UK autumn budget 2025 – what it means for you and your business

The UK Autumn Budget 2025 introduced a wide set of tax, wage and business policy changes affecting individuals, landlords, freelancers and company directors. It arrives during a period of rising inflation, ongoing fiscal pressure and a continued Government objective to stabilise public finances. As a result, the Budget combines revenue-raising measures—such as higher taxes on income from work and investments—with targeted reforms intended to support business investment, modernise digital compliance, and address long-standing structural issues in the tax system.

For business owners and taxpayers, understanding the timeline of these changes is essential, as many will be phased in gradually between 2026 and 2031. The Autumn Budget also outlines several technical updates published on GOV.UK, which provides additional context for how these measures will be implemented (see the official HMRC Autumn Budget 2025 documents). Many measures continue the Government’s focus on fiscal tightening through threshold freezes and targeted tax rises, while others aim to encourage investment and simplify administration.

Key changes at a glance

The Autumn Budget 2025 introduces several shifts that will influence how individuals, landlords and businesses plan their tax, savings, wages and investment strategies. The summary below highlights the measures most likely to affect day-to-day financial decisions over the next few years.

The major updates to be aware of

Measure	What changes	Who is affected	When it starts
Income tax & NI thresholds	Frozen until 2031, increasing fiscal drag	Employees, directors, freelancers	Ongoing until 2031
Dividend, savings & property income tax	Rates rise by 2% across most bands	Investors, landlords, company directors	2026–27
National Living Wage	Above-inflation wage increases	Investors, landlords, and company directors	April 2026
ISA reform	Under-65s capped at £12,000 cash allowance	SMEs, e-commerce sellers	April 2027
Salary sacrifice NIC cap	£2,000 NIC-free limit on pension salary sacrifice	Directors, high earners, employers	April 2029
Inheritance tax reform	100% APR/BPR relief limited to first £1m	Farms, family businesses, property groups	April 2026
Investment schemes (EMI, EIS, VCT)	Higher limits but reduced VCT relief	Start-ups, scale-ups, investors	2025–26
Retail & customs reform	Business rates adjustments and end of low-value import relief	Employers in retail, care, hospitality, and logistics	2026–29
EV road pricing and VED changes	Per-mile road charge (EVs 3p, plug-in hybrids 1.5p) plus VED continues	EV owners, company car drivers and fleets	From April 2028
Making Tax Digital for Income Tax	Phased rollout of digital records, quarterly updates and end-of-year declaration	Sole traders and landlords above thresholds	2026–28
HMRC enforcement & digitalisation	Stronger compliance, mandatory digital invoicing	All businesses and landlords	2026–29

Taken together, these changes will influence financial planning across almost every taxpayer group and will require a forward‑looking approach over the next three to five years. Businesses reviewing strategy for the Autumn Budget period should pay close attention to phased changes running through 2026–2031.

Income tax and National Insurance: threshold freeze extended to 2031

The Government has extended the freeze on income tax and National Insurance thresholds until April 2031. Although tax rates have not increased, this freeze creates fiscal drag – meaning more individuals drift into higher tax brackets as wages rise.

Current income tax thresholds

These thresholds remain frozen as part of the wider Autumn Budget strategy to increase tax revenues gradually over time.

Band	Income range	Rate
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571–£50,270	20%
Higher Rate	£50,271–£125,140	40%
Additional Rate	£125,140+	45%

Why this matters for individuals and directors

For many taxpayers, the Autumn Budget threshold freeze will gradually increase the effective tax burden even if income only keeps pace with inflation.

• Individuals may find themselves moving into higher tax bands more quickly than expected.
• Directors who take a mix of salary and dividends will need to review their remuneration strategy.

For directors reviewing remuneration strategies under the Autumn Budget changes, our tax planning services provide structured, compliant approaches to managing salary, pension contributions and dividends effectively under the new rules.

Employers should also anticipate growing payroll tax exposure over the coming years as salaries rise within frozen bands.

