension benefits for up to 15 months after death to cover potential IHT and interest.

Savings, Dividends & Capital Gains

  • Dividend tax (outside ISAs)
    • From April 2026, the ordinary (basic-rate) dividend tax rises from 8.75% to 10.75%, and the upper (higher-rate) from 33.75% to 35.75%.
    • The additional rate remains at 39.35%.
    • The Dividend Allowance stays at £500 per person, per tax year.
  • Savings and rental / property income (non-dividend)
    • From April 2027, tax on savings income (e.g. bank/building society interest) and property income (e.g. rental income from second properties) increases by 2 percentage points to 22% / 42% / 47% for basic / higher / additional-rate taxpayers.
    • The Personal Savings Allowance is unchanged (£1,000 for basic-rate, £500 for higher-rate; none for additional-rate).
    • The Property Allowance remains at £1,000 per year.
  • Capital Gains Tax (CGT)
    • No changes were made to CGT rates in this Budget.
    • The annual exempt amount remains £3,000 for individuals and personal representatives, and £1,500 for most trusts for 2026/27, with main CGT rates staying at 18% / 24% (residential property) and other existing rates unchanged.

Inheritance Tax (IHT)

  • The IHT nil-rate band (NRB) stays at £325,000 and the residence nil-rate band (RNRB) at £175,000, with both now frozen until at least April 2031, in line with income tax and NIC thresholds.
  • Business Property Relief (BPR) and Agricultural Property Relief (APR) will continue to benefit from the 100% IHT relief up to a limit of £1 million. Business property in excess of the limit will benefit from a 50% relief. the £1 million allowance is to be transferable between spouses/civil partners if unused on first death.
  • Gifts out of normal expenditure and other lifetime exemptions remain unchanged – regular gifts from surplus income and use of the nil-rate band every 7 years continue to form the core of standard IHT planning.
  • Charity exemption tightened
    • IHT relief for charitable gifts will, from 26 November 2025 / 6 April 2026 (depending on the event), be restricted to gifts made directly to UK charities and Community Amateur Sports Clubs (CASCs).
    • Gifts to trusts that do not themselves qualify as UK charities or CASCs will no longer be exempt from IHT.

Employment & National Insurance

  • For 2025/26:
    • Class 1 employee NICs: 8% (main rate) and 2% (upper rate).
    • Employer NICs: 15%.
    • The Secondary Threshold – the point at which employers start paying NICs – is effectively equivalent to £5,000 per year per employee (via a reformed system and updated Employment Allowance rules).
  • For the self-employed:
    • Class 4 NICs are 6% and 2% for 2025/26 and 2026/27.
    • Access to contributory benefits (including State Pension) continues via Class 2 credits where profits are above £6,845, without a separate Class 2 payment.
  • The National Living Wage / minimum wage has risen, for example to £10.85 per hour for 18–20-year-olds from April 2026.

 
Corporation Tax & Business Owners

  • Corporation Tax
    • The main rate remains 25% for profits over £250,000.
    • The small profits rate remains 19% for profits up to £50,000.
    • Profits between £50,001 and £250,000 attract marginal relief, giving a gradual rise in the effective rate between 19% and 25%.
  • VCTs and EIS
    • From 6 April 2026, Venture Capital Trust (VCT) income tax relief on new subscriptions falls from 30% to 20%, though annual and company investment limits are being increased.
    • EIS keeps its 30% income tax relief, while also benefiting from wider availability and higher company size limits.

 
Property & “Mansion Tax”

  • Landlords / rental income
    • From April 2027, tax on property income rises by 2 percentage points across basic / higher / additional rates (22% / 42% / 47%), as above. This is explicitly framed as aligning the tax on rental income more closely with earned income.
  • High Value Council Tax Surcharge (HVCTS) – England only
    • From April 2028, there will be a new High Value Council Tax Surcharge on owner-occupied residential properties valued at over £2 million in England.
    • The current design is:
      • £2,500 per year for properties worth £2m – £2.5m, £3,500 worth between £2.5m- £3.5m, £5,000 worth between £3.5m – £5m and £7,500 above £5m.
    • Valuations will be based on prices as at April 2026, with charges indexed to CPI from 2029/30 onwards.

