Autumn Budget 2025: Key announcements, tax changes and what they mean for you
After months of unprecedented and exhausting speculation, policy kite-flying and last-minute U-turns that rattled the markets, Rachel Reeves has finally unveiled her much-anticipated second Budget, delivered as late in the year as politically possible.
The Chancellor faced a tough backdrop: stagnant economic growth, persistently high inflation, rising unemployment and interest rates that continue to squeeze both households and businesses.
With welfare spending set to rise and the fiscal black hole widening, Reeves opted for a mix of stealth and structural tax measures to raise revenue. The Budget leans heavily on frozen thresholds, higher property-related taxes and a renewed focus on wealth taxation.
Most notably, the Chancellor abandoned her planned increase in income tax rates, which would have been the first rate rise since 1975, choosing instead to rely on quieter but no less costly tax rises to balance the books.
To avoid a spike in inflation, the Chancellor will continue the freeze on fuel duty (but only until 2026) and retain the 5p cut in the duty. However, she will increase the national living wage from £12.21 to £12.71 (as suggested by the Low Pay Commission), which will feed its way through to price rises and impact jobs in the wake of the April 2025 rise in employers' national insurance.
The two-child benefit cap will be removed from April 2026, and welfare benefits will rise in line with inflation
This and other spending announcements will be paid for by freezing income tax thresholds, taxing pension contributions, charging electric cars per mile, a mansion tax for expensive properties, a gambling tax, a tourism tax, etc, A veritable mixture of measures to add more complexity to the tax system.
With all the measures announced today, the question is will the Chancellor be back again this time next year with more tax rises that a simple income tax rate rise would have solved?
See:
Brief recap – key changes previously announced:
What are the key measures announced in the Autumn Budget 2025?
Taxes
- No increase in the rate of income tax, national insurance or VAT
- Soft drinks levy extended to high-sugar drinks, including milk-based drinks.
- A new tourist tax on overnight stays
- Income tax thresholds frozen for a further three years beyond 2028 to 2031
- Electric vehicle drivers face a 3p per mile tax from 2028/29. 1.5p per mile for hybrid cars. The charge will rise with inflation
- Pensions: no change to the 25% tax-free lump sum or relief for contributions (but see salary sacrificed pensions)
- Salary sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from National Insurance from April 2029. Contributions above the threshold will be subject to both employer and employee NICs, 15% and 8% respectively for earnings under £50,270 and 2p on income above that level
- Owners of properties worth £2m or more face a high value council tax surcharge from April 2028. Collected alongside council tax. The tax will be banded, with properties valued at £5m+ facing a £7,500 hit. The lowest band - £2m to £2.5m - will be £2,500. One suspects the threshold will be lowered over time, catching more properties.
- The basic and higher rates of dividends tax is rising by 2% to 10.75% and 35.75% respectively from April 2026
- From April 2027, the £20,000 ISA annual limit is kept, but £8,000 must be in investment (but over 65s not affected)
- Fuel duty frozen until September 2026 followed by staged increases. Temporary 5p cut also retained until September
- From April 2026, the main rate of writing down allowances will reduce by 4% to 14%. From 1 January 2026, there will be a new first-year allowance of 40% for main‑rate assets, preserving incentives to invest. Cars, second-hand assets and assets for leasing overseas will not be eligible.
- Reduced CGT relief on disposals to employee ownership trusts
- Payments from inherited blood compensation free from IHT
- Abolish access to voluntary Class 2 NICs for people living abroad
- Tax on savings income will increase by 2% across all bands from April 2027.
- New separate tax rates for property income, so property income will have its own individual tax rates. From April 2027, the property basic rate will be 22%, higher rate 42% and additional rate 47%. Finance cost relief will be provided at the separate property basic rate (22%).
- £1m 100% ABR/BPR IHT relief (from April 2026) to be transferrable between spouses, so married farmers can hand down to their children up to £2m.
- Permanently lower business rates for hospitality premises paid for by warehouses of online companies
- Low value imports into the UK. The £135 or less relief to be abolished from March 2029
- New settlement opportunity on the long-running loan charge
- Tobacco, vaping and alcohol duties to rise with inflation
- Gambling taxes to rise on remote gambling (but no change on in-person gambling)
- Bingo duty to be abolished
- EMI scheme to be made more generous
- Student loan repayment threshold frozen at the 2026/27 level for three years
- From 2027, people receiving only the basic or new state pension will not be subject to small tax bills via simple assessment
- Help to Save scheme to be permanent. Those eligible will receive a 50% bonus for every £1 they save over 4 years, a potential gain of £1,200.
- Small and medium-sized enterprises will continue to benefit from the existing exemption from transfer pricing.
- Making Tax Digital for Income Tax: there will be no late submission penalties for quarterly updates during the 2026/27 tax year.
Spending
- Welfare spending will be £16bn higher by 2029/30 in the wake of the Budget, the OBR has forecast
- Two-child benefit cap lifted from April 2026
- Greater resources to crack down on tax and benefits fraud
- More funds for devolved governments
- More sanctions on Russian assets
- National debt will rise to above £3 trillion for the first time.
- Rail fares frozen
- State pension to rise under the triple lock
- £150 average cut off energy bills from April 2026 (removing green levies)
Autumn Budget 2025 resources
Tax Tables 2026/27
Links to HM Treasury pages
Finance Bill 2025/26
Economic background to the Budget
Understand the Autumn Budget impact on you and your business
If you would like to discuss how these changes in tax policy may affect you and/or your business, please contact your usual Bishop Fleming advisor or speak to a member of our team.
