Autumn Budget 2025 summary

From April 2029, pension salary sacrifice contributions above £2,000 per year will lose their exemption from National Insurance, with amounts over the threshold treated as standard employee pension contributions and subject to both employer and employee National Insurance Contributions (NIC). Employer pension contributions will remain exempt from NICs.

Given that employee NIC rates are higher in the basic tax band, and many employers pass on some or all of their own NIC savings to staff who contribute via salary sacrifice, the arrangement has long been an attractive way for basic rate earners to enhance their pension savings. 

The £2,000 cap will also lead to a further increase in employers’ NIC liabilities, which is already a bone of contention for many following the employer NIC increase announced in the Autumn 2024 Budget.    

On a positive note, the continued NIC relief on ordinary employer contributions allows business owners to extract profits tax‑efficiently and use their full Annual Allowance. Employees may also negotiate higher pension entitlements to maximise savings.

The overall ISA allowance will remain at £20,000, but the cash ISA allowance will be reduced to £12,000 from April 2027 for those under 65. Over 65s are exempt from the cash ISA changes.

This change aligns with our understanding that the Chancellor is keen to encourage individuals to invest rather than hold surplus cash. It is, however, hard to see the direct benefit to the UK economy as there appears to be no measures encouraging or mandating investment into UK companies.

Whilst we do expect that this will drive a modest increase in the uptake of investment ISA savings, it’s important to note that Premium Bonds and short-dated gilts are still available as tax-efficient ways to hold cash funds, so those keen to remain in very low-risk assets are likely to explore these routes rather than being forced into investing. 

Capital Gains Tax (CGT) relief for shareholders disposing of a qualifying interest to an Employee Ownership Trust (EOT) has been cut to 50% (previously 100%) with immediate effect.  Whilst the value remains uncapped, disposals will now effectively be taxed at up to 12%.

The reduction in CGT relief for disposals to EOTs significantly weakens the incentive for business owners, with notable cashflow implications. As much of the consideration is typically structured through loan notes and deferred payments, the need to fund the CGT liability by 31 January following disposal may force a larger share of initial cash into tax, making external financing increasingly important for successful EOTs.

Planned CGT rate increases for other disposals to 18% (from 14%) on up to £1m of lifetime gains qualifying for Business Asset Disposal Relief will still take effect from 6 April 2026.

No exit charge was introduced for individuals ceasing UK tax residence, nor were changes made to the death uplift, which continues to reset asset values to market value. However, the government will modernise anti-avoidance rules for share exchanges and reorganisations with immediate effect, to be legislated in the Finance Bill 2025‑26.

Whilst the Inheritance Tax (IHT) rates and thresholds remained unchanged, the government announced a further freeze on the Nil Rate Band (NRB) and Residence Nil Rate Band (RNRB) until 2031. 

This will result in more estates paying IHT on death as the value of homes and other assets continue to rise.

Agricultural Property Relief and Business Relief combined allowance is now transferable

As for other thresholds, the combined £1m allowance for Agricultural Property Relief (APR) and Business Relief (BR) taking effect from 6 April 2026 will be frozen to 2031. 

However, in a welcome update, the Chancellor announced the allowance will now be transferable between spouses and civil partners, including if the first death was before 6 April 2026.

Agricultural property held in offshore entities

New anti-avoidance legislation will target attempts to sidestep IHT by holding agricultural property in non-UK entities. The rules apply immediately to trust exit charges and gifts to charities in lifetime and death from 6 April 2026, and for UK agricultural property from 6 April 2026.

Infected Blood Compensation Payments

Payments made under the Infected Blood Compensation Scheme and Interim Compensation Payment Scheme will be free of IHT where the original infected person died before the compensation was paid. Living recipients will have two years to gift some or all without an IHT charge.    

IHT on unused pension funds and death benefits

From 6 April 2027, under the proposed inclusion of pension assets within IHT, personal representatives will be able to instruct pension scheme administrators to withhold up to 50% of taxable benefits for 15 months and use these funds to settle IHT liabilities in certain cases.

To ease concerns about the risks of administering Estates in future, PRs will be discharged from liability for payment of IHT on pensions discovered after they have received clearance from HMRC.