Benefits & Family Support

  • Two-child benefit cap scrapped
    • From April 2026, the two-child limit on Universal Credit and Child Tax Credit is removed. Families can claim support for all children, which the government estimates will lift around 450,000 children out of poverty by 2030.
  • High Income Child Benefit Charge (HICBC)
    • The Budget makes no further changes to HICBC, but earlier reforms (from April 2024) still apply:
      • Charge starts at £60,000 of adjusted net income.
      • It withdraws 1% of Child Benefit for every £200 of income between £60,000 and £80,000, so Child Benefit is fully clawed back at £80,000.
  • Winter Fuel Payment / Pension Age Winter Heating Payment
    • The Winter Fuel Payment has been restored to most pensioners, but with a £35,000 taxable income threshold: if total income exceeds this, the payment is effectively clawed back via the tax system. The Budget confirmed that this £35,000 threshold will be maintained for the rest of this Parliament.
  • Energy bills
    • From April 2026, green levies on energy bills are being reduced/reshaped, cutting the typical bill by around £150 a year.

Motoring & Electric Vehicles

  • Fuel duty
    • Fuel duty remains frozen until September 2026, with the temporary 5p cut being gradually reversed thereafter.
  • Electric Vehicle Excise Duty (eVED)
    • From April 2028, a new mileage-based Electric Vehicle Excise Duty (eVED) will apply to battery electric and plug-in hybrid cars:
      • 3p per mile for pure electric vehicles.
      • 1.5p per mile for plug-in hybrids.
    • This is on top of existing Vehicle Excise Duty (VED) and is expected to rise with CPI from 2029.
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Min-Budget

Well the mini-budget was certainly a fiscal event. You have probably been inundated with commentary, but we will attempt to summarise it for you.

Globally a shift is taking place as we transition from an era of disinflation to a world of inflation and therefore higher interest rates. At the same time the picture is complicated by supply chains being modified to compensate for geopolitical challenges. Central banks only really have one weapon and that is raising rates to remove liquidity from the markets.
 
The government wants to stimulate growth. It has already announced the Energy Price Guarantee (EPG), capping the unit price for households and the Energy Bill Relief Scheme for non-domestic energy customers.
 
It is also trying to put more money in our back pockets with the following:
 

  • The Health and Social Care Levy Act provided a temporary increase in National Insurance contributions (NIC). This has been reversed and will come into effect on 6 November 2022.
  • The reduction in income tax to 19% from 20% scheduled for April 2024 has been brought forward to April 2023.
  • The residential nil rate tax threshold (stamp duty) is increased to £250,000 from £125,000 and for first time buyers £425,000 (£625,000 max) from £300,000.
  • The dividend ordinary rate will be reduced back down to 7.5% and the upper rate back down to 32.5% from April 2023.
  • Corporation tax will not rise and will stay at 19%.
  • The Annual Investment Allowance (AIA) will not be reduced in April 2023.
  • Investment Zones to be established and Enterprise Investment Schemes expanded.
  • If you have been affected by the change in IR35 this has also been reversed.

However, the Chancellor did not handle the announcements well. He started by dismissing the Permanent Secretary to the Treasury. The Office of Tax Simplification will be closed. He also did not ask the Office of Budget Responsibility (OBR) to review the announcements (therefore it is not really a budget) and then announced that there were ‘more cuts to come’.

The markets did not like the uncertainty and promptly sold Sterling and increased the cost of government borrowing by selling UK government bonds (gilts).  This then affected the defined benefit pension industry as the cost of liability matching pensions using derivatives increased. The pension industry then needed to increase the amount of capital (margin) to pay for the increase. This created a vicious recursive circle. The Bank of England (BoE) then stepped in to prop up the gilts market.

Going forward, the BoE only increased the bank rate by 0.5% to 2.25% on 22 September 2022. The next meetings are on 3 November and 15 December. There is a high probability that rates will go up on both dates. This will of course affect mortgage rates and if you are worried give Alastair a call in the office.

It looks like the Chancellor will be trying to balance the books. Simon Clarke, the new levelling up secretary has written to Whitehall departments asking them to ‘trim the fat’ and tackle the ‘very large welfare state’.

The Government’s strategy seems to be based on ‘Reaganomics’ from the 1980s. There will be more volatility in the markets for the foreseeable future; however this is normal market mechanics adjusting to the new regime. We are coming into the Q3 earning season but our companies will be able to pass through the increase in input costs from the energy rises feeding inflation price rises.