UK Autumn Budget 2025 - Our analysis

With the Autumn Budget Statement 2025 now delivered, UK taxpayers and business owners are once again assessing how the Chancellor’s announcements will shape the financial landscape for the year ahead. Whilst the government has tried to avoid tax-raising measures, the impact of this year’s Budget will still hit business owners, self-employed, landlords and contractors.

The Chancellor stated that she wanted to create a country for scale-up businesses and entrepreneurs. She continued to say that she aims to make Britain the best place to start up, scale up and stay. But has the Chancellor delivered a Budget that supports that statement?

In this post, we break down the key announcements, who is affected, what has changed and how these measures could influence your tax planning going forward.

National Minimum Wage increase

Before the Budget, it was announced that the National Minimum Wage would increase.

• The minimum wage for over-21s will increase to 50p per hour a 4.1% rise, from April 2026.
• Workers aged 18 to 20 will get an increase of 8.5%, to £10.85 an hour.
• And 16 and 17-year-olds will get a 6% increase to £8 an hour.
• For 16–17-year-olds and apprentices, the NMW will go up from £7.55 to £8.00/hour.

The living wage is set to increase from £12.21 to £12.71 per hour.

The National Living Wage will also increase.

• The statutory National Living Wage (for workers aged 21 and over) will rise from £12.21/hour to £12.71/hour starting April 2026.

Rising statutory wage levels will increase payroll costs for employers across many sectors, particularly those with large numbers of lower-paid staff such as retail, hospitality, care and services. Businesses that already operate on tight margins may feel the pressure most, as higher wages feed directly into their operating costs. Some employers may need to review staffing levels, restructure roles or adjust shift patterns to manage the increased outlay.

At the same time, higher wages can help with staff retention and recruitment, reducing turnover and the associated costs of constantly hiring and training new employees. Improved pay can also boost morale and productivity, which may offset a portion of the increased expense over time. However, many businesses will still need to reassess pricing, budgeting and long-term financial plans to absorb the impact of the new rates. For small businesses in particular, these changes could result in higher prices for customers or slower investment growth as resources are redirected to wage bills.

Income Tax & National Insurance

Although the Chancellor did not increase income tax rates or national insurance, she has once again frozen income tax thresholds. The income tax threshold freeze will now continue until the end of the 2030/31 tax year.

The continued freeze effectively increases the tax burden through what is known as fiscal drag. As wages and business income rise with inflation, more of that income is pulled into higher tax bands, meaning individuals pay more tax without any explicit rate increase. This subtle shift will affect both employed and self-employed earners who see their income grow, even modestly, over the coming year.

The National Insurance threshold freeze will now continue until the end of the 2030/31 tax year.

A reminder of the thresholds is here:

For landlords: From 6 April 2027, the government will introduce separate tax rates specifically for property income, setting the basic rate at 22%, the higher rate at 42% and the additional rate at 47%.

For dividends: From 6 April 2026, dividend tax rates will rise, with the ordinary rate increasing to 10.75% and the upper rate to 35.75%, while the additional rate remains at 39.35%. The dividend allowance is unchanged at £500 pa.

For savings: From 6 April 2027, tax on savings income (e.g. interest of deposits) will also increase, with the basic rate rising to 22%, the higher rate to 42% and the additional rate to 47%.

Capital Gains Tax & Employee Ownership Trusts (EOTs)

The Chancellor announced that from November 2025, the current 100% CGT exemption for qualifying sales to an Employee Ownership Trust will be reduced.

The revised rules are:

• 50% of the gain will remain exempt.
• 50% will be subject to CGT at the seller’s applicable rate

Enterprise Management Incentive (EMI)

An announcement was made that changes to Enterprise Management Incentives (EMIs) will be made to make them available to larger businesses. From April 2026, the government will expand EMI by increasing the employee limit to 500, the gross assets threshold to £120 million, and the company share option limit to £6 million (currently £ 3million), with the maximum holding period extended to 15 years (from 10 years).

Enterprise Investment Schemes (EIS) and Venture Capital Trust Schemes (VCT)

EIS and VCT schemes are also being re-engineered to support firms for longer as they grow, rather than only at a very early stage. The VCT and EIS company investment limit is being increased to £10 million (or £20 million for Knowledge Intensive Companies), and the lifetime company investment limit to £24 million (or £40 million for KICs). The gross assets test for companies is rising to £30 million pre-investment and £35 million post-investment from April 2026.

Alongside this, VCT income tax relief will reduce to 20% (from 30%), with all measures to be legislated in Finance Bill 2025–26.

Corporation Tax

The headline rate of corporation tax is staying the same, but the Budget brings several changes to the capital allowances system.