Cap on IHT charges for excluded property trusts

It was also announced that a cap of £5m will be introduced for relevant property trust charges for pre-October 2024 excluded property trusts. 

National Insurance and Income Tax thresholds will stay frozen until 2030/31, marking over a decade without movement. As wages climb, millions more will be dragged into higher tax bands, creating a stealth tax rise that piles pressure on ordinary earners despite unchanged headline rates.

Income Tax on dividend income will increase by 2% from April 2026 resulting in rates of 10.75% for basic rate taxpayers and 35.75% for higher rate taxpayers. 

The rate of 39.35% applying to additional rate taxpayers remains unchanged.  

A similar 2% increase will apply to property and savings income from April 2027 resulting in Income Tax rates of 22%, 42% and 47% applying to these sources of income.

A new annual High Value Council Tax Surcharge, now commonly referred to as the Mansion Tax, has been introduced. Mansion Tax will apply to properties valued at more than £2 million in England and will take effect from 6 April 2028.    

The surcharge will be added to existing council tax bills with the revenue generated going to central government rather than local authorities (as is currently the case with Council Tax).  

Mansion Tax will have four bands starting at £2,500, for homes worth between £2 million and £2.5 million, rising to £7,500 for properties valued at over £5 million.  

Intermediate bands will apply for homes between these, and it is expected that the charges will increase each year in line with CPI inflation.

The Government estimates that fewer than one percent of UK properties will be affected, with the impact concentrated in London and the Southeast of England.  A consultation will explore options for asset-rich but cash-poor homeowners to defer payment until the property is sold or upon death. 

The state pension is being increased by 4.8%, maintaining the triple lock as expected. 

The 100% First Year Allowances (FYA) for qualifying expenditure on zero emission cars and FYA for qualifying expenditure on plant or machinery for Electric Vehicle (EV) charge points will be extended for a further year.

The FYA will now be in place until 31 March 2027 for Corporation Tax purposes, and 5 April 2027 for Income Tax purposes.   

The Writing Down Allowance (WDA) main rate will be reduced from 18% to 14%, effective from 1 April 2026 for corporation tax and 6 April 2026 for income tax, alongside a new 40 per cent first-year allowance from 1 January 2026. This is expected to raise £1.5 billion in 2029/30.  

This measure adjusts Capital Allowance rates for both companies subject to Corporation Tax and unincorporated businesses under self-assessment, on mainrate qualifying expenditure. Notably, leased assets will now qualify for the new 40% first-year allowance, even though they remain excluded from full expensing. 

As expected, Enterprise Management Incentive (EMI) has been widened with the employee limit increased from 250 to 500 employees, gross assets from £30m to £120m and the limit of EMI options which can be granted from £3m to  £6m per company. Finally, the maximum length of EMI options will be lengthened from 10 years to 15 years.

These changes come in from April 2026.

From an admin perspective, the requirement to notify HMRC of the grant of EMI options is being abolished from April 2027.

This is great news for businesses and means that more employees and businesses can benefit from the great tax reliefs on offer within EMI.

An EMI option offers highly favourable tax treatment. There is no tax on grant of the option and no tax on exercise, provided the exercise price is at least equal to market value. On disposal, the gain is subject to CGT , with BADR available after two years, applied to the entire gain.

This creates a remarkably advantageous position: reducing personal tax rates from as high as 47% (50% in Scotland) down to just 18% under current rules.

In addition the employer also receives a corporation tax relief at (currently) 25% for the same gain.

EIS & VCTs

We welcome the news for growing companies with the expansion of the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) investment limits, moving from an annual limit of £5m to £10m while increasing the lifetime limit from £12m to £24m in April 2026. The Knowledge Intensive Company limits will move from £10m to £20m annual limit and £40m lifetime limit at the same time.

In addition from April 2026, the gross asset limit will increase to £30m before the share issue and £35m after the share issue from £15m before  and £16m after currently.

However, alongside these changes, the VCT income tax relief reduces from 30% to 20% - not so good for VCT investors, but the idea being to balance the tax relief gained by individuals on EIS (30% income tax reducer) and how funds claiming VCT are taxed.

All in all, good news for start-up or growing companies who require investment, which has to be good for the UK economy.

