The UK Government has just announced its 2025 Autumn Budget, detailing how its new policies will shape the economy and affect households nationwide. Staying informed about what has changed, and what hasn’t, is essential for making smart decisions about your financial future.
We have simplified the key points below, allowing you to quickly focus on the areas that matter most to your finances and plans.
Here is a summary of the main points.
Focus on Individuals and Self-Employed
Several announcements directly impact personal wealth, savings, and the decision-making of sole traders.
Savings, Income, and Investment Taxes
| Area | Change | Effective Date | Key Consideration |
| Cash ISAs | Annual allowance reduced from £20,000 to £12,000 (for under 65s). The £20,000 overall ISA limit remains until 2030/31. | April 2027 | Maximize current Cash ISA allowance now. Review whether a Stocks & Shares ISA is better for utilizing the full £20,000 limit over the long term. |
| Income Tax | The freeze on income tax thresholds is extended to April 2031. Tax on property rental and savings income will rise by 2% across all bands. | Thresholds: April 2031. Property/Savings Tax: April 2027. | More earnings will be pulled into higher tax bands over time. Landlords must recalculate rental yields due to the 2% tax rise. |
| Dividend Tax | Basic and Higher rates rise by 2% (to 10.75% and 35.75% respectively). | April 2026 | Dividends outside tax wrappers are more costly. |
Property and Wealth Taxes
- High-Value Property Surcharge: A new annual levy will apply to residential properties valued at £2 million or above from April 2028. The annual charge starts at £2,500 and rises to £7,500 for properties over £5 million. Owners must factor this charge into long-term cash flow.
- Inheritance Tax (IHT) Thresholds Frozen: The IHT Nil Rate Band (£325k) and Residence Nil Rate Band (£175k) are both frozen until April 2031.
- IHT on Business and Agriculture Relief (BPR/APR): From April 6, 2026, the relief for assets will be cut from 100% to 50%. However, a 100% relief allowance of up to £1 million will be introduced (frozen until 2031), which is transferable between spouses.
Retirement Savings
- Salary Sacrifice Cap (Individuals): From April 2029, the National Insurance Contributions (NICs) exemption will be removed for pension contributions made via salary sacrifice that exceed £2,000 annually.
- Impact: While salary sacrifice remains effective, the primary NICs advantage is lost on higher contributions after 2029, requiring individuals to recalculate their long-term funding costs.
Essential Changes for Employers and Payroll
Measures affecting employee compensation, compliance, and incentives require immediate planning for HR and payroll departments.
Employee Pay and Benefits
- National Living Wage (NLW) Increase: The NLW for those aged 21 and over will rise by 4.1% from £12.21 to £12.71 per hour from April 1, 2026. National Minimum Wage rates for younger workers also see significant increases.
- Employer Pension Contributions Cap: From April 6, 2029, contributions made under a salary sacrifice arrangement will become subject to Employer’s NICs (as well as employee NICs) to the extent they exceed £2,000 per year. Employers should prepare to adjust payroll systems and communicate the reduced NICs advantage to staff.
- Benefits-in-Kind (BIKs) Reporting: HMRC has published interim guidance to help employers prepare for the mandatory payrolling of BiKs from April 2027. This formalizes the process and streamlines end-of-year reporting.
- BiK Alignment: From April 6, 2026, the tax treatment for reimbursing employees for costs like flu shots or home working equipment will be aligned with the treatment for benefits provided directly by the employer, simplifying administration.
Green Incentives and Schemes
- Plug-in hybrid electric vehicles (PHEVs) Bik Easements: Temporary easements have been introduced (retrospectively from January 1, 2025, to April 5, 2028) to address unexpectedly high BiK charges on certain PHEVs resulting from updated emissions testing.
- Employee Car Ownership Schemes (ECOS) Deferral: Changes intended to bring certain ECOS under company car BiK rules have been deferred until April 6, 2030, giving employers more time to review their schemes.
- Enterprise Management Incentives (EMI) Expansion: Eligibility for the tax-advantaged EMI scheme is being significantly widened from April 6, 2026, with the employee limit rising to 500 (from 250) and the asset limit rising to £120 million. This makes the scheme accessible to many more scaling companies.
Key Measures for Incorporated Companies
These changes primarily impact limited companies, especially those dealing with capital expenditure, compliance, and growth schemes.
Corporate Tax Rates and Capital Expenditure
- Corporation Tax Rate: The main rate is confirmed to remain at 25%.
- Capital Allowances (WDAs): The standard Writing Down Allowance (WDA) for the main pool of plant and machinery will drop from 18% to 14% from April 1, 2026.
