27 Nov Budget 2025: Key Highlights and Changes
Chancellor Rachel Reeves has delivered the 2025 Budget, listing ‘stability, investment and reform as a platform which British ambition can finally get moving again’.
With a projected £26 billion increase in taxes by 2029-30, let’s take a look at the key points announced:
Economic Overview
Growth: UK economy expected to grow 1.5% in 2025, 1.4% in 2026, and 1.6% in 2027.
Inflation: Forecasted to average 3.5% in 2025 and then dropping to 2.5% in 2026, and 2% in 2027.
Changes to Tax Rates
From 6 April 2026, the tax rates for dividend income will increase from 8.75% to 10.75% for ordinary rate, and 33.75% to 35.75% for upper rate. The additional rate of 39.35% will remain unchanged.
The tax on savings income will also increase by 2% across all band rates. The basic rate band will rise from 20% to 22%, higher rate will increase from 40% to 42% and the additional rate will increase from 45% to 47%.
New Category of Income for Tax Introduced
Property Income will no longer be classed as non-savings income from the 6th of April 2026, and any property income received will be subject to income tax at its own separate rate. The Property basic rate will be 22%, higher rate will be 42% and additional rate will be taxed at 47%.
The increase in rates for savings and dividends will apply in Scotland. At present property income is part of the Scottish tax rates but the changes may be replicated in the Scottish budget in January.
Other Tax Points
Income Tax: Thresholds have been frozen for a further year until 2031
National Insurance: Thresholds also remain frozen until 2031
Capital Gains Tax: CGT relief on disposals to employee ownership Trusts will be reduced from 100% to 50%, with immediate effect.
Pension salary sacrifice: From 2029 there will be a £2,000 a year cap on National Insurance Relief.
Capital allowances: reduction of writing-down allowance on plant & machinery main pool balances from 18% to 14% from 1 April 2026. Introduction of a 40% first-year allowance (FYA) from 1 January 2026 for main rate expenditure, with less restrictions compared to other FYAs.
Mansion Tax: A new mansion tax announced for England. Will be in the form of an annual council tax surcharge. This will be £2,500 for properties worth between £2m and £5m, and £7,500 for properties worth more than £5m.
Inheritance Tax: Compensation payments for the Infected Blood Scheme to be exempt from Inheritance Tax.
The government is restricting accessibility to claiming the current Voluntary National Insurance Contributions (VNIC) for non-resident individuals contributing towards a UK State Pension. HMRC aim to amend the criteria for the cheapest VNIC requirement to 10 years of UK residency.
Wages and Support
Minimum Wage: Increased to £12.71 per hour for those aged 21+, £10.85 an hour for workers between 18 and 20, and finally to £8 an hour for those under 18 and apprentices.
Apprenticeships – The government is to fund a new ‘Youth Guarantee’ which will assist every 18-21 year old in England in gain access to an apprenticeship, training, education opportunities or assistance in securing employment.
Fuel Duty: Frozen with 5p per litre cut extended until September 2026
Business and Employment
Business Rates: Lower business rates to be introduced for more than 750,000 retail, hospitality and leisure properties. To be funded through higher rates in properties worth £500K or more.
Public Services and Investment
Education: £5m has been allocated to libraries in secondary schools and £18m for improving and upgrading playgrounds in England.
Infrastructure and Housing
Electric cars: New excise duty announced of 3p a mile for electric cars and 1.5p a mile for plug in hybrids
Environmental and Social Policy
Gambling Taxes: Remote gaming duty to be raised from 21% to 40% and duty on online betting to be increased from 15% to 25%.
Child Benefit: The two child benefit cap will be removed from April 2026.
Other Measures
Funds for devolved governments were announced with £820m for the Scottish government, £505m for the Welsh government and an additional £370m for the Northern Ireland executive.
There will be a reform to the Motability scheme in which luxury vehicles will be removed.
There will be a further update once the Scottish Budget has been announced.
If you’d like personalised advice on how the Budget affects you or your business, please contact us.