National Living Wage and National Minimum Wage

The widely anticipated 50p increase in the headline rate of National Living Wage (NLW) was confirmed and the rates are set out below:

• From April 2026, the NLW for workers aged 21+ will rise to £12.71 per hour (+4.1%).
• 18–20-year-olds: hourly rate increases by 8.5% to £10.85.
• 16–17-year-olds and apprentices: minimum hourly rate set at £8.00 (+6%).

The government has opted not to extend NLW coverage to 18-year-olds, but the difference between age bands is narrowing.

Employers will need to plan carefully for these changes and consider how they can continue to protect jobs, alongside increased costs, especially given wider Employment Rights Bill considerations.

Further review is needed on how salary sacrifice arrangements, address considerations for salaried employees (including graduates and school leavers), and ensure strong controls are in place to maintain compliance.

National Minimum Wage (NMW) compliance has been under intense scrutiny, with around 500 employers publicly named this year. Staying compliant is therefore critical, especially as rising rates risk wage compression and the erosion of pay differentials. Employers should explore alternative reward strategies to retain and motivate staff, for example, share based incentives such as Enterprise Management Incentive (EMI) schemes. 

Employment Tax changes

HMRC is placing greater emphasis on the Construction Industry Scheme (CIS), with £189m expected to be recovered in 2026/27 through fraud penalties. This highlights the need for strong governance and compliance, particularly in relation to IR35, righttowork checks, and Corporate Criminal Offence. The government has also announced a consultation to simplify CIS administration, with further details to follow. 

With dividend rate changes, individuals working offpayroll and outside IR35 may need to reassess how their reward packages are structured. At the same time, scrutiny of the gig economy is increasing, with a focus on employment status, righttowork, and Corporate Criminal Offence. 

For the automotive sector and those operating employee car ownership schemes, there was welcome news: the current treatment will continue until April 2030 (rather than October 2026), meaning vehicles under these arrangements will not be treated as company cars until at least 2030, with transitional rules running to 2031. 

Finally, from April 2026, the income tax and NIC exemption for employer-provided benefits will be extended to cover reimbursements for eye tests, homeworking equipment, and flu vaccinations, a welcome simplification that reflects calls for change. 

Tour Operators’ Margin Scheme 

From 2 January 2026, private hire vehicle services will be excluded from the Tour Operators’ Margin Scheme (TOMS), overturning the Upper Tier Tax Tribunal ruling in March 2025 in favour of Bolt Services. HMRC has clarified that TOMS was created to simplify VAT treatment of EU travel services such as package holidays, and was never intended for domestic taxi or private hire supplies. To provide certainty, legislation will be introduced to exclude these services from TOMS, except where they form part of wider travel packages. 

From 1 July 2026 VAT will be introduced at the standard rate (20%) on advance (top-up) payments paid to Motability or equivalent schemes, and Insurance Premium Tax at the standard rate (12%) on insurance related to vehicle leased through the scheme.

HMRC has updated its position on the UK VAT treatment of intra-entity services involving establishments located in an EU member state that are part of a UK VAT group. HMRC acknowledges that some VAT groups may have accounted for VAT in line with the previous guidance and may now be eligible to reclaim overpaid VAT through the error correction notification procedure. Please contact the indirect tax team for detailed information on this matter, as the anti-avoidance legislation associated with VAT groups may need to be considered.

Charities will benefit from a new VAT relief on business donations of goods to charity for onward distribution or use in the delivery of their services, from 1 April 2026. 

Electric Vehicle Excise Duty (eVED) 

From 1 April 2028, a new mileage supplement will apply, 3p per mile for electric cars and 1.5p per mile for plugin hybrids. 

Fuel Duty

The cancellation of the uprating on fuel duty was announced for 2026-27; extending the 5p cut in rates to 31 August 2026, with the cut being reversed in stages by 1p from 1 September 2026, 2p from 1 December 2026, and 2p from 1 March 2027. 

Low Value Imports  

The reform of the customs treatment of low value imports will occur by March 2029 at the latest. When that is done, all parcels coming into the UK will be within the scope of customs duty.  

Landfill Tax 

To maintain the differential, there will be an increase in the lower rate of landfill tax by the cash increase of the standard rate of landfill tax from 1 April 2026 and in each year of the forecast period.

