Autumn Budget Summary 2025

Autumn Budget Highlights 26 November 2025

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  • Contents Overview

    1. Introduction

    2. Personal taxation

    3. Pensions, savings, and investments

    4. Capital taxes

    5. Welfare and labour markets

    6. Business taxes

    7. Value Added Tax (VAT)

    8. Tax administration

    9. National Insurance Contributions (NICs)

Budget Highlights

  • Personal Taxation

    • Income tax personal allowance levels and thresholds will be frozen until April 6, 2031.

    • National Insurance contribution thresholds for employees and the self-employed will also be frozen for three more years until April 6, 2031.

    • Tax rates on dividends for basic and higher rate taxpayers will increase by 2 percentage points starting in 2026/27.

    • Rates on savings income and property income will also rise by 2 percentage points from 2027/28 for all rates of taxpayers.

    • Salary sacrifice arrangements for pension contributions will be capped at £2,000 annually starting from 2029/30.

    • A high value council tax surcharge for properties valued over £2 million will be implemented from April 2028.

    • A pay-per-mile charge for electric and hybrid vehicles to be introduced from April 2028.

    • Transferability of unused Inheritance Tax (IHT) agricultural and business reliefs between spouses and civil partners upon death will be allowed.

    • The IHT nil rate band of £325,000 and the residential nil rate band of £175,000 will be frozen until April 6, 2031.

    • Maximum cash ISA subscription will be reduced to £12,000 from 2027/28 for individuals under age 65, while the overall ISA limit remains at £20,000.

    • The two-child benefit cap will be abolished effective April 2026.

    • Eligibility for the Enterprise Management Incentive (EMI) will expand to include scale-ups and not just start-ups from April 2026.

Detailed Introduction

  • The Autumn Budget marks Rachel Reeves’ second presentation focusing on the budget where fiscal pressures emerged amid significant U-turns on government policy (e.g. winter fuel payment, disability benefits).

    • These decisions resulted in a fiscal gap estimated at £6 billion by 2029/30, prompting speculation about tax increases.

    • The Chancellor’s pre-Budget statements suggested income tax rate rises, contradicting Labour's manifesto, but these plans were later tempered by alternative tax increases.

Personal Allowances and Reliefs

Key Figures for 2026/27

  • Personal Allowance: £12,570 (remains unchanged)

  • Married Couple’s/Civil Partners’ Transferable Allowance: £1,260

  • Blind Person’s Allowance: To Be Announced; previously £3,130

  • Rent-a-Room Relief: £7,500

  • Property and Trading Allowance: £1,000 each

  • Personal allowance reduces by £1 for every £2 of adjusted net income above £100,000.

Income Tax Rates and Bands (2026/27)

  • UK Taxpayers (Excl. Scottish):

    • 20% Basic Rate (up to £37,700)

    • 40% Higher Rate (over £37,700 to £125,140)

    • 45% Additional Rate (over £125,140)

  • Scottish Taxpayers:

    • Starter, Basic, Intermediate, Higher, Advanced rates to be confirmed in the Scottish Budget on 13 January 2026.

  • Dividend Tax Rates:

    • Basic Rate: 10.75%

    • Higher Rate: 35.75%

    • Additional Rate: 39.35%

  • Dividend Allowance: £500 (remains unchanged).

National Insurance Contributions (NICs)

  • NIC thresholds for employees and self-employed will remain unchanged from April 2028 to April 2031.

  • Class 1 Secondary Threshold set at £5,000.

  • Changes include removal of access to pay voluntary Class 2 NICs abroad and an increase in residency period for NICs payments to ten years from April 2026.

Welfare and Labour Markets

  • National Living Wage (NLW) and Minimum Wage (NMW) rates effective 1 April 2026:

    • NLW: £12.71 (up 4.1%)

    • NMW (18-20): £10.85 (up 8.5%), (16-17): £8.00 (up 6%), (apprentices): £8.00 (up 6%).

  • Removal of the two-child limit for Universal Credit (UC) and child tax credit from April 2026.

  • State pensions will increase by 4.8% effective April 2026 (up to £575 additional income).

Business Taxes

  • Corporation tax rates to remain at 25% and 19%.

  • A decrease in capital allowances effective April 2026; introduction of a new 40% first-year allowance for main rate assets.

  • Changes to EMI to allow scaling companies to access tax-advantaged shares, adjusting gross asset and employee limits.

Capital Taxes

  • CGT annual exempt amounts, rates and changes discussed, including lifetime allowance adjustments for VCTs and EISs.

Value Added Tax (VAT)

  • VAT registration and deregistration thresholds, changes to be implemented for business donations to charities, and changes affecting private hire vehicle operators.

Tax Administration

  • New rules regarding e-invoicing for all VAT invoices starting April 2029, alongside penalty structures for late submissions and payments effective 2026.