- New Investment Incentive: A 40% First-Year Allowance (FYA) will be introduced for main rate expenditure from January 1, 2026. This aims to partially support the leasing sector, who are currently excluded from Full Expensing.
- Penalties Doubled: Automatic penalties for late filing of Corporation Tax returns will double. The basic penalty rises from £100 to £200, and penalties for repeated late filings rise substantially (e.g., up to £2,000).
Growth Incentives and Share Schemes
- EIS/VCT Limits Increased: To boost investment in growing firms, the limits for both the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) are significantly raised.
Note: The Income Tax relief on VCT investments will be reduced from 30% to 20% to align closer with EIS.
- Employee Ownership Trusts (EOTs): From November 26, 2025, the CGT relief on selling shares to an EOT is reduced from 100% to 50%, resulting in an effective CGT rate of 12% on the sale.
- CGT Rollover Relief: From April 2026, claiming rollover relief on incorporation must be done explicitly via a Self-Assessment return.
Compliance and International Reporting
- International Transactions (ICTS): HMRC will introduce the International Controlled Transactions Schedule (ICTS), requiring an estimated 75,000 businesses dealing with cross-border related-party transactions to file an annual ICTS return for risk profiling, starting in 2028.
- VAT Grouping: From November 26, 2025, the rules on cross-border VAT grouping will revert to the UK’s previous position, meaning intra-group charges between a UK VAT group and its overseas establishments will generally be outside the scope of VAT.
Next Steps for Your Business and Finances
The Autumn Budget 2025 introduces a mix of short-term and long-term measures that will impact businesses and individuals. Below is a clear timeline of when key changes take effect:
| Effective Month & Year | Policy Area | Change |
| Jan-25 | Green Incentives | PHEV BiK Easements: Temporary easements introduced retrospectively to address high Benefits-in-Kind (BiK) charges on certain plug-in hybrid electric vehicles (running to April 2028). |
| Nov-25 | Growth Incentives | Employee Ownership Trusts (EOTs): CGT relief on selling shares to an EOT reduced from 100% to 50%. |
| Compliance (VAT) | VAT Grouping: Rules on cross-border VAT grouping revert to the UK’s previous position, generally putting intra-group charges outside VAT. | |
| Jan-26 | Corporate Tax | New Investment Incentive: A 40% First-Year Allowance (FYA) introduced for main rate expenditure. |
| Apr-26 | Employee Pay | National Living Wage (NLW) Increase: NLW for age 21+ rises from £12.21 to £12.71 per hour. |
| Corporate Tax | Capital Allowances (WDAs): Standard Writing Down Allowance drops from 18% to 14%. | |
| Investment Taxes | Dividend Tax: Basic and Higher rates rise by 2% (to 10.75% and 35.75%). | |
| Wealth Taxes (IHT) | IHT on BPR/APR: Relief reduced from 100% to 50%, with a new £1m 100% allowance. | |
| Employee Benefits | BiK Alignment: Tax treatment of reimbursements aligned with employer-provided benefits. | |
| Growth Incentives (EMI) | EMI Expansion: Employee limit rises to 500; asset limit rises to £120m. | |
| Corporate Compliance | CGT Rollover Relief: Claims must now be made explicitly via Self-Assessment. | |
| Apr-27 | Investment Taxes | Cash ISAs: Allowance reduced from £20,000 to £12,000 (under age 65). |
| Income Tax | Property & Savings Tax: Tax on property rental and savings income rises by 2%. | |
| Employer Compliance | Mandatory payrolling of Benefits-in-Kind (BiKs). | |
| Apr-28 | Property & Wealth Taxes | High-Value Property Surcharge: Annual levy for properties valued at £2m+. |
| General 2028 | International Compliance | ICTS: Annual International Controlled Transactions Schedule return required. |
| Apr-29 | Retirement Savings | Salary Sacrifice NIC Exemption removed for pension contributions over £2,000. |
| Employer Pay/Benefits | Employer NICs apply to pension salary-sacrifice contributions over £2,000. | |
| Apr-30 | Green Incentives | ECOS Deferral: Changes to Employee Car Ownership Schemes deferred. |
| Apr-31 | Income Tax | Income Tax Thresholds frozen until April 2031. |
| Until April 2031 | Wealth Taxes (IHT) | IHT Nil Rate Band & Residence Nil Rate Band frozen until 2031. |
Need help understanding how these Autumn Budget changes affect your tax bill or business plans?
Our experts at Accounting People can provide tailored guidance to keep you compliant, tax-efficient, and fully prepared for what’s ahead.
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If you’d like a more detailed, in-depth breakdown of the Autumn Budget 2025, simply click the button below to download the complete guide.
