What the 2025 UK Autumn Budget Announcement Means for Individuals and Businesses
The Chancellor of the Exchequer, Rachel Reeves, today delivered her second Budget, which sets out her tax and saving plans. Her day got off to a bad start when another Government department accidentally published her plans before she had announced them to the House of Commons…
As your trusted accountants at Wallace White, we’ve picked out the main issues that are likely to impact you and your business.
National Insurance and Income Tax Thresholds
UK-wide, National Insurance thresholds have been frozen for an extra three years until 2031. In England, UK income tax thresholds have also been frozen, however Scotland has its own Income Tax bands and rates and it will be for the Scottish Government to decide if they wish to follow suit.
Tax on Dividend Income
Tax on dividend income will increase by 2%. From April 2026, the basic rate will rise from 8.75% to 10.75%, and the higher rate from 33.75% to 35.75% from April 2026. The additional rate will remain unchanged at 39.35%.
Tax on Savings Income
Tax on savings income will increase by 2% across all bands. The basic rate will rise from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47% from April 2027.
Tax on Property Income
The government is creating separate tax rates for property income, on which income tax is already charged. These separate rates mean property income will have its own individual tax rates (as already occurs for the taxation of savings and dividend income).
From April 2027, the property basic rate will be 22%, the property higher rate will be 42% and the property additional rate will be 47%. Finance cost relief will be provided at the separate property basic rate (22%).
Pension Salary Sacrifice Cap
The Chancellor has introduced a £2,000 cap on salary sacrifice for pensions, with contributions above that taxed in the same way as other employee pension contributions.
National and Minimum Wage Increase
The National Living Wage is set to increase by 4.1% to £12.71 per hour starting from April 2026. The minimum wage for 18 to 20-year-olds will go up 8.5%, from £10 to £10.85 per hour, as part of a plan to establish a single rate for all adults.
Electric Vehicles (EV)
A new mileage-based tax for electric vehicles and plug-in hybrid cars is to be introduced from 2028. Drivers of electric cars will be taxed three pence per mile driven, while those driving a plug-in hybrid (PHEV) will also have to pay, but at a reduced rate of one-and-a-half pence per mile.
The budget also provides new £2bn in support for the EV transition and 10-year 100% business rates relief for eligible changepoints and EV-only forecourts, cutting costs for businesses. It also includes a one-year extension to the 100% first year allowances for businesses buying zero emission cars and charge-point infrastructure to April 2027.
Personal Taxation
The amount that under-65s can put into cash ISAs (Individual Savings Accounts) has been reduced from £20,000 a year to £12,000 a year, with the remaining £8000 of the £20,000 annual allowance reserved for investments such as Stocks and Shares ISAs.
Capital Gains Tax on Employee Ownership Trust
The government has reduced the attractiveness of employee ownership trusts, announcing that CGT disposals will be reduced from 100% to 50% from this month. From now on, 50% of disposals will be treated as chargeable gains.
Writing Down Allowances
From April 2026 the main rate of Writing Down Allowances will be reduced from 18% to 14%. Writing Down Allowances are where businesses can claim tax relief when they buy capital items. However, from 1 January 2026, there will be a new first-year allowance of 40% for main rate assets (not applicable to cars or second-hand assets). The annual investment allowance and full expensing provisions remain untouched.
Two-Child Benefit Cap
The cap limiting households on universal or child tax credit from receiving payments for a third or subsequent child is set to be scrapped from April 2026. The rules on who can claim Child Benefit can be found here.
“Mansion” Tax
Properties in England worth more than £2m will face a council tax surcharge of between £2,500, rising to £7,500, for properties worth more than £5m, following a revaluation of homes in bands F, G and H.
This new tax currently applies to England only.
One More Thing…
Many of you may remember the controversy when Irn Bru was forced to change their recipe a number of years ago, reducing the sugar content by almost half in order to avoid the incoming sugar tax. Today’s budget removes the exemption for milkshakes and canned lattes, while also reducing the sugar tax threshold from 5g per 100ml to 4.5g. Could this force Scotland’s other national drink into a price rise or further changes to its iconic recipe?
Summary
While the budget did not directly increase National Insurance or Income Taxes, it did contain a number of tax raising measures that will affect businesses and individuals across the nation, in what Deutsche Bank described as the third biggest tax-raising budget since 2010.
In the coming days we will be looking into the detail of the 2025 Budget and as always, if you have any questions, please do not hesitate to get in touch.