Tobacco Duty Rates

Duty rates on all tobacco products will increase by RPI inflation +2 ppts. These changes will take effect from 6pm on 26 November 2025. The one-off increase of £2.20 per 100 cigarettes or 50g of other tobacco products and annual uprating of tobacco duty by RPI + 2 ppts next year will take effect from 1October 2026 and will be included in Finance Bill 2025-26.

Vaping Products Duty and Vaping Duty Stamps

From 1 October 2026, the government will legislate a new Vaping Products Duty at a flat rate of £2.20 per 10ml applied to all vaping liquids, alongside the Vaping Duty Stamps scheme to support compliance.  

Up to £10 million in funding will be directed from HMRC to Border Force in 2026-27 to enhance operational information gathering capabilities ahead of the Vaping Products Duty introduction and to support enforcement at the border.  

Reform Gambling Taxes

There will be an increase in Remote Gaming Duty from 21% to 40% from 1 April 2026, as well as a Remote Betting Rate at 25% (excluding Self-Service Betting Terminals, spread betting, pool betting & UK horseracing) from 1 April 2027. In addition, Bingo Duty will be abolished from 1 April 2026. 

Carbon Border Adjustment Mechanism 

Carbon Border Adjustment Mechanism (CBAM) will be introduced with effect from 1 January 2027, with the inclusion of indirect emissions within scope from 1 January 2029 at the earliest.  

The Soft Drinks Industry Levy (SDIL) has been strengthened following a consultation exercise by the government.    

The threshold at which the SDIL applies has been lowered from 5g to 4.5g sugar per 100ml.

The exemption for milk-based drinks has been removed, with pre-packaged milk-based drinks with added sugar, like bottled milkshakes and coffee drinks now being brought into the scope of the levy. ‘Open-cup’ milkshakes prepared in cafés, bars, etc will remain out of scope of SDIL; as will plain cow’s milk, and other milk drinks without added sugar. A “lactose allowance” will be introduced to account for naturally occurring sugars in milk.  

The exemption is also removed for milk substitute drinks with added sugar. This will bring plant-based drinks with added sugar into scope of SDIL, should they contain 4.5g or more total sugars per 100ml.  The government will exclude from scope milk substitutes without added sugar. Plant-based drinks which contain only sugars released from their principal, or ‘core,’ ingredient (such as soya, or oats) will be out of scope, ensuring that unsweetened plant-based drinks continue to be out of scope, just as plain animal milks are.

The changes will take effect from 1 January 2028. Recognising the challenges for industry, the government has allowed over two years for reformulation, starting from policy confirmation on 25 November 2025. 

The government will legislate measures to simplify the administrative burden for reporting companies under the corporate interest restriction rules.  

The most significant simplification measures will apply to periods ending on or after 31 March 2026. The key change removes both the time limit for appointing a reporting company and the requirement to notify HMRC of the appointment. 

In addition, the government will legislate technical amendments to the corporate interest restriction rules. Tax EBITDA will be adjusted to exclude capital expenditure deducted under specific reliefs, including waste disposal site preparation and restoration, cemeteries and crematoria, and flood and coastal erosion risk management projects. These changes will apply retrospectively to periods ending on or after 31 December 2021. 

The government will legislate measures to simplify the tax on related party transactions, non-resident companies trading in the UK, and profits diverted from the UK. These measures will be enacted for periods beginning on or after 1 January 2026.   

In-scope multinationals will be required to submit an International Controlled Transaction Schedule (ICTS) under proposed legislation. The ICTS will be an annual report on cross-border related party transactions. It is expected that this measure will take effect for accounting periods beginning on or after 1 January 2027. Technical consultation will take place in spring 2026. 

The government will double the flat rate for late filing penalties for taxpayers submitting a Company Tax return. These apply to the initial late filing penalty and the further penalty if the return is not filed within three months of the normal due date. The increase is noted to have been introduced to counteract the effect of inflation since the penalties were introduced. Returns which are filed after the filing deadline from 1 April 2026 will be subject to the higher late filing penalties. 

Legislation will be introduced in the Finance Bill 2025-26 to set out the treatment for Corporation Tax purposes of intra-group payments made in return for surrendered Research & Development Expenditure Credit (RDEC), Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC). This will come into effect for payments made on or after 26 November 2025. 

