Autumn Budget Analysis

November 2025

Chancellor of the Exchequer Rachel Reeves set out tax-raising measures worth up to £26 billion in the Autumn Budget on 26 November 2025.  This was in response to the Office for Budget Responsibility’s (OBR) forecast for GDP growth of 1.5% over the next five years, 0.3% lower than their forecast in March 2025.

The increases will be achieved through a range of measures, including extending the freeze on Income Tax thresholds for a further three years and increases in taxes on property, dividend and savings income.  

The Budget also announced employee and employer National Insurance contributions (NICs) on salary sacrifice pension contributions above £2,000 a year and introduced a tax on homes valued at £2 million or more.  So the main changes were in the areas of personal taxation with the Chancellor emphasizing the need for all individuals to contribute to the plan. 

Overall, despite the anticipation, leaked messages and speculation in the run up to the Budget, there were few changes impacting businesses in the UK as the Chancellor tried to maintain a focus on encouraging growth whilst seeking to address the fiscal deficit.  Corporation tax rates remain unchanged, there were small changes to capital allowances and more investment in the Enterprise Management Incentive Scheme and the Enterprise Investment Scheme.  The Chancellor also announced a £10m investment in AI and the supporting industries to ensure the UK is able to compete in this growth market.

We have summarized below the key changes announced and the impact on Business, Personal and Capital Taxes.  As ever, the devil is in the detail so we have focused our review on the areas most likely to impact our clients.

Business

Corporation Tax

The government has confirmed that the rates of Corporation Tax will remain unchanged, which means that, from April 2026, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.

Comment

The government has committed to capping the main rate of Corporation Tax at 25% for the duration of the Parliament.

The penalty for taxpayers submitting a Corporation Tax return late will double for returns for which the filing date is on or after 1 April 2026. 

Capital allowances

The Full Expensing rules for companies allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is new and unused. Similar rules apply to integral features and long-life assets at a rate of 50%.

The government will reduce the main rate Writing Down Allowance (WDA) from 18% to 14% per year from 1 April 2026 for Corporation Tax purposes and 6 April 2026 for Income Tax purposes. For businesses with chargeable periods which span 1 April (Corporation Tax) or 6 April (Income Tax), a hybrid rate will apply. The WDA on the special rate pool remains at 6% per year.

For expenditure incurred on or after 1 January 2026, the government will introduce a new first year allowance (FYA) of 40% for all businesses on main rate assets, including most expenditure on assets for leasing. Cars, second-hand assets and assets for leasing overseas will not be eligible. 

The Annual Investment Allowance is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit remains at £1 million.

The 100% FYA for qualifying expenditure on zero-emission cars and the 100% FYA for qualifying expenditure on plant or machinery for electric vehicle chargepoints have been extended to 31 March 2027 for Corporation Tax purposes and 5 April 2027 for Income Tax purposes.

Targeted Research and Development Advance Assurance Service

The government will pilot a targeted advance assurance service from spring 2026. This will enable small and medium-sized enterprises to gain clarity on key aspects of their Research and Development (R&D) tax relief claims before submission to HMRC. A summary of responses to the advance clearance consultation will also be published.

Advance Tax Certainty Service

A new Advance Tax Certainty Service will be launched in July 2026. This will provide major investment projects in the UK with certainty on the application of tax law to their specific circumstances. Qualifying project expenditure must be at least £1 billion. Subject to full initial disclosure of all material facts, a clearance will bind HMRC for five years, and may be renewed for a further five years.

Enterprise Investment Scheme and Venture Capital Trusts investment limit increase and restructure

The government has announced significant changes to the limits applying to the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) from 6 April 2026. The gross assets requirement that a company must not exceed for EIS and VCTs will increase from £15 million to £30 million immediately before the issue of the shares, and from £16 million to £35 million immediately after the issue. The annual investment limit that companies can raise will increase from £5 million to £10 million.

For Knowledge-Intensive Companies (KICs), the annual investment limit will increase from £10 million to £20 million. The company’s lifetime investment limit will increase to £24 million and for KICs to £40 million. The Income Tax relief that can be claimed by an individual investing in VCTs will decrease from 30% to 20%.