Investment income: higher taxes on dividends, savings and property

Tax on property income increases (from April 2027)

Property income will be taxed at standalone rates separate from other income:

Rate type	Current	From April 2027
Basic rate	20%	22%
Higher rate	40%	42%
Additional rate	45%	47%

Dividend tax rises (from April 2026)

Band	Current	New
Basic rate	8.75%	10.75%
Higher rate	33.75%	35.75%

Savings income tax rises (from April 2027)

Savings income will increase by 2 percentage points across all bands.

Sector-specific impact

These Autumn Budget updates form a core part of the Government’s approach to raising additional revenue from investment-based income.

• Landlords face cumulative pressure from rising mortgage rates, frozen thresholds and higher tax on rental profits.
• Investors holding large dividend portfolios will see reduced net returns and may need to reassess portfolio composition.
• Directors relying heavily on dividends will need to revisit how they extract profits from their companies.

⚠️ Risk for landlords

A landlord with £20,000 taxable rental profit may see tax rise by around £400 annually at basic rate once the new property income rates take effect. Higher-rate landlords face proportionally larger increases and should review their cash flow and financing assumptions.

National Living Wage and minimum wage increases (from April 2026)

This rise is one of the most immediate cost changes introduced by the Autumn Budget and will directly influence payroll planning for 2026 and beyond.

Group	Old rate	New rate	Increase
NLW (23+)	£12.21	£12.71	+4.1%
18–20	£10.00	£10.85	+8.5%
16–17 & apprentices	£7.55	£8.00	+6%

Impact on employers

Employers facing rising wage costs can explore support options in our payroll services, ensuring accurate forecasting and compliance during the rollout of new wage thresholds.

Labour-intensive sectors such as hospitality, retail, care, transport and warehousing will feel the largest impact. Businesses should start modelling labour budgets for 2026–27 and consider how apprenticeships (see below), process improvements or technology can help manage higher staffing costs.

ISA reform: reduced cash allowance for under-65s (from April 2027)

This ISA adjustment, introduced as part of the Autumn Budget, changes the balance between cash saving and investment-based saving for many individuals. By capping cash savings for those under 65, the Government is encouraging the use of investment-based ISAs, which generally carry higher risk but also the potential for greater long-term return.

From 2027:

• Under-65s can only place £12,000 of the £20,000 annual ISA allowance into cash ISAs.
• The remaining £8,000 must be invested in stocks & shares or other investment-based ISAs.
• Savers aged 65+ retain the full £20,000 cash allowance.

Why this matters

This adjustment may push younger savers into higher-risk investment products at a time of market volatility. Those who rely heavily on cash savings for stability will need to reconsider their approach or diversify into blended portfolios. Businesses offering employee financial well-being resources should also update guidance to reflect the new rules.

For individuals completing annual tax returns, these ISA changes—outlined in the Autumn Budget—may influence long-term saving and investment decisions. Additional ISA guidance is available from MoneyHelper’s ISA guidance. Our Self Assessment tax return service can help ensure investment income and allowances are reported correctly while supporting better forward planning.

Pension salary sacrifice NIC relief capped (from April 2029)

Salary sacrifice has long been a popular tax-efficient planning tool, especially for directors and higher earners seeking to increase pension contributions while reducing NIC liabilities. The introduction of the £2,000 NIC-free cap represents a major change, narrowing the scope of salary sacrifice strategies and requiring earlier forward planning.

Salary-sacrificed pension contributions will only receive NIC exemption on the first £2,000 per year, meaning contributions above the threshold become less tax-efficient.

What changes

Contributions above £2,000:

• are treated as employee contributions
• attract the employer and employee NICs

Who is most affected?

These changes will particularly impact individuals who make large annual pension contributions under the new Autumn Budget framework through their employer, including limited company directors who use salary sacrifice to extract profits in a tax-efficient manner. Employers may also need to revisit remuneration packages to ensure benefit structures remain competitive.

Numbered planning steps

1. Review your pension contribution levels and identify any reliance on salary sacrifice above £2,000.
2. Assess whether alternative tax-efficient extraction methods—such as dividends or employer pension contributions—offer better long-term value.
3. Consider bringing forward larger pension contributions into the years before 2029 to maximise relief under the current system and plan ahead for when the new cap applies.

