Autumn Budget 2025

On 26 November, the Labour government presented the Autumn Budget, describing it as a programme of “fair and necessary choices” intended to advance its commitments to ease living costs and reduce public debt and borrowing.

The main tax measures introduced in the Budget are summarised below.

Personal Taxation and National Insurance

Frozen thresholds and National Insurance amendments

• Income tax and NIC thresholds extended to 2031: The current personal allowance (£12,570) and the higher and additional rate thresholds (respectively £50,270 and £125,140) will remain unchanged for an additional three years from April 2028. This prolonged freeze will draw more taxpayers into higher tax bands over time.
• Residence: where non-UK residents receive both dividend income and UK rental or partnership income they can choose to pay tax on:

• just their UK rental and partnership, but they may not claim their personal allowance; or
• the whole of their income and claim their personal allowance, and get a tax credit at the ordinary rate against their dividend income (this was not repealed when the UK resident tax credit was abolished).

From 6 April 2026, the notional tax credit will be abolished to bring non-UK residents in line with UK residents.

• Employer NIC secondary threshold fixed: The earnings point at which employers begin paying National Insurance contributions will not change until April 2031.
• Voluntary Class 2 NICs for individuals abroad removed: From 6 April 2026, expatriates will no longer be able to make voluntary Class 2 payments, closing a path previously used to maintain entitlement to certain UK benefits.

Dividend, Savings and Property Income Taxation

Dividend income

• From 2026/27 onwards, the basic and higher rates of income tax on dividends will increase by two percentage points. The basic rate will increase from 8.75% to 10.75%, and the higher rate will rise from 33.75% to 35.75%. The additional rate for dividend income remains at 39.35%.

Property income

• Beginning in 2027–28, property income will be taxed under separate bands set at 22% (basic), 42% (higher) and 47% (additional). As property income is not subject to NICs, the new structure aligns more closely with broader income tax treatment.

Savings income

• For 2027/28 the rates of income tax on savings will increase by two percentage points. From 6 April 2027, the basic rate will be 22% (currently, 20%), the higher rate 42% (40%) and the additional rate 47% (45%).

 Capital gains tax 

• Employee ownership trusts: with immediate effect from 26 November 2025, the capital gains tax relief available on disposals of shares to employee ownership trusts will be restricted to 50% of the gain arising. Thus the person making the disposal will be subject to capital gains tax on 50% of the gain. Neither business asset disposal relief nor investors’ relief will be available if capital gains tax relief is claimed on disposal to the trustees of the employee ownership trust.
• Claims for incorporation relief: currently, rollover relief on the transfer of a business to a company in exchange for share consideration applies automatically if the conditions are satisfied, subject to an election by the person making the disposal to disapply the relief. With effect for transfers on or after 6 April 2026, a claim for incorporation relief will be required in the self-assessment return for the tax year in which the transfer occurs.
• Anti-avoidance (non-resident capital gains): for disposals on or after 26 November 2025, changes will be made to the rules that bring non-residents within the scope of capital gains tax or corporation tax (as appropriate) in relation to disposals of assets that derive 75% of their value from UK land.

Wealth and Estate Planning

Inheritance Tax developments

• IHT thresholds: The existing freeze on the nil rate band (currently £325,000) and residence nil rate band (currently £175,000) has been extended until 2030/31 (previously 2029/30), meaning that the maximum amount that a married couple or civil partners can pass on whilst benefiting from the 0% rate remains £1m until 2030/31. The maximum value of an estate above which the residence nil rate band is subject to restriction or withdrawal (the taper threshold) has also been frozen at £2m until 2030/31.
• Transferable APR and BPR allowances: From 6 April 2026, any unused portion of the £1 million 100% relief for agricultural or business property can be transferred between spouses or civil partners.
• The nil rate band, residence nil rate band, including its £2m taper limit, will be frozen for a further year, to 5 April 2031;
• Limit on excluded property trusts: the introduction of a £5m capon IHT 10-year and exit charges, over each 10-year cycle, for trusts which held excluded property at 30 October 2024, provided that the property remains outside of the UK at the date of each charge. This measure will appear in the 2025/26 Finance Bill and take effect from 6 April 2025.
• Relevant property trusts - Anti-avoidance: a technical change will apply to exit charges in a relevant property occurring on or after 26 November 2025 to ensure that the charge that applies to overseas property that ceases to be relevant property (by becoming excluded property) because the settlor ceases to be a long-term UK resident cannot be avoided by bringing the assets to the UK before the change in status and then moving them offshore again afterwards.
• Anti-avoidance: with effect from 6 April 2026, the anti-avoidance rules that prevent UK residential property held in a non-UK structure from being treated as excluded property if held by a person who is not a long-term UK resident or in a trust that is outside the scope of inheritance tax in relation to overseas property will be extended to UK agricultural property.

 Housing and Property Taxation

High-value council tax surcharge (HVCTS)

• Residential properties in England worth £2 million or more will be subject to a new surcharge from April 2028. Annual charges will begin at £2,500 and increase to £7,500 for homes valued above £5 million. Liability will rest with property owners, not occupiers.
• Revised property valuations will be used to determine which homes fall within scope, and the surcharge is expected to raise roughly £0.4 billion per year.

Annual tax on enveloped dwellings (ATED)

• From the date the Finance Bill 2025–26 receives Royal Assent, with the effect that it has always been in force, claims for relief to reduce the initial chargeable amount under an annual tax on enveloped dwellings (ATED) return, will no longer be required to be made within one year of the end of the chargeable period. There will be no time limit to claim relief made in an ATED return. However, the time limit for amending an ATED return still applies.

Business and Investment Reliefs

Corporation tax

• The main corporation tax rate remains unchanged at 25%.

New 40% First Year Allowance (FYA)

• From 1 January 2026, businesses will be able to claim a 40% FYA on qualifying main-rate capital expenditure, including most leased assets.
• Writing-down allowances for the main pool will decrease from 18% to 14% from April 2026 (for corporation tax) and from the same date under income tax rules.

VCT and EIS reforms

• Investment thresholds for Venture Capital Trust (VCT) s and the Enterprise Investment Scheme (EIS) will double (e.g., VCT limits rising from £5 million to £10 million, and EIS limits from £12 million to £24 million), with more generous allowances.
• However, the income tax relief that can be claimed by an individual investing in a VCT will be reduced from 30% to 20% from April 2026.

Other Key Measures

• Tighter temporary non-residence rules: From 6 April 2026, any distributions or dividends received from a close company during a period of temporary non-residence will be fully taxable in the UK, removing the current exemption for profits generated after an individual’s departure.

Conclusion

The Autumn Budget 2025 marks a continued move toward indirect or “stealth” tax increases. Rather than raising headline rates, the government is opting to freeze thresholds, impose new limits on reliefs and increase taxation on investment, savings and property-related income. These measures are set to impact owners of high-value homes, individuals with substantial rental or investment income, employers providing salary-sacrifice pensions and those living overseas.

Nonetheless, certain opportunities remain—such as transferable APR/BPR allowances and expanded incentives for business investment through the new FYA and enhanced VCT/EIS limits—which may offer valuable planning strategies.

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The information provided in this article is of a purely general nature and is not a substitute for specific advice that may be requested here.