The government will introduce technical amendments to the Pillar 2 legislation. These amendments have been introduced following stakeholder consultation to ensure the multinational top-up tax and domestic top-up tax remain consistent with commentary to the Global Anti-Base Erosion (GloBE) rules agreed by the UK and other members of the Inclusive Framework. 

Legislation is proposed in the Finance Bill 2025-26 for a payment of interest where, following a successful challenge of a European Commission Decision, amounts collected from taxpayers become repayable.

Targeted legislative changes to ensure the Qualifying Asset Holding Companies (QAHC)regime continues to operate effectively will be considered during consultations with industry stakeholders taking place over the coming months. Future legislative changes will be introduced in a subsequent Finance Bill.  

The government have proposed the introduction of a number of measures to tackle tax avoidance. These include new powers to clamp down on promoters of marketed tax avoidance, and enhanced powers and sanctions to tackle tax advisors who facilitate non-compliance.  

Steps will be taken to modernise the anti-avoidance provisions in relation to share exchanges and company reorganisations. These changes will apply with immediate effect and be legislated in Finance Bill 2025-26.

The government will also work with tax advisors to raise standards of practice in the tax advice market.  

Over the next five years, the government will invest £59m to develop new technology that delivers realtime digital prompts within VAT and corporation tax filing software. These prompts are expected to be introduced by April 2027 for VAT and April 2028 for corporation tax. 

In early 2026, consultations will be launched on delivery timescales and enforcement for the content and tagging of Corporation Tax computations. At the same time, the government will consult on potential new requirements for reporting transactions between close companies and their shareholders to HMRC. 

It was confirmed that no substantial changes would be made to the new residence-based Foreign Income and Gains regime (FIG) which was instituted from 6 April 2025 as a replacement to the domicile-based Remittance Basis. There are, however, some technical amendments which will have retrospective effect from 6 April 2025. 

Therefore, it is important that employers have a firm understanding of this new regime, and consider any additional costs involved, especially from a global mobility policy perspective.   

Currently, non resident individuals can maintain a National Insurance record by paying Class 2 Voluntary NICs (£3.50 per week in 2025/26). From 6 April 2026, this option will be withdrawn, and affected individuals will instead need to pay Class 3 NICs (£17.75 per week in 2025/26). 

This represents a substantial increase in cost. In addition, new applicants to Class 3 NICs will be required either to have paid 10 years of NICs while resident in the UK, or to have lived in the UK continuously for 10 years. These restrictions will significantly reduce the ability of non-resident individuals to qualify for UK state benefits.

With the Chancellor signalling that HMRC will intensify efforts to tackle fraud and late payment of taxes, this may create challenges in international cases where UK tax liabilities depend on overseas refunds. We therefore recommend that international taxpayers settle all UK liabilities promptly to ensure full compliance and maintain close communication with HMRC and professional advisers where immediate payment is not possible.

The Government’s decision to ease the business rates burden on small businesses is a welcome step towards addressing the cost pressures facing the retail sector, whilst the U-turn for large supermarkets on proposed exemptions to business rate increases is widely seen as a significant setback. Lower rates for smaller retail and leisure properties will provide meaningful relief, but funding these reductions through higher charges on larger units could create unintended consequences. Many of those sites form the backbone of high streets up and down the country, and any retreat in investment or presence from them will impact the wider retail ecosystem, supply chains, jobs and communities. 
For the sector to move from survival to sustainable growth, clarity is now needed on how reforms will be implemented. Businesses will be looking for assurance that there are no cliff edges as they grow or adapt, and that any relief supports reinvestment rather than simply offsetting costs. 

We also welcome further steps to ease pressures on retailers, despite the announced increases to the National Living/Minimum Wage rates from April 2026, including freezing employer National Insurance contributions and the abolition of low-value import exemptions, however it’s disappointing to see this won’t take immediate effect. While delaying this until 2029 presents time for implementation, the delay still means those unable to operate through the exemption prior to 2029 will be at a commercial disadvantage to those who can. Lower employment costs will support recruitment and retention across a labour-intensive sector, while a fairer import regime helps level the playing field between UK-based retailers and international competitors. 

The Government’s updates to the Soft Drinks Industry Levy announced yesterday will also require careful planning. Retailers and manufacturers will need clarity through the technical consultation period to manage reformulation, supply chain adjustments and pricing changes without adding further cost pressures. 

