Budget 2025 – What It Means for You and Your Business

Chancellor Rachel Reeves delivered her second Budget on 26 November 2025 — and it’s a big one. With £26.1 billion in annual tax rises planned by 2029/30, this Budget brings major changes that will affect business owners, landlords, contractors, employers and investors.

Although Labour kept its promise not to increase income tax, NI or VAT for “working people”, the Budget introduces a long list of measures that will indirectly increase the tax burden for millions.

Here’s the full breakdown of the key points and what they could mean for you.

Income Tax & National Insurance

Threshold freeze extended to 2030/31

The personal allowance (£12,570) and higher-rate threshold (£50,270) will remain frozen for another three years.
This “fiscal drag” quietly pushes more people into higher tax bands and is expected to raise £7.6bn annually.

National Insurance

No new changes were announced:

• Employer NI: 15% on most earnings above £5,000

• Employee NI: 8% (basic rate band), 2% (above £50,270)

Payroll costs remain significantly higher, with no relief in sight.

Dividend, Savings & Property Tax

Dividend tax rises (from April 2026)

All dividend tax rates (except additional rate) rise by 2%:

• Basic rate: 10.75%

• Higher rate: 35.75%

• Additional rate: 39.35%

Combined with the dividend allowance cut to £500, this is another squeeze on company directors and small business owners.

Non-UK residents lose dividend tax credit

From April 2026, non-residents pay dividend tax exactly the same as UK residents.

New Property Income Tax Rates (from April 2027)

Property income will have its own tax rates:

• 22% basic

• 42% higher

• 47% additional

Reliefs will be applied first to non-property income, making property income taxed more heavily.

Savings income tax increases (from April 2027)

Savings rates rise by 2%, although the Personal Savings Allowance remains unchanged.

Inheritance Tax (IHT)

Major changes to APR and BPR

From April 2026:

• £1m combined 100% relief limit for APR (Agricultural Property Relief + BPR (Business Property Relief)

• Anything above £1m gets 50% relief

• AIM shares now only receive 50% relief

• Payment can be spread over 10 years interest-free

Pensions brought into IHT

From April 2027, unused pension funds will form part of an individual’s estate.

IHT thresholds frozen to 2030/31

Nil-rate band (£325,000) and residence nil-rate band (£175,000) remain unchanged.

Capital Allowances

Writing Down Allowances reduced

From April 2026, the main rate drops from 18% to 14%.

New 40% First-Year Allowance (from Jan 2026)

Companies can deduct 40% upfront on qualifying plant and machinery.

AIA & Full Expensing retained

• £1m AIA maintained

• Full expensing kept for companies investing in main-pool assets

Property Taxes

A “Mansion Tax” from April 2028

Annual charge on residential properties worth over £2m:

• £2,000,000–£2,500,000: £2,500

• Up to £7,500 for £5m+ properties

Properties in council tax bands F, G, and H (approximately 2.4 million) will be revalued to determine liability. This Charge can be deferred until sale or death.

Salary Sacrifice & Workplace Benefits

Pension salary sacrifice capped (from April 2029)

The first £2,000 remains NI-free, but anything above becomes subject to employer and employee NI.

Expansion of tax-free workplace benefits

From April 2026, reimbursements for eye tests, flu jabs and home-working equipment will receive the same NI/tax treatment as direct provision.

PHEV benefit-in-kind easement (retroactive)

CO2 for qualifying plug-in hybrids will be deemed as “1” for BIK purposes until April 2028.

Umbrella Companies & Contractors

PAYE responsibility shift (from April 2026)

Recruitment agencies or end clients (not the umbrella company) will be liable for correct PAYE.
HMRC can pursue any party in the chain.

This is a major shake-up for the contractor market.

Tax Compliance & Administration

MTD soft landing

First four quarterly submissions from April 2026 will not attract penalty points.

Corporation Tax penalties doubled

From April 2026, all CT late filing penalties are doubled.

Mandatory tax adviser registration (from May 2026)

All tax agents must register with HMRC. Non-compliant advisers can be suspended.

Strengthened HMRC powers

HMRC can:

• Demand adviser files without tribunal approval

• Publish details of advisers involved in deliberate wrongdoing

• Issue penalties linked to Potential Loss of Revenue

Crackdown on tax avoidance promoters

DOTAS strengthened with new notices, penalties and criminal powers.

Loan Charge settlement

Government introduces significant reductions for affected taxpayers — many could settle with 50%+ reductions.

Enterprise & Investment

EMI scheme expanded

From April 2026:

• Limits double

• Company size thresholds increase

• Exercise period extended to 15 years

EIS / VCT changes

• Investment limits doubled

• VCT income tax relief cut from 30% to 20%

• Reinvestment relief extended to 2035

VAT

Charitable donations: VAT relief extended

From April 2026, goods donated for use by charities will benefit from VAT relief, not just resale stock.

Private Hire Vehicles

No new favourable VAT rules. PHV/taxi services excluded from the Tour Operators’ Margin Scheme.

Construction Industry Scheme (CIS)

Enhanced compliance powers include:

• HMRC can amend CIS claims where fraud suspected

• Tightened rules on materials deductions

• £3m rolling threshold for deemed contractors

• New “failure to prevent fraud” offence

Capital Gains Tax

Incorporation Relief

From April 2026, must be claimed via Self Assessment with full details.

BADR rate increase

Up from 14% to 18% on the first £1m of qualifying gains.

Electric Vehicles & Motoring

Mileage tax for EVs (from April 2028)

• EVs: 3p per mile

• PHEVs: 1.5p per mile

EV tax incentives retained

• First-Year Allowances for chargepoints

• Full expensing on qualifying infrastructure

What This Means for You

This Budget represents a long-term tightening of the tax system. For most clients, this means:

✔ More tax paid over time
✔ Greater administrative burden
✔ Stricter HMRC enforcement
✔ Fewer opportunities for tax-efficient extraction of profits
✔ Higher costs for employers, landlords and contractors

The positive side: many changes come with multi-year lead times, giving a window for professional tax planning — but only if acted on early.

If you’d like to discuss how these changes affect your business, salary strategy, dividends, pensions or property income, I’m happy to help.

This analysis is based on Budget announcements made 26 November 2025 and supporting HMRC policy papers. Specific details may change as draft legislation progresses through Parliament.