Expanding the eligibility limits of the Enterprise Management Incentives scheme

The government is also increasing certain limits relating to the Enterprise Management Incentives (EMI) scheme. For EMI contracts granted on or after 6 April 2026, the employee limit will increase from 250 employees to 500 employees, the gross assets test will be increased from £30 million to £120 million, and the company share option limit will be increased from £3 million to £6 million. The limit on the exercise period will increase to 15 years, and will also apply retrospectively to existing EMI contracts which have not already expired or been exercised.

UK Listing Relief

The government has announced an exemption from the 0.5% Stamp Duty Reserve Tax (SDRT) charge on agreements to transfer securities of a company whose shares are newly listed on a UK regulated market. This measure will have effect for agreements to transfer made on or after 27 November 2025. The exemption will apply for a three-year period from the listing of the company’s shares. The exemption will not apply to the 1.5% SDRT charge, or where the transfer forms part of a merger or takeover where there is a change of control.

Personal Tax

Tax bands and rates

The basic rate band remains at £37,700, with the higher rate threshold remaining at £50,270. The additional rate threshold remains at £125,140. The freeze of these thresholds will continue until April 2031. The NICs Primary Threshold and Lower Profits Limit remain at £12,570. The NICs Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 up to April 2031 as well. Other employer NICs relief thresholds aligned to the Upper Earnings Limit will also be maintained at this level.

The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.

The personal allowance

The Income Tax personal allowance is fixed at the current level of £12,570 and will remain frozen until April 2031.

There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. This means that there is no personal allowance where adjusted net income exceeds £125,140.

The government will increase the married couple’s allowance and blind person’s allowance from 6 April 2026 by the CPI rate for September 2025 of 3.8%.

Tax on property income

Property income is any income from letting land and buildings. Individuals have a Property Allowance. This exempts property income of £1,000 or less. Property income over £1,000 can be offset either by the £1,000 Property Allowance or by deducting relevant expenses.

The government is introducing the following separate tax rates for property income from 2027/28:

• 22% for basic rate taxpayers

• 42% for higher rate taxpayers

• 47% for additional rate taxpayers.

Tax on savings income

Savings income is income such as bank and building society interest.

The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of Income Tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.

Savings income within the allowance still counts towards an individual’s basic or higher rate band and so may affect the rate of tax paid on savings above the Savings Allowance.

Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. This will remain at £5,000 until 5 April 2031. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income, less allocated allowances and reliefs) exceeds £5,000.

The current tax rates on savings income will be maintained for 2026/27. From 6 April 2027, there will be a 2% increase in the applicable tax rates. The basic rate will increase to 22%, the higher rate will increase to 42% and the additional rate will increase to 47%.

Tax on dividends

Currently, the first £500 of dividends is chargeable to tax at 0% (the Dividend Allowance). This £500 is retained for 2026/27. These rules apply to the whole of the UK. From 6 April 2026, there will be a 2% increase in the ordinary and upper rates of Income Tax applicable to dividends. The additional rate will remain unchanged at 39.35%

Dividends received above the Dividend Allowance will be taxed at the following rates for 2026/27:

• 10.75% for basic rate taxpayers

• 35.75% for higher rate taxpayers

• 39.35% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.

To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

Income Tax ordering rules

The Income Tax ordering rules will change from 6 April 2027. The personal allowance will be deducted from employment, trading or pension income first. Currently, individuals can choose which income the allowance is offset against.

Pension tax limits

For 2026/27:

• The Annual Allowance (AA) is £60,000.

• Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a minimum AA of £10,000.

• The Lump Sum Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum, is £268,275.

• The Lump Sum and Death Benefit Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum in certain circumstances, is £1,073,100.

Individual Savings Accounts

For 2026/27, the limits are as follows:

• Individual Savings Accounts (ISAs) £20,000

• Junior ISAs £9,000

• Lifetime ISAs £4,000 (excluding government bonus)

• Child Trust Funds £9,000.

