Emery & Co | Autumn Budget Summary 2025
Autumn Budget 2025 – What It Means for You and Your Business
Introduction
Chancellor Rachel Reeves has set out tax-raising measures worth up to £26 billion in the Autumn Budget on 26 November 2025. The extra revenue will be raised through a combination of frozen thresholds and targeted tax increases across income, property, dividends, savings and capital taxes.:contentReference[oaicite:0]{index=0}
Key tax-raising measures
- Extending the freeze on Income Tax thresholds for a further three years to April 2031.
- New and higher taxes on property income, dividends and savings.
- A new National Insurance charge on salary sacrifice pension contributions over £2,000 a year (from April 2029).
- A High Value Council Tax Surcharge for homes valued at £2 million or more from April 2028.
Spending and cost-of-living measures
On the spending side, the Budget includes actions to cut energy bills, freeze rail fares and end the two-child benefit cap. From April, the average household energy bill will fall by £150 a year through support on unit prices.
Personal Tax
Income Tax bands and rates
For 2026/27 the main Income Tax bands and thresholds remain frozen:
| Band (England, Wales, N. Ireland – non-savings, non-dividends) | Taxable income | Rate |
|---|---|---|
| Basic rate | £0 – £37,700 | 20% |
| Higher rate | £37,701 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
These thresholds will now remain frozen until April 2031. The National Insurance (NI) Primary Threshold and Lower Profits Limit stay aligned with the personal allowance at £12,570, and the Upper Earnings/Upper Profits Limits remain fixed at £50,270 to the same date.
Scottish and Welsh taxpayers
Scottish residents
Scotland sets its own rates and bands for non-savings, non-dividend income (e.g. salary, self-employment, property income). Scottish taxpayers still receive the same personal allowance as the rest of the UK. Rates and bands for 2026/27 will be confirmed in the Scottish Budget.
Welsh residents
The Welsh Government has powers to vary income tax rates (excluding savings and dividends). For 2025/26 and 2026/27, the total rates for Welsh taxpayers remain aligned with those in England and Northern Ireland.
The personal allowance
The personal allowance remains at £12,570, frozen until April 2031.
- It is reduced by £1 for every £2 of “adjusted net income” over £100,000.
- This means there is no personal allowance once income exceeds £125,140.
From 6 April 2026 the married couple’s allowance and blind person’s allowance will increase in line with September 2025 CPI (3.8%).
Tax on property income
Property income covers income from letting land and buildings. Most individuals benefit from a £1,000 Property Allowance:
- Property income up to £1,000 is exempt.
- Above this, you can deduct either the £1,000 allowance or your actual allowable expenses.
From 2027/28, separate higher tax rates will apply to property income:
- 22% for basic rate taxpayers
- 42% for higher rate taxpayers
- 47% for additional rate taxpayers
Tax on savings income
Savings income includes bank and building society interest. The Personal Savings Allowance depends on your marginal tax rate:
- Basic rate taxpayers: £1,000 allowance
- Higher rate taxpayers: £500 allowance
- Additional rate taxpayers: no allowance
Savings income within the allowance still uses up your basic or higher rate band and can affect the rate paid on savings above it.
A separate 0% starting rate for savings of up to £5,000 remains available where taxable non-savings income is within £5,000. This band is frozen until 5 April 2031.
The current tax rates on savings income are maintained for 2026/27, but from 6 April 2027 they rise by 2 percentage points:
- Basic rate on savings: 22%
- Higher rate on savings: 42%
- Additional rate on savings: 47%
Tax on dividends
The Dividend Allowance remains at £500 for 2026/27. Dividends within this allowance are taxed at 0%, but they still count towards your basic/higher rate bands.
From 6 April 2026 the dividend tax rates are:
- 10.75% for basic rate taxpayers (up from 8.75%)
- 35.75% for higher rate taxpayers (up from 33.75%)
- 39.35% for additional rate taxpayers (unchanged)
Dividends are treated as the last type of income to be taxed when determining which band they fall into.
New Income Tax ordering rules from April 2027
From 6 April 2027, the personal allowance will be automatically set against employment, trading or pension income first. At present, individuals have flexibility to choose how the allowance is allocated between different income sources.
