Autumn Budget 2025: How Will It Impact Individuals?

On 26 November 2025, Chancellor Rachel Reeves announced tax-raising measures worth up to £26 billion in the Autumn Budget. These changes include extending the freeze on Income Tax thresholds for another three years. 

Alongside the continued freeze on Income Tax thresholds, taxes on property, dividends, and savings income will rise over the next two years. The Budget also introduces National Insurance contributions (NICs) on salary sacrifice pension contributions above £2,000 a year and a new tax on homes valued at £2 million or more. 

To ease living costs, the Chancellor announced steps to cut energy bills, freeze rail fares, and remove the two-child benefit cap. From April, households will see an average of £150 taken off their annual energy bills. Reeves said these measures put ‘money off bills, and in the pockets of working people.’ 

Personal Tax 

The basic rate band stays at £37,700, the higher rate threshold at £50,270, and the additional rate threshold at £125,140. These freezes will continue for an extra three years until April 2031. NIC thresholds remain aligned with these limits. 

Scottish residents pay different rates on non-savings income, with 2026/27 rates to be confirmed in the Scottish Budget. Welsh taxpayers will continue to pay the same rates as those in England and Northern Ireland for 2026/27. 

Personal Allowance

The personal allowance remains at £12,570 until April 2031. It tapers away for incomes over £100,000, disappearing completely at £125,140. Married couple’s and blind person’s allowances will rise by 3.8% from April 2026. 

Property Income

From 2027/28, property income will be taxed at 22% for basic rate taxpayers, 42% for higher rate, and 47% for additional rate taxpayers. 

Savings Tax Rates

Current savings tax rates remain for 2026/27, but from April 2027 they will also rise by 2% in line with property income. 

Dividend Allowance

The Dividend Allowance stays at £500 for 2026/27. From April 2026, ordinary and upper dividend tax rates rise by 2%, to 10.75% for basic rate taxpayers and 35.75% for higher rate taxpayers, but the additional rate remains at 39.35%. 

From April 2027, personal allowance will offset employment, trading, or pension income first, in priority to investment income. Currently taxpayers have a choice of which income they wish to utilise it against.

Pension Allowances 

Pension allowances remain unchanged, with the Annual Allowance at £60,000 and tapering for high earners with ‘threshold income’ above £200,000. The Lump Sum Allowance of £268,275 and Lump Sum and Death Benefit Allowance of 4 times that value remain unchanged. 

ISA Limits

ISA limits stay frozen until 2031, including the special purpose Junior and Lifetime ISAs, but from April 2027 the cash ISA cap drops to £12,000 (except for those over 65) with the remaining £8,000 only available for stocks and shares investment. 

Employment 

Employee NIC rates remain at 8% and 2%, employer rate at 15%. Self-employed NIC rates remain unchanged, though Class 2 and 3 rates will rise slightly from April 2026. 

National Living Wage

From April 2026, the National Living Wage rises in line with the recommendation of the Low Pay Commission to £12.71 per hour for those aged 21+, with increases for younger workers and apprentices with the minimum rate £8. 

Company Car Tax

As previously announced, company car tax rates increase by 1% from 2026/27 for zero and low emission cars, with zero-emission cars taxed at 4%. Increases are published some years in advance, to provide certainty over a typical company car ownership cycle. 

Electric Vehicles

The benefit in kind rates for plug-in hybrid electric vehicles (PHEVs) were due to increase significantly due to increased CO2 emissions ratings for these vehicles. Emissions on these types of vehicles can vary greatly, depending on length of journeys and whether the user keeps then charged, and the CO2 ratings and benefit rates cannot easily cover the broad range of real use possibilities.  

A temporary easement is being introduced until April 2028 to mitigate the increase, with some transitional arrangements for the following 3 years.   

Benefits in Kind

As previously announced, reporting benefits in kind via payroll will become mandatory from April 2027. 