These limits will remain frozen until 5 April 2031.

From 6 April 2027, the annual ISA cash limit will be set at £12,000. The remaining £8,000 will be designated for stocks and shares ISA investment. This restriction will not apply for those over the age of 65, where the cash ISA limit will remain at £20,000.

Employment

National Insurance contributions

Employees

For 2025/26 the rates of Class 1 employee NICs are 8% and 2%. The employer rate is 15%. The Secondary Threshold is the point at which employers become liable to pay NICs on an individual employee’s earnings and is currently set at £5,000 a year from 6 April 2025. The government announced that this will be maintained at this level until April 2031.

The Employment Allowance allows eligible businesses with employer NICs bills to deduct £10,500 from their employer NICs bill.

The self-employed

For 2025/26 the rates of Class 4 self-employed NICs are 6% and 2%. These rates remain the same for 2026/27.

For Class 2 NICs from 6 April 2025:

• Self-employed people with profits of £6,845 and above get access to contributory benefits, including the State Pension, through a National Insurance Credit, without paying Class 2 NICs.

• Those with profits under £6,845 who pay Class 2 NICs voluntarily to get access to contributory benefits, including the State Pension, will continue to be able to do so.

Changes for 2026/27

The government will increase the Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) from 2026/27. For those paying voluntarily, the government will also increase Class 2 and Class 3 NICs for 2026/27.

The LEL will be £6,708 per annum (£129 per week) and the SPT will be £7,105 per annum. The main Class 2 rate will be £3.65 per week and the Class 3 rate will be £18.40 per week.

Employer NICs relief for veterans

The government will extend the employer NICs relief for employers hiring qualifying veterans to April 2028.

This means that businesses continue to pay no employer NICs up to annual earnings of the Veterans Upper Secondary Threshold of £50,270 for the first year of a veteran’s employment in a civilian role.

National Living Wage and National Minimum Wage

The government has announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2026. The rates which will apply are as follows:

	NLW	18-20	16-17	Apprentices
From 1 April 2026	£12.71	£10.85	£8.00	£8.00

The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.

Taxable benefits for company cars

The rates of tax for company cars are amended for 2026/27:

• the charge for zero emission cars rises from 3% to 4%

• the charge for other cars with emissions below 75g/km increases by 1%

• the maximum benefit of 37% remains.

The government has confirmed increases to the benefit in kind rates for company cars for tax years up to and including 2029/30.

The government announced that it is introducing a temporary easement to mitigate the increasing benefit in kind tax liabilities of plug-in hybrid electric vehicle (PHEV) company cars due to new emission standards. The easement will apply retrospectively from 1 January 2025 to 5 April 2028. Transitional arrangements will apply to certain PHEVs until 5 April 2031.

Car fuel benefit charge

The government will increase the car fuel benefit charge from 6 April 2026.

Mandating the reporting of benefits in kind via payroll software

The government confirms that the use of payroll software to report and pay tax on benefits in kind will become mandatory, in phases, from April 2027. This will apply to income tax and Class 1A NICs.

Tackling tax non-compliance in the umbrella company market

To tackle the significant levels of tax avoidance and fraud in the umbrella company market, the government will make recruitment agencies responsible for accounting for PAYE and Class 1 NICs on payments made to workers that are supplied via umbrella companies.

Legislation will be introduced to make employment agencies or end clients joint and severally liable for any amount required to be accounted for under the PAYE provisions, where an umbrella company forms part of a labour supply chain. Further legislation will be introduced which will impose an equivalent joint and several liability for NICs purposes.

This will allow HMRC to pursue an agency in the first instance for any payroll taxes that a non-compliant umbrella company fails to remit to HMRC on their behalf.  The end client will be liable if contracting directly with an umbrella company.

Where there is no agency, the responsibility will fall to the end client business.

This will take effect from 6 April 2026. The measure will protect workers from large, unexpected tax bills caused by unscrupulous behaviour from non-compliant umbrella companies.

Changes to salary sacrifice for pensions from April 2029

The government is changing how salary sacrifice for pension contributions works.

