Autumn Budget 2025 - A Clear Breakdown of the Key Tax Changes
The Chancellor has unveiled an extensive package of tax changes—some taking effect immediately, others phased in over the coming years. While positioned as a means of meeting fiscal targets without breaching manifesto commitments, the breadth of reform means that most taxpayers will feel the effects in one form or another.
To help you understand the impact, we’ve summarised the headline announcements alongside a more detailed, contextual overview below.
Headline Announcements at a Glance
Income Tax on Dividends, Property and Savings
The government will increase the tax rates applied to dividends, property income and savings income by 2 percentage points across most bands (with the additional dividend rate unchanged).
Dividend increases take effect from April 2026.
Property and savings increases follow from April 2027.
Meanwhile, the cash ISA allowance will fall to £12,000 from April 2027, although the overall ISA limit remains £20,000 through a ring-fenced £8,000 for stocks and shares.
Pensions and National Insurance
Pensions were largely untouched, but a key restriction arrives in 2029: the value of pension contributions made via salary sacrifice that can benefit from NI relief will be capped at £2,000 per year.
Electric Vehicles
Owners of electric and hybrid vehicles will face a new per-mile levy from 1 April 2028:
3p per mile for fully electric vehicles
1.5p per mile for hybrids
Council Tax Surcharge (“Mansion Tax”)
Properties valued at over £2 million will attract a new council tax surcharge from 1 April 2028, ranging from £2,500 to £7,500 per year.
Inheritance Tax Relief
There is one notable positive change: the £1 million combined allowance for Agricultural Property Relief (APR) and Business Property Relief (BPR) will become transferable between spouses and civil partners from April 2026, even where the first death occurred before this date.
Detailed Summary of All Announcements
Stealth Taxes and Threshold Freezes
A central theme of this statement is the extension of threshold freezes. Most personal tax and National Insurance thresholds, including the personal allowance, higher-rate threshold, and the employer secondary NIC threshold, will remain unchanged until 6 April 2031, extending an already lengthy freeze by three more years. The inheritance tax nil-rate band, previously fixed until April 2030, will also remain frozen until April 2031, as will the combined £1 million allowance for Agricultural Property Relief and Business Property Relief.
In addition to these freezes, the repayment threshold for Plan 2 student loans will not increase for a three-year period beginning in April 2027. These combined measures represent significant “stealth” tax rises, dragging more individuals into higher tax brackets over time.
Capital Allowances
Reforms to capital allowances will alter the pace at which businesses can obtain tax relief on capital expenditure. From April 2026, the main rate of writing-down allowance will fall from 18% to 14%, reducing the annual relief available. However, this is partially balanced by the introduction of a new 40% first-year allowance, available from 1 January 2026, enabling businesses to claim a more substantial upfront deduction in the year of investment.
Dividend Tax
Owner-managers and investors will face higher dividend tax rates from April 2026. The basic dividend rate will rise from 8.75% to 10.75%, while the higher rate increases from 33.75% to 35.75%. The additional dividend rate remains untouched at 39.35%. For many business owners, this creates an incentive to consider extracting surplus profits before the rate increases take effect.
Property Income and Savings
Landlords and savers will also experience higher tax burdens as the Chancellor introduces a clearer separation of income categories. From April 2027, new standalone tax rates will apply to property income—22% for basic rate, 42% for higher rate and 47% for additional rate taxpayers. Finance cost relief, which replaced mortgage interest deductibility, will be calculated using the new 22% property basic rate rather than the main basic rate.
Savings income will be taxed more heavily too, with all rates rising by two percentage points. At the same time, the cash ISA allowance will be limited to £12,000 from April 2027, although the overall £20,000 ISA limit remains through the protected £8,000 stocks and shares allowance. The message is clear: long-term investment is being prioritised over cash savings.
Inheritance Tax
In a rare easing of the rules, the government has confirmed that the new combined £1 million allowance for 100% agricultural and business property relief will be fully transferrable between spouses and civil partners from 6 April 2026. Importantly, this transferability applies even where the first death occurred before the implementation date—an amendment that significantly broadens the practical benefit of the relief and brings it in line with the existing nil-rate band framework.