Umbrella Companies

In an effort to protect workers providing their services through umbrella companies that may not apply PAYE appropriately, recruitment agencies or end clients contracting with umbrella companies will become liable for PAYE and NICs on the relevant workers from April 2026. 

Salary Sacrifice Pension Contributions

Salary sacrifice pension contributions currently benefit from an NIC exemption for both employers and employees. This exemption will be capped at £2,000 from April 2029, so that excess contributions are subject to NIC in the same way as employee pension contributions. 

Employee Benefits

Currently if employers provide eye tests or home working equipment to employees these are not a taxable benefit for the employee, but if the employee pays for them and is reimbursed by the employer there is no relief. From April 2026 the relief will be extended to reimbursement by the employer, and flu vaccines will also be brought within the scope of the reliefs. 

The tax relief that enables employees to claim relief for additional costs incurred where they are required to work from home will be withdrawn from April 2026 where the employer does not actually reimburse those costs. 

Business

Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) Reliefs

There is significant expansion to the scope of the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) reliefs from April 2026. Currently investments could qualify for either scheme where a company’s gross assets are not more than £15m before issue, which will increase to £30m, and the post-issue limit of £16m increases to £35m.  

The maximum amount a company can raise annually under the schemes doubles from £5m to £10m, or from £10m to £20m for Knowledge Intensive Companies, and the company lifetime limits also double to £24m and £40m respectively. The VCT Income Tax relief for individuals drops to 20% from 30%, but EIS relief remains at 30%. 

Enterprise Management Incentive (EMI) Scheme Eligibility Limits

Enterprise Management Incentive (EMI) scheme eligibility limits also increase significantly from April 2026, applying to companies with gross assets up to £120m (currently £30m), and 500 employees (currently 250).  

The limit on total EMI options in the company also doubles, from £3m to £6m, and the maximum exercise period is extended from 10 to 15 years, and existing contracts will be able to be amended to match the longer period. 

Capital Taxes 

Capital Gains Tax

CGT rates are unchanged; and the annual exemption stays at £3,000. 

Employee Ownership Trusts

Employee Ownership Trust (EOT) relief is cut to 50% immediately.  Previously on selling to a qualifying EOT a seller could benefit from relief from the whole of their capital gain, with the gain being carried over so that it would be taxed on a future disposal (or deemed disposal) by the EOT.  

Now only 50% of the gain will be relieved and carried forward in the EOT, the balance will be taxable on the seller.  If this relief is claimed then Business Asset Disposal Relief (and Investors’ Relief, which may apply for non-employees) cannot also be claimed. 

Incorporation Relief

Incorporation relief will be required to be claimed from 2026/27, instead of being automatic as previously. 

Business Asset Disposal Relief

As announced at the 2024 Budget, Business Asset Disposal Relief rate rises to 18% from April 2026. 

Inheritance Tax

Inheritance Tax nil rate bands are frozen for a further year until 2031.  As announced at last year’s Budget, new rules will bring unused pension funds into estates from April 2027, bringing them into line with other investments.  Death in service benefits payable from registered pension schemes will be excluded from the value of the estate. 

Agricultural and Business Property Relief

As announced at the 2024 Budget, 100% agricultural and business property relief will be capped at £1 million per person from April 2026, with the excess benefiting from 50% relief.  In this budget it was announced that the £1m allowance will be transferable between spouses and civil partners, including where the first death was before April 2026. 

Other Matters 

Making Tax Digital for Income Tax

Making Tax Digital for Income Tax starts in April 2026 for qualifying incomes over £50,000, expanding gradually to those on lower incomes. 

High Value Council Tax Surcharge

High Value Council Tax Surcharge will apply from April 2028 to properties worth £2 million+, starting at £2,500 per annum increasing in stages to £7,500 for properties worth above £5m. 

Electric Vehicle Excise Duty

Electric Vehicle Excise Duty will be introduced from April 2028 for electric and PHEV cars, at 3p per mile for EVs and a lower rate for PHEVs to reflect that they may also be paying fuel duty.  It will not apply to other vehicle types, which are generally less advanced on the transition to electric power.