Salary sacrifice is when you agree to reduce your gross salary or sacrifice a bonus and, in return, your employer pays the same amount into your pension.

From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from NICs. Contributions through salary sacrifice, like all pension contributions, will still be exempt from Income Tax (subject to the usual limits).

Employers and employees can still make contributions above £2,000 through salary sacrifice arrangements. However, employee contributions above this amount will be subject to employer and employee NICs like other employee workplace pension contributions.

Employers will need to report the total amount sacrificed through their existing payroll. All employer pension contributions will continue to be free of NICs.

Employees, as well as employers, will pay NICs on the amount above £2,000 for employee contributions through salary sacrifice.

Employees who choose to salary sacrifice to receive Tax Free Childcare or Child Benefit can keep doing so.

Expanding workplace benefits relief

This measure will introduce new legislative exemptions for the reimbursement of eye tests, flu vaccines and home working equipment.

Under current law, the exemption only applies where the employer provides the benefit directly. This change will ensure that reimbursements are treated in the same way.

This will have effect on or after 6 April 2026.

Removal of tax relief on non-reimbursed homeworking expenses

This measure will remove the tax relief available to employees who have incurred additional household costs if they are required to work from home. These costs include increased household utility costs and business telephone calls.

It will only apply to those employees who have not had these costs reimbursed by their employer.

This will not impact the existing ability for employers that reimburse employees for costs relating to homeworking where eligible without deducting Income Tax and NICs.

This will take effect from 6 April 2026.

Capital Taxes

Capital Gains Tax

Capital Gains Tax rates

The Capital Gains Tax rates remain unchanged for 2026/27 and the annual exempt amount will remain at £3,000 for 2026/27.

Employee Ownership Trusts

The current relief available for qualifying disposals by business owners selling their shares to Employee Ownership Trusts (EOTs) is a 100% exemption of any gain. From 26 November 2025, the relief will only exempt 50% of the gain. Business Asset Disposal Relief and Investors’ Relief will not be available where the 50% exemption has been claimed. The remaining 50% of the gain on disposal will not form part of the disposer’s chargeable gain. Instead, 50% of the gain will be held over and deducted from the trustees’ acquisition cost. This will mean that it will come into charge on any subsequent disposal or deemed disposal of the shares by the trustees of the EOT.

Incorporation Relief

The government will introduce a requirement for taxpayers to actively claim incorporation relief for transfers of a business to a company on or after 6 April 2026. The relief previously applied automatically.

Business Asset Disposal Relief

The rate applying for individuals claiming Business Asset Disposal Relief and Investors’ Relief will increase to 18% for disposals made on or after 6 April 2026.

Carried interest rates and reform

From April 2026, all carried interest will be taxed within the income tax framework. A multiplier of 72.5% will be applied to any qualifying interest brought within the charge.

The current Council Tax system uses property values from 1991. From April 2028, properties valued at £2 million or more will be liable to a new High Value Council Tax Surcharge (HVCTS).

The HVCTS will be staggered depending on the value of the property. For property over £2 million, the annual charge will be £2,500. For property valued between £2.5 - £3.5 million, the annual charge will be £3,500 and for those properties valued between £3.5 - £5 million, the annual charge will be £5,000. Properties valued in excess of £5 million will have an annual charge of £7,500.

The surcharge will be collected alongside the existing Council Tax due for the property.

Other Matters

Electric Vehicle Excise Duty

The government is introducing Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars, which will come into effect from April 2028. Drivers will pay for their mileage alongside their existing VED.

The government will work closely with industry and motoring representative groups on the delivery of the new tax.

The tax paid by EV drivers will be around half the fuel duty rate paid by the average petrol/diesel driver, with a reduced rate for plug-in hybrid drivers. When eVED takes effect in April 2028, an average EV driver will pay around £240 per year or £20 per month.

Other vehicle types, such as vans, buses, motorcycles, coaches and HGVs, will be out of scope of eVED when it is introduced, with the transition to electric power for these vehicle types being currently less advanced than for cars.