Employment and Payroll
Several reforms affect employees and payroll operations. From April 2026, employees will no longer be able to claim a tax deduction for homeworking expenses unless reimbursed by their employer. However, employers who reimburse certain costs—such as eye tests, approved homeworking equipment or flu vaccinations—will benefit from extended tax and NI exemptions.
A more significant change arrives in April 2029, when the value of pension contributions made via salary sacrifice that can receive employee and employer NIC relief will be capped at £2,000 per year. This introduces a notable constraint on a widely used tax-efficient remuneration structure.
Additionally, the government has delayed the inclusion of employee car ownership schemes within Benefit-in-Kind rules until April 2030, with transitional arrangements extending until 2031.
Cars
From April 2026, the threshold for the Expensive Car Supplement applied to zero-emission vehicles will rise to £50,000, allowing more electric vehicles to fall outside the higher rate. A new mileage supplement for electric and plug-in hybrid cars will come into force on 1 April 2028, imposing an additional cost on individuals and employers running low-emission fleets.
State Pension
From April 2027, individuals whose only source of income is the basic or new state pension—and whose pension exceeds the personal allowance—will no longer be required to settle their tax through the simple assessment process. This change is intended to simplify administration, particularly for older pensioners with straightforward financial affairs.
Capital Gains Tax
The Chancellor announced several important reforms to capital gains tax. From November 2025, the relief on disposals to Employee Ownership Trusts will be reduced from 100% to 50%, reducing the attractiveness of EOT-based exits. The government has also immediately widened anti-avoidance provisions relating to share reorganisations and exchanges, although further guidance is awaited.
Another notable shift is that, from April 2026, incorporation relief will no longer apply automatically. Instead, taxpayers will need to actively claim the relief when transferring a business into a company structure.
Share Schemes
The Enterprise Management Incentives (EMI) scheme is set to become more generous from April 2026. Eligibility will expand substantially as the employee limit increases to 500 and the gross assets threshold rises to £120 million. The company share option limit will also be increased to £6 million, and the maximum holding period will extend to 15 years, including existing contracts. In addition, the requirement for EMI notifications will be removed from April 2027, reducing the administrative burden on qualifying companies.
Investment Incentives
A wide set of investment-related reforms is planned. From 27 November, certain transfers of company securities will qualify for relief from Stamp Duty Reserve Tax for a period of three years following a UK stock market listing. From April 2026, the investment limits for both the Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) will rise significantly, alongside increased lifetime investment thresholds and revised gross asset tests.
However, these enhancements are accompanied by a reduction in the VCT income tax relief rate, which will fall from 30% to 20%, adjusting the overall attractiveness of the scheme.
VAT and Indirect Taxes
VAT changes include a new relief—effective from April 2026—for businesses donating goods to charities for distribution or charitable use. From July 2026, vehicles leased through the Motability Scheme or similar qualifying schemes will become subject to 20% VAT on top-up payments, as well as Insurance Premium Tax at the standard 12% rate. Vehicles adapted for wheelchair or stretcher users are excluded from these changes.
Fuel duty will remain temporarily reduced for five further months, before gradually increasing through three staged rises between September 2026 and March 2027.
Non-UK Residents
Several reforms target non-UK residents. From April 2026, the dividend tax credit will be abolished for non-residents, aligning their treatment with UK residents. Amendments to the non-resident capital gains tax rules take immediate effect, closing loopholes for protected companies and refining the legislation around disposals.
Individuals living overseas will no longer be able to enhance their UK state pension by making Class 2 NI contributions after April 2026, and all dividends received during periods of temporary non-residence will become taxable, due to the removal of post-departure trade profit provisions.
Other Measures
A number of additional reforms round off the statement. From April 2027, income tax allowances will be applied to non-property income first, before being offset against property, savings, or dividend income. Corporation tax late filing penalties will double from April 2026, signalling an increased emphasis on compliance.
Finally, the government will remove the customs duty relief on imported goods valued at £135 or less by March 2029, bringing low-value online purchases within the scope of customs duty under a new framework currently under consultation.
This Autumn Budget represents one of the most wide-ranging tax reform packages in recent years. Although many measures are phased in gradually, the cumulative effect will reshape how investment income, property income, pensions, and business structures are taxed.
For business owners, landlords, investors, and high-value property owners, early planning will be essential to manage exposure and take advantage of reliefs while they remain available.
If you’d like help understanding how these changes affect your personal or business tax position, feel free to reach out.