Pension tax limits (2026/27)
- Annual Allowance (AA): £60,000.
- If “threshold income” exceeds £200,000 and “adjusted income” exceeds £260,000, the AA is tapered – reduced by £1 for every £2 above £260,000, down to a minimum AA of £10,000.
- Lump Sum Allowance: £268,275 (broadly the maximum tax-free lump sum in most cases).
- Lump Sum and Death Benefit Allowance: £1,073,100.
Individual Savings Accounts (ISAs)
For 2026/27 the annual subscription limits remain:
- Adult ISA: £20,000
- Junior ISA: £9,000
- Lifetime ISA: £4,000 (excluding government bonus)
- Child Trust Fund: £9,000
These limits are frozen until 5 April 2031.
From 6 April 2027, the annual cash ISA limit will be set at £12,000, with the remaining £8,000 of the £20,000 total restricted to stocks & shares ISA investment. This restriction does not apply to individuals aged 65 and over, who retain a full £20,000 cash ISA limit.
Employment
National Insurance contributions (NICs)
Employees – Class 1 NICs
For 2025/26 the main employee Class 1 NIC rates are 8% and 2%, with an employer rate of 15%. The Secondary Threshold, where employers start to pay NICs for an employee, is £5,000 per year from 6 April 2025 and will be frozen until April 2031.
The Employment Allowance continues to allow eligible businesses to offset up to £10,500 against their annual employer NIC bill.
The self-employed – Class 2 and Class 4
For 2025/26 and 2026/27, Class 4 NIC rates remain:
- 6% on profits between £12,570 and £50,270
- 2% on profits above £50,270
From 6 April 2025:
- Self-employed people with profits of £6,845 or more receive a National Insurance credit (no Class 2 NIC actually paid) giving access to contributory benefits including the State Pension.
- Those with profits under £6,845 can continue to pay Class 2 NIC voluntarily to build qualifying years.
Changes from 2026/27
From 2026/27 the government will increase the Lower Earnings Limit (LEL) and Small Profits Threshold (SPT), and raise voluntary Class 2 and Class 3 rates:
- LEL: £6,708 per annum (£129 per week)
- SPT: £7,105 per annum
- Main Class 2 rate: £3.65 per week
- Class 3 voluntary rate: £18.40 per week
Employer NIC relief for veterans
Employer NIC relief for hiring qualifying veterans is extended to April 2028. Employers pay no NICs on earnings up to £50,270 for the veteran’s first year in a civilian role.
National Living Wage & National Minimum Wage
From 1 April 2026 the following hourly rates apply:
| Category | Rate from 1 April 2026 |
|---|---|
| National Living Wage (age 21+) | £12.71 |
| Ages 18–20 | £10.85 |
| Ages 16–17 | £8.00 |
| Apprentices* | £8.00 |
*Apprentice rate applies to apprentices under 19 or 19+ in their first year; the NLW applies to those aged 21 and over.
Taxable benefits for company cars and vans
From 2026/27:
- Zero-emission company car benefit rises from 3% to 4%.
- Other cars emitting under 75g/km see their benefit-in-kind (BIK) rates increase by 1 percentage point.
- The maximum car BIK rate remains 37%, and confirmed rate increases extend to 2029/30.
A temporary easement is introduced to mitigate higher BIK charges for plug-in hybrid electric vehicles (PHEVs) arising from new emissions standards. The easement applies retrospectively from 1 January 2025 to 5 April 2028, with transitional rules running to 5 April 2031.
The car fuel benefit, and the van benefit and van fuel benefit, will all increase from 6 April 2026 (final figures to be confirmed).
Mandatory payrolling of benefits in kind
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 and will eventually replace most P11D reporting.
Tackling non-compliance in the umbrella company market
To address tax avoidance and fraud in the umbrella market, legislation from 6 April 2026 will:
- Make recruitment agencies responsible for operating PAYE and Class 1 NICs on payments to workers supplied via umbrella companies.
- Introduce joint and several liability rules so that agencies or end clients can be pursued where umbrellas fail to pay PAYE/NICs.
- Place responsibility on the end client where there is no agency involved.
The aim is to protect workers from unexpected tax bills arising from non-compliant umbrella companies.