• The full expensing regime will continue, meaning companies can still deduct the entire cost of eligible plant and machinery when the expenditure is made.
• A new first-year allowance will be introduced, allowing businesses to claim 40% upfront relief on specific main rate assets.
• From April 2026, the writing-down allowance for main rate assets will fall by 4% (to 14% from 18%), slowing the rate at which remaining costs can be deducted.
• The first-year 100% allowance for zero-emission vehicles and charging points has been extended to 31st March 2027.

In practice, these changes shift more of the available tax relief to the beginning of the investment cycle, while reducing the relief available in later years.

Inheritance tax

There was no broad overhaul of IHT today. The main nil-rate threshold, residence nil-rate protections, and other existing allowances are unchanged.

Previous reforms affecting IHT reliefs for business and agricultural property remain in effect (see below re: previous announcements), with the added benefit of allowing the unused allowance to be transferred to the surviving spouse or civil partner.

National insurance on salary sacrifice schemes

The Budget introduced a cap on the National Insurance advantage available through pension salary sacrifice, limiting the NI-free portion of contributions to £2,000 a year from April 2029. Anything paid above that level through salary sacrifice will be subject to the usual NI charges.

For employees, this reduces the tax efficiency of channelling larger pension contributions through their employer, particularly for higher earners who have historically benefited most from the relief.

Employers, meanwhile, may see an increase in payroll costs where they currently share NI savings with staff, and will need to adjust their reward structures and communication strategies accordingly. The change may also prompt businesses to revisit their wider benefits packages as the financial incentives associated with salary sacrifice become less generous.

Higher taxes on expensive residential properties

The introduction of an annual surcharge on homes valued at over £2 million significantly increases the ongoing costs of holding high-value property.

An annual charge will be levied of:

• £2,500 on properties worth more than £2m
• £7,500 on properties worth more than £5m

For investors and landlords, this means that premium residential assets will now carry an additional annual tax liability of £2,500 to £7,500, depending on value. This reduces net rental yields and makes the economics of luxury-end buy-to-let or long-term property investment less attractive, particularly in markets such as London and the South East, where many properties fall close to or above the threshold.

The measure may also influence investment decisions, potentially reducing demand for top-end properties and shifting investor focus toward lower-value or higher-yield opportunities.

Overall, the surcharge marks a clear policy shift toward taxing wealth held in property more heavily, requiring investors to review their portfolios and long-term plans carefully.

Electric vehicles

As expected, the Chancellor confirmed a new mileage tax on electric vehicles (EVs). Known as the Electric Vehicle Excise Duty, the new mileage-based charge on electric and plug-in hybrid cars will come into force from April 2028 at around half the fuel duty rate paid by drivers of petrol cars (raising £1.4bn for the government).

In 2028-29, the charge will equal £0.03 per mile for battery-electric cars and £0.015 per mile for plug-in hybrid cars.

Fuel duty frozen

Good news for businesses with high fuel bills, that fuel duty will be frozen at its current rate until September 2026. This freeze will be followed by staged increases from 2026.

ISA reforms

Although the Chancellor maintained the overall annual ISA limit at £20,000, the tax-free allowance for cash Individual Savings Account (ISA) has been cut. From April 2027, the annual limit for cash ISAs will drop from £20,000 to £12,000 for those under 65, with the remaining £8,000 allowance available only for investment into a Stocks and Shares ISA.

For people aged 65 or over, the full £20,000 allowance remains intact for investing in cash ISAs for investing in cash ISAs.

For financial planning: Savers and business owners may need to reassess whether to hold cash savings or shift assets toward investment to achieve better long-term returns, while also weighing risk and tax implications.

There will also be a consultation on reforming Lifetime ISAs. The proposal will be to replace Lifetime ISAs with another ISA product aimed at first-time buyers. The consultation is expected to be published in early 2026.

Skills & apprenticeships

The Chancellor announced that for small and medium-sized enterprises (SMEs), the cost of training apprentices under 25 will now be fully covered. This means that apprenticeships will be free for eligible SMEs.

For many SMEs, the removal of training-cost burdens for under-25 apprentices lowers a barrier to hiring and training young people. That can help businesses expand, bring in fresh talent, and invest in their workforce without an initial cost outlay.

Retail sector

The Budget introduced long-term reforms to business rates that will benefit a large number of shops, hospitality venues and leisure businesses. From 2026–27, these sectors will pay reduced rate multipliers, with both the small business and standard rates set lower than the national levels. This change is expected to support hundreds of thousands of premises across the UK.

To ease the impact of the 2026 revaluation, the government has also committed £4.3 billion over three years to help businesses facing significant increases in their rates bills. The reductions for high-street and hospitality businesses will be funded in part by higher business-rate charges on larger commercial properties, including major warehouses often linked to online retail operations.

The Budget also confirmed that customs duty will apply to all inbound parcels, regardless of value. This step is intended to create a more even competitive environment between online retailers and physical shops by removing a cost advantage previously enjoyed by some overseas sellers.