The focus now should be on delivery - ensuring that these measures are implemented smoothly and without adding new administrative burdens, so retailers can plan with confidence and focus on growth. 

The UK energy sector remains at a critical juncture, with every policy, regulatory, and fiscal development assessed against the Government’s long-standing Clean Power 2030 commitment to decarbonise the energy sector by 2030. There was considerable anticipation around the Autumn Budget and its potential impact; however, the measures announced do not indicate any significant shift in the overall direction of travel for the energy sector. 

The emphasis on reducing household energy bills has been a recurring theme, and the Budget reinforces this by absorbing some costs through general taxation. Ongoing regulatory changes - such as reforms to grid costs and connection processes led by NESO - are expected to have a more substantial and lasting influence on the sector than the Budget itself. Investor sentiment towards Allocation Round 7 (govt. scheme to attract private investment in renewables generation projects) will inevitably be shaped by the fiscal context, and the downward revision of GDP growth forecasts may dampen optimism in the near term.  

Looking ahead, targeted action to accelerate grid infrastructure rollout and incentives for private investment in renewables will be essential if the UK is to maintain its leadership in the global energy transition.” 

The Chancellor’s decision not to increase the banking surcharge has ensured the UK’s appeal to international financial institutions remains.  

Global banks require predictability and consistency in both regulation and taxation to plan long-term investments, which is why we welcome the Chancellor’s move. Financial services contribute around 8% of the UK’s GDP - supporting growth in this sector should remain a policy priority, not a revenue-raising exercise. 

It is disappointing that today’s Budget did not include meaningful measures to boost investment in the UK’s pharma and life sciences sector. At a time when global competition for R&D, manufacturing and clinical trials is intensifying, businesses were looking for clear signals that the Government intends to back the sector with long-term, stable support.   

Instead, ongoing uncertainty around NHS drug pricing and wider fiscal pressures continue to undermine confidence and risk deterring the patient capital and entrepreneurial investment essential for research, innovation and commercialisation. Without decisive action, the UK could become a less attractive destination for global life sciences investment at the very moment when stability and ambition are needed most.  

Life sciences remain one of the UK’s most strategically important growth sectors, yet today’s announcements fall short of offering the certainty, incentives and forward-looking policy framework investors and innovators require. To maintain the UK’s competitive edge, the Government must urgently resolve the NHS pricing deadlock and set out a coherent plan to support innovation, skills and long-term capital investment across the sector. Without this, the UK risks missing a critical opportunity to secure its position as a world leader in life sciences. 

Local public services may not have taken the spotlight, but we have still seen a number of significant developments emerge. 

Government policy changes are beginning to take shape, including Fair Funding 2.0, the Business Rates Reset for 2026/27 and the much anticipated, but delayed, reform of Special Educational Needs in 2026. 

With the promise of a provisional multi-year settlement in December, the Fair Funding Review 2.0, there is hope that some of the uncertainty surrounding mounting financial pressures will be addressed, including the projected £1.9 billion funding gap facing English councils in 2025/26. With the Budget suggesting £26billion of tax increases, including a High Value Council Tax surcharge from April 2028 that will go straight to the Treasury, it has the potential to narrow the shortfall in core funding for local authorities and ease pressure on essential services. Whether these measures flow to public services and collectively address the true scale of the financial challenge remains to be seen. 

Regardless, Public Services are not simply a cost to be contained, but a cornerstone of growth and well being. Empowering local government to plan, innovate and invest with confidence will be critical to supporting communities and delivering the Government’s wider economic ambitions.

Wednesday, 26 November.

The Autumn Budget is expected to start at 12:30 pm on Wednesday, 26 November.

The Autumn Budget is one of the UK government's most important annual financial statements. It is typically delivered by the Chancellor of the Exchequer in October or November, and it outlines the government's plans for taxation, public spending and economic policy for the upcoming financial year.

The proposed budget for 2025 was outlined in the Spring Statement and Autumn Budget 2024.

The UK budget forecast for 2025 points to slow economic growth, tight public finances and potential tax reforms. While borrowing remains high, the government is expected to focus on fiscal discipline, with possible changes to pensions, wealth taxation and public spending.