Ending contrived car ownership schemes
Some arrangements sell a car to employees on favourable terms (e.g. a loan with negligible interest and no clear repayment terms), then buy it back later, effectively avoiding company car tax. New rules will treat vehicles made available on restricted terms through such schemes as taxable benefits.
- Existing arrangements continue under current rules until the earlier of the arrangement being varied, renewed or 6 April 2032.
- A separate exemption will apply where vehicles are provided on arm’s-length terms within the motor industry.
- The operative date for this package is delayed to 6 April 2030.
Salary sacrifice for pensions – changes from April 2029
Currently, pension contributions made via salary sacrifice save both Income Tax and NICs (subject to limits). From April 2029:
- Only the first £2,000 of employee pension contributions via salary sacrifice each tax year will be exempt from NICs.
- Contributions above £2,000 via salary sacrifice will attract employee and employer NICs, just like normal employee pension contributions.
- All such contributions remain exempt from Income Tax, subject to the usual pension limits.
- Employers must report the total amount sacrificed through payroll.
Employer pension contributions will continue to be NIC-free. Employees using salary sacrifice to access Tax-Free Childcare or Child Benefit can continue to do so.
Expanding workplace benefits relief
New exemptions will be introduced (from 6 April 2026) for the reimbursement of specific benefits:
- Eye tests
- Flu vaccines
- Home-working equipment
The current exemption applies only where the employer provides the item directly. After the change, reimbursed costs will be treated the same way as employer-provided benefits.
Removal of tax relief on non-reimbursed home-working expenses
From 6 April 2026, employees will no longer be able to claim tax relief on additional household costs incurred because they are required to work from home, where those costs are not reimbursed by the employer.
This does not affect an employer’s ability to reimburse eligible homeworking expenses without deducting Income Tax or NICs.
Business Tax
Corporation Tax
Corporation Tax rates remain unchanged from April 2026:
- 25% main rate for companies with profits over £250,000.
- 19% small profits rate for companies with profits of £50,000 or less.
- Companies with profits between £50,001 and £250,000 pay tax at the main rate but receive marginal relief to smooth the transition.
The government has capped the main rate at 25% for the duration of this Parliament.
Penalties for late submission of Corporation Tax returns will double for returns with filing dates on or after 1 April 2026.
Capital allowances
The Full Expensing regime remains in place for companies:
- 100% first-year deduction on qualifying new plant and machinery (excluding cars).
- 50% first-year deduction for new integral features and long-life assets.
From 1 April 2026 (Corporation Tax) and 6 April 2026 (Income Tax):
- The main pool Writing Down Allowance reduces from 18% to 14% per year (with a hybrid rate for straddling periods).
- The special rate pool remains at 6%.
For expenditure incurred on or after 1 January 2026, all businesses can claim a new 40% first-year allowance on main-rate assets, including most assets for leasing (but excluding cars, second-hand assets and assets leased overseas).
The Annual Investment Allowance (AIA) remains at £1 million per 12-month period for qualifying plant and machinery (excluding cars).
The 100% first-year allowance for zero-emission cars and the 100% allowance for plant and machinery used for electric vehicle chargepoints are extended to 31 March 2027 for Corporation Tax and 5 April 2027 for Income Tax.
Targeted R&D Advance Assurance Service
From spring 2026, an Advance Assurance Service for Research & Development (R&D) claims will be piloted. This will allow small and medium-sized enterprises to gain clarity on key aspects of their R&D relief claims before submitting them to HMRC. The government will also publish a summary of responses to its advance clearance consultation.
Advance Tax Certainty Service
A new Advance Tax Certainty Service will launch in July 2026. It will give major investment projects (minimum qualifying expenditure £1 billion) upfront certainty on how tax law applies.
- Clearance will generally bind HMRC for five years.
- It may be extended for a further five years, subject to full initial disclosure of material facts.
EIS & VCT – higher company limits, lower VCT investor relief
From 6 April 2026, significant changes apply to the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs):
-
Gross assets requirement increases:
- Immediately before share issue: from £15m to £30m.
- Immediately after share issue: from £16m to £35m.
- Annual investment limit per company rises from £5m to £10m.