HMRC powers

The Budget confirms a crackdown on tax avoidance and evasion more broadly — the government has indicated that older, more generous reliefs and loopholes will be curtailed and enforcement stepped up.

Economic growth forecast

The Office for Budget Responsibility (OBR) has upgraded the growth forecast from 1% to 1.5%.

The forecast estimates that GDP will grow by 1.5% in 2025, above the 1% expected earlier this year.

But from then on, the outlook is downgraded from the fiscal watchdog’s March projection.

• In 2026, the economy is now expected to expand by 1.4%, below a previous forecast of 1.9%
• For 2027, GDP is estimated to expand by 1.6% against March’s estimate of 1.8%
• In 2028, GDP is forecast to rise by 1.5%. In March, the OBR reckoned it would increase by 1.7%
• In 2029, the economy will expand by 1.5%, not 1.8% as previously thought.

Reminder of key tax changes from the 2024 Autumn Budget

The 2024 Autumn Budget introduced a series of significant tax reforms that will be phased in over the next few years. These changes will be particularly relevant for business owners, landowners, families planning for succession, and individuals considering asset disposals.

Below is a summary of what’s coming and what it may mean for you.

Capital taxes: Capital Gains Tax (CGT), Business Property Relief (BPR), Agricultural Property Relief (APR) and Investors’ Relief

From 6 April 2026, major reforms will be introduced to Agricultural Property Relief (APR) and Business Property Relief (BPR), both of which are widely used in inheritance tax (IHT) planning. At the same time, significant changes to Capital Gains Tax (CGT) and the rules on carried interest will also take effect.

Key changes from 6 April 2026

Business Asset Disposal Relief (BADR)

• Current rate (2025/26): 14%
• From April 2026: 18%
• The lifetime limit remains at £1 million of qualifying gains.

Investors’ Relief (IR)

• Current rate: 14%
• From April 2026: 18%
• The lifetime limit remains at £1 million of qualifying gains.

Carried interest

• Currently taxed under CGT at 32%.
• From April 2026: Will be taxed as trading income.
• Subject to Income Tax (up to 45%) and Class 4 NICs (2% on profits above upper profits limit), giving an estimated effective rate of around 34.075% (after applying a 72.5% multiplier to qualifying carried interest).

Agricultural Property Relief (APR) and Business Property Relief (BPR)

• Currently up to 100% relief on qualifying agricultural property.
• From April 2026: APR and BPR will share a new combined £1 million lifetime cap.
• Value above the cap will receive only 50% relief, meaning around a 20% IHT rate may apply to values above £1m (or £2m for a couple).

Planning considerations for business owners and investors

The upcoming increase to CGT rates for BADR and IR may make timing a key factor for business and asset disposals. Individuals should consider:

• Whether completing a business sale before 6 April 2026 could reduce CGT exposure.
• How the new APR/BPR combined cap affects inheritance tax planning.
• Re-evaluating succession plans for family businesses and farms.
• Modelling tax costs under the new 2026 regime.

Broader inheritance tax (IHT) changes

The Autumn Budget confirmed wider IHT amendments that will affect many families:

• Unused pension funds will fall within the taxable estate for IHT from 6 April 2027.
• The IHT Nil Rate Band (£325,000) and Residence Nil Rate Band (£175,000) will remain frozen until April 2030.

These freezes, combined with rising asset values, mean that more estates are likely to become liable for IHT over time.

Pensions and IHT from April 2027

From 6 April 2027, most unused pension pots and many death-benefit payments will be treated as part of the taxable estate for IHT purposes.

Key points:

• Executors will be responsible for valuing pension benefits and paying any IHT due.
• Transfers to a spouse, civil partner or charity remain exempt.
• The change may increase IHT exposure for families who use pensions as part of long-term wealth planning.
• Estate administration may become more complex and time-consuming due to pension valuations.

How dns accountants can support you

The dns tax experts can help you prepare for the upcoming changes by:

• Reviewing business exit and disposal strategies before the 2026 CGT changes.
• Assessing how the new APR/BPR cap may impact succession and IHT planning.
• Updating estate and pension planning ahead of the 2027 reforms.
• Modelling potential tax liabilities and exploring ways to mitigate them.

For personalised advice on how these Budget changes may affect you or your business, get in touch with the dns accountants tax team today.

Contact us today on 03300 886 686 or email us at [email protected].

About the author

Siddharth Agarwal
I am a Chartered Tax Advisor (OMB) and ACCA. I have 9+ years of experience in owner-managed business taxation issues, company reorganisations, property taxation, and succession planning. I also work with private clients on bespoke tax planning strategies for trusts, residence status, and non-residents. I aim to fulfil my professional duties towards my clients and keep them satisfied, my utmost priority. I believe in establishing and maintaining businesses and personal relationships as the key to mutual growth.