Employment and workplace updates

The employment measures introduced in the Autumn Budget 2025 are designed to modernise workplace tax rules and ensure more consistent application across employers. The changes will affect how reimbursements, shift payments and PAYE treatment are handled from 2026 onwards.

Homeworking expenses

From April 2026:

• Employees can no longer claim tax relief on homeworking expenses they personally pay.
• Employers may still reimburse eligible costs tax-free.

This change reverses the temporary flexibility introduced during the pandemic and places more responsibility on employers to support remote staff where needed.

Expanded employer benefit exemptions

New exemptions apply to employer reimbursements of:

• eye tests
• homeworking equipment
• flu vaccinations

These changes simplify compliance by aligning tax treatment more closely with modern workplace needs.

Shift payment rules

Payments for cancelled or altered shifts become taxable earnings. This clarification removes inconsistencies in how such payments were previously handled and ensures tax is applied uniformly.

PAYE for new residents

This restricts how much overseas work can be excluded from PAYE, ensuring contributions remain proportionate to UK-based duties.

Apprenticeships and skills funding for SMEs

To support workforce development and help smaller employers manage rising wage costs, the Government has expanded funding for apprenticeships. This includes full funding for apprentices under the age of 25 working in small businesses. The policy aims to increase the pipeline of trained workers while reducing hiring barriers for SMEs.

This measure helps reduce training costs and supports employers in developing long-term talent while controlling payroll budgets.

Business relevance

This brings down the true cost of recruitment and training and can offset wage increases for 2026.

Our small business accountants team supports SMEs with forecasting, budgeting and cash flow planning around staffing and training decisions.

Inheritance tax: APR and BPR reforms from April 2026

The Autumn Budget 2025 introduces a significant reform to Inheritance Tax (IHT) reliefs for business and agricultural assets. These reliefs are widely relied upon by family businesses, farming families and investors holding qualifying AIM portfolios, as they can allow certain assets to pass on death with reduced or, in some cases, no IHT. From April 2026, the government will change how Agricultural Property Relief (APR) and Business Property Relief (BPR) apply, introducing a new cap on the amount of value that can benefit from full relief. Further technical detail is set out in HMRC guidance.

What’s changing from 6 April 2026

Area	Current position	From April 2026
APR/BPR relief rate	Often 100% relief on qualifying assets	100% relief capped at £1 million per individual
Relief above £1 million	100% relief may apply (where qualifying)	50% relief applies above £1 million
Effective IHT rate above £1m	Potentially 0% on qualifying value	Effective 20% (50% chargeable × 40% IHT rate)
Nil-rate band	£325,000	No change
Residence nil-rate band	£175,000 (where conditions are met)	No change
Spouse and civil partner exemption	Available	No change

What this means in practice

Under the new rules, the first £1 million of qualifying farm or business assets can still pass free of IHT. Any qualifying value above £1 million will only receive partial relief, meaning that half of the excess value becomes chargeable to IHT.

As a result, assets above the cap may face an effective IHT rate of 20%, even though they continue to qualify for APR or BPR. For asset-rich businesses and farms, this can represent a material change in succession planning outcomes.

Who is most affected?

These reforms are most relevant for:

• Farm owners, particularly where land values are high
• Family-owned trading businesses with significant asset value
• Property groups qualifying for BPR
• Investors relying heavily on AIM or BPR-based portfolios as part of estate planning

What hasn’t changed

Despite the reform to APR and BPR, several key elements of the IHT framework remain unchanged:

• The £325,000 Nil-Rate Band still applies
• The £175,000 Residence Nil-Rate Band remains available where conditions are met
• Spouse and civil partner exemptions continue to apply

Risk if you delay planning

Where a business or farm exceeds the £1 million relief cap, an IHT liability may arise even if the business remains fully operational. This can create cash-flow pressure for successors if most of the value is tied up in land, buildings or trading assets rather than liquid funds.

Early planning is particularly important where ownership is concentrated, asset values have risen sharply, or succession is expected within the next decade.

