After months of speculation, the Chancellor has unveiled the government’s Autumn 2025 Budget, setting out a package of tax and spending measures aimed at supporting economic growth while addressing ongoing cost-of-living pressures.
In her statement, the Chancellor described the measures as “fair and necessary choices to deliver on our promise of change.” In practice, the Budget relies heavily on continued fiscal drag, targeted tax rises, and a rebalancing of incentives for investment and business growth. Below is a summary of the key announcements affecting individuals and businesses.
Income tax and national insurance
The freeze on income tax thresholds has been extended yet again. The personal allowance (£12,570), higher-rate threshold (£50,270) and additional-rate threshold (£125,140), together with equivalent National Insurance Contribution (NIC) thresholds, will now remain frozen until 5 April 2031. Scottish income tax rates and bands will continue to differ.
The NICs secondary threshold of £5,000 will also be frozen until 2031. In addition, salary-sacrificed pension contributions above £2,000 per annum will become subject to employer and employee NICs from 6 April 2029, reducing the attractiveness of higher pension sacrifice arrangements.
Tax relief for non-reimbursed homeworking expenses will be removed from 6 April 2026, ending a long-standing claim for many employees.
Dividend taxation will increase from 6 April 2026, with rates rising from 8.75% to 10.75% for basic-rate taxpayers and from 33.75% to 35.75% for higher-rate taxpayers. From 6 April 2027, savings income UK-wide and property income in England, Wales and Northern Ireland will also see a two-percentage-point rise, taking rates to 22%, 42% and 47%.
Voluntary Class 2 NICs will be abolished for individuals living abroad, while the dividend tax credit for non-UK residents will be removed from April 2026. Image rights payments linked to employment will be treated as taxable employment income from 6 April 2027, subject to income tax and both employer and employee NICs.
Further changes include the removal of post-departure trade profits provisions in temporary non-residence rules from April 2026, and a reduction in income tax relief on Venture Capital Trust (VCT) investments to 20% from the same date.
Capital gains tax
Several changes will affect business owners and succession planning. CGT relief on qualifying disposals to employee ownership trusts (EOTs) will reduce from 100% to 50% for disposals on or after 26 November 2025.
Incorporation relief will no longer be automatic and must be actively claimed from 6 April 2026. Anti-avoidance rules covering share exchanges and company reconstructions will also be tightened from 26 November 2025.
Inheritance tax
The inheritance tax nil-rate band (£325,000), residence nil-rate band (£175,000), and the new combined £1 million allowance for agricultural property relief (APR) and business property relief (BPR) will now remain frozen until 5 April 2031.
The combined £1 million APR and BPR allowance will be transferable between spouses and civil partners. In addition, inheritance tax charges on relevant property trusts settled by former non-domiciled individuals will be capped at £5 million from 6 April 2025.
Other personal tax measures
A new High Value Council Tax Surcharge will apply to English residential properties valued at £2 million or more from 1 April 2028, ranging from £2,500 to £7,500 per year and uprated annually by CPI.
The cash ISA allowance for those under 65 will reduce from £20,000 to £12,000 from April 2027, although the overall ISA allowance will remain unchanged. New London Stock Exchange listings will be exempt from Stamp Duty Reserve Tax for three years, and a new settlement opportunity will be introduced for individuals with outstanding loan charge liabilities.
The scope of higher-rate Air Passenger Duty will extend to all private jets over 5.7 tonnes from 1 April 2027.
Business taxes
For businesses, the Chancellor announced a new 40% first-year capital allowance from 1 January 2026, alongside a reduction in the main writing-down allowance from 18% to 14%.
The 100% first-year allowances for zero-emission cars and EV charge-points will be extended to 2027, while historic Shadow ACT restrictions will be relaxed from April 2026.
Transfer pricing, permanent establishment and Diverted Profits Tax rules will be simplified from January 2026, with new international transaction reporting requirements introduced from 2027.
Other measures include VAT changes affecting private hire vehicles and disabled vehicle schemes, a new VAT relief for business donations to charity, expansion of the EMI scheme, and increased fundraising limits under EIS and VCT.
Overall, the Autumn 2025 Budget continues the trend of raising revenue through threshold freezes and targeted tax increases, while selectively encouraging investment and business growth. For individuals and business owners alike, forward planning will be critical in navigating the changes ahead.
A Happy and Prosperous 2026, Everyone!
As we head into the New Year, we start with dealing with the 31st January self-assessment deadline and payments that are also due by 31st January 2026.
WatkinsonBlack have considerable experience in all areas of taxation and business services. This includes providing a very cost-effective payroll bureau service, as well as assisting to ensure compliance with the latest Making Tax Digital legislation. If you are employed or self-employed either as a sole trader, partnership or limited company and want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us by telephone on 01925 413210 or by e-mail to info@watkinsonblack.com. Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