Anti-avoidance and trust reforms

From 2026, additional measures will tighten the use of structures commonly associated with IHT planning:

• UK agricultural property held via non-UK structures will be treated as UK situs
• Trust exit charge rules are tightened to block avoidance
• Charity exemptions are restricted to UK-registered charities only

These changes are especially relevant for cross-border families, international business owners and those using trust structures as part of long-term estate planning.

Business tax changes and investment incentives

The Autumn Budget also reshapes several key corporate reliefs and investment incentives, including EMI, EIS, VCT and capital allowances. These measures affect how companies reward employees, attract investment and structure long-term growth plans.

Employee ownership trusts

CGT relief reduces from 100% to 50% for disposals after 26 November 2025.

Capital Gains Tax: BADR and Investors’ Relief rates

If you are planning a business sale, company closure, succession, or a restructuring, the Autumn Budget timeline for Capital Gains Tax reliefs matters.

• From 6 April 2025, the CGT rate for Business Asset Disposal Relief and Investors’ Relief increased from 10% to 14%.
• From April 2026, it is scheduled to rise again from 14% to 18%.

For some owners, this creates a genuine timing issue: delaying a disposal into the later period can materially increase the tax cost on qualifying gains, so it’s worth planning early if a sale or closure is on the horizon.

Enterprise management incentives (EMI)

• Employee limit rises to 500.
• Gross assets limit rises to £120m.
• Total scheme value doubles to £6m.

EIS and VCT updates

• Annual investment limit rises to £10m (or £20m for KICs).
• Lifetime limit increases to £24m (or £40m for KICs).
• VCT income tax relief falls from 30% to 20%.

Capital allowances

From 1 April 2026 for corporation tax, and from 6 April 2026 for income tax, the main rate writing-down allowance will reduce from 18% to 14%. Where an accounting period straddles the change, a blended rate may apply. This matters most for businesses that rely on writing-down allowances rather than claiming relief upfront, because the same spend will take longer to relieve.

Allowance	Old	New
Writing Down Allowance	18%	14%
First-Year Allowance	N/A	40% (excl. cars & used assets)
Annual Investment Allowance	£1m	£1m (unchanged)

Retail, business rates and customs reforms

The Autumn Budget introduces several measures aimed at supporting high-street businesses while also tightening customs processes for online imports. These reforms reflect both the need to stimulate local economic activity and the Government’s intention to close tax gaps associated with ecommerce.

Retail, hospitality and leisure relief

• Over 750,000 properties benefit from reduced multipliers in 2026–27.
• Properties with rateable values over £500,000 will see higher multipliers.

These changes aim to ease pressure on small and medium-sized retail and hospitality businesses, helping them remain competitive amid rising costs.

Customs reform affecting ecommerce (from 2029)

• Removal of customs duty relief for parcels under £135.
• New import arrangements apply across online marketplaces.

This will increase duties on low-value imports, impacting ecommerce sellers that rely heavily on international supply chains. The policy closes long‑criticised tax loopholes that previously benefited overseas retailers.

Business relevance

Ecommerce sellers, importers and multi-channel retailers should model increased costs from 2029 onwards. Businesses may need to review supplier contracts, pricing strategies and order volumes to maintain profitability under the new customs framework.

Motoring taxes: electric vehicles, fuel duty and road charges

The Autumn Budget 2025 includes several measures affecting running costs for drivers, company car users and fleets. While these changes may seem separate from income tax and payroll, motoring costs flow directly into business overheads, mileage policies, employee benefits and pricing decisions.

Electric vehicles: per-mile road charge from April 2028

From April 2028, electric vehicle drivers will pay a 3p per mile road charge, and plug-in hybrid drivers will pay 1.5p per mile, with rates expected to be adjusted annually in line with inflation. This is in addition to the existing Vehicle Excise Duty (VED), not a replacement.

Existing VED and “expensive car” threshold changes

From April 2026, the expensive car supplement threshold for EVs increases from £40,000 to £50,000, reducing extra tax on many electric cars that would otherwise fall into the higher supplement category.

Fuel duty: freeze phased out from September 2026

The Autumn Budget confirms that the fuel duty freeze will begin to be phased out from September 2026. Businesses with higher fuel exposure (for example trades, delivery, logistics and field-based teams) should allow for this in 2026–27 forecasting and pricing assumptions.

VAT and indirect tax changes

The Autumn Budget 2025 includes several indirect tax adjustments that affect a wide range of businesses, particularly those operating in retail, hospitality, manufacturing and import‑dependent sectors. While none of the changes are individually dramatic, together they point to a continued shift toward digital compliance and tighter control over duty‑based revenue.

According to HMRC’s VAT digitalisation roadmap, digital systems and e-invoicing will play an increasingly central role in compliance.

What’s changing

• The VAT registration threshold remains unchanged, offering stability for small businesses that were concerned about potential reductions.
• Digital VAT invoicing becomes mandatory from 2029, requiring all VAT‑registered businesses to issue invoices in an approved electronic format. This forms part of the Government’s long‑term digital reporting strategy, and businesses should allow time to update or replace older accounting systems.
• Adjustments have been made to charity donation relief, alongside duty increases for alcohol, tobacco and soft drinks. These changes will be most relevant for hospitality operators, retail businesses and manufacturers dealing with duty‑sensitive goods.

Overall, these measures signal the Government’s intention to streamline VAT processes and modernise the tax system, while raising additional revenue through sector‑specific duty changes.

Making Tax Digital for Income Tax: who must comply and when

A key Autumn Budget-era compliance change for many self-employed individuals and landlords is the phased rollout of Making Tax Digital for Income Tax Self Assessment (MTD ITSA). The requirement is based on gross income from business and property, and it includes combined income across both sources.

Rollout thresholds

• From April 2026: sole traders and landlords with gross income over £50,000 in the previous tax year (2024–25) must comply.
• From 6 April 2027: the threshold lowers to £30,000 gross income.
• From 6 April 2028: the threshold is planned to lower further to £20,000 gross income.

Over time, this means that most sole traders and landlords earning above these levels from business and/or property will fall within scope.

What you must do

To comply with MTD ITSA, you must:

1. Keep digital records using approved software.
2. Send quarterly summary updates to HMRC.
3. Submit a final end-of-year declaration by 31 January after the tax year end.
4. Pay any tax due (including Class 4 NICs where applicable) by the usual deadlines.

If you are close to the thresholds, it’s worth preparing early. The workload is not just “more reporting” — it often requires changes to bookkeeping routines, software, and how frequently records are reconciled.

High-value property surcharge (from 2028)

A new annual high‑value property surcharge will apply from April 2028 for residential properties valued above £2 million (based on 2026 valuations). This measure is designed to ensure that owners of high‑value homes contribute more towards local funding.

How it works

Property value threshold	Surcharge (£)
£2.0 – £2.5 million	£2,500
£2.5 – £3.5 million	£3,500
£3.5 – £5 million	£5,000
£5 million plus	£7,500

Who is affected?

This measure primarily impacts high‑value homeowners, property investors and those with large UK property portfolios. Overseas owners of high‑value UK homes will also be subject to the surcharge. Businesses operating serviced accommodation or holding residential property within a company structure may need to account for higher annual operating costs.

Conclusion: planning confidently through long-term change

The Autumn Budget 2025 sets the tone for the UK’s financial landscape over the next several years. It delivers a wide mix of tax rises, wage adjustments, digitalisation measures and incentive reforms that will unfold gradually between 2026 and 2031.

While none of the individual changes may appear dramatic on their own, their combined effect will influence how individuals save, how landlords structure their portfolios, how employers manage payroll, and how company directors extract profits.

For business owners, the key message is preparation. Wage increases, revised capital allowances, customs changes and new compliance rules all require updates to budgeting, pricing and investment plans. Individuals and landlords will also need to revisit their tax strategies as dividend, savings and property income rates increase.

As Autumn Budget changes continue to roll out across multiple years, early planning is essential. Whether you’re a business owner, contractor, landlord or director, our team can help you navigate these updates.