-
For Knowledge-Intensive Companies (KICs):
- Annual limit rises from £10m to £20m.
- Lifetime limit rises to £40m (from £20m).
- However, Income Tax relief for individual VCT investors will decrease from 30% to 20%.
Enterprise Management Incentives (EMI) – expanded eligibility
For EMI options granted on or after 6 April 2026, the following enhanced limits apply:
- Employee limit increased from 250 to 500.
- Gross assets test increased from £30m to £120m.
- Company share option limit doubled from £3m to £6m.
- Maximum exercise period increased to 15 years, also applied retrospectively to existing EMI contracts that have not yet expired or been exercised.
UK Listing Relief – SDRT exemption for new UK listings
For agreements to transfer securities of a company whose shares are newly listed on a UK regulated market on or after 27 November 2025, a three-year exemption from the 0.5% Stamp Duty Reserve Tax (SDRT) charge will apply.
- The exemption does not apply to the 1.5% SDRT charge.
- It is not available where the transfer forms part of a merger or takeover involving a change of control.
Capital Taxes
Capital Gains Tax (CGT)
CGT rates remain unchanged for 2026/27. The annual exempt amount stays at £3,000 for individuals and £1,500 for most trusts.
Employee Ownership Trusts (EOTs)
At present, qualifying disposals of company shares to an Employee Ownership Trust can benefit from a 100% exemption from CGT. From 26 November 2025:
- Relief will only exempt 50% of the gain on qualifying disposals.
- Business Asset Disposal Relief (BADR) and Investors’ Relief will not be available where the 50% exemption is claimed.
- The remaining 50% of the gain will be held over by being deducted from the trustees’ acquisition cost. It will come into charge on a later disposal by the EOT.
Incorporation Relief – active claim required
For transfers of a business to a company on or after 6 April 2026, Incorporation Relief will no longer apply automatically. Taxpayers will need to actively claim the relief.
Business Asset Disposal Relief & Investors’ Relief
From 6 April 2026, gains qualifying for: Business Asset Disposal Relief and Investors’ Relief will be taxed at 18% (up from 14% in 2025/26), subject to the usual lifetime limits.
Carried interest – move to Income Tax framework
From April 2026, all carried interest will be taxed within the Income Tax framework, with a multiplier of 72.5% applied to qualifying interest brought within the charge.
Inheritance Tax (IHT)
Nil rate bands
- The main nil rate band remains at £325,000, frozen until 5 April 2031.
- The residence nil rate band remains at £175,000, also frozen until 5 April 2031, with the taper continuing to start at estates over £2 million.
Unused pension funds & death benefits
From 6 April 2027, unused pension funds and certain death benefits payable from a pension will be brought into an individual’s estate for IHT purposes.
- Personal representatives will generally be responsible for paying IHT on these amounts.
- Beneficiaries of registered pension schemes may request that administrators pay IHT directly to HMRC in specific circumstances.
- Beneficiaries can also instruct administrators to withhold up to 50% of taxable benefits for up to 15 months.
All death-in-service benefits from registered pension schemes remain excluded from the value of the estate for IHT purposes.
Agricultural Property Relief (APR) & Business Property Relief (BPR)
From 6 April 2026:
- Agricultural and business property will benefit from 100% IHT relief up to a combined limit of £1 million per person.
- Property above this limit will qualify for 50% relief.
- The £1m limit is refreshed every seven years.
- The allowance will be transferable between spouses or civil partners, including where the first death occurred before 6 April 2026.
Trusts may access a further £1 million allowance in certain cases, but the rules are complex. All £1m limits for individuals and trusts will be frozen until 6 April 2031.
Cap on excluded property in trusts
From 6 April 2025, a retrospective £5 million cap applies to excluded property (typically non-UK assets) held in trust as at 30 October 2024. The cap applies to each ten-year cycle for trust charges.
Other Measures
VAT registration threshold
From 1 April 2026:
- VAT registration threshold remains at £90,000.
- VAT deregistration threshold remains at £88,000.
Making Tax Digital (MTD) for Income Tax Self Assessment
The government remains committed to MTD for Income Tax Self Assessment:
- From April 2026: applies to those with qualifying income over £50,000.
- From April 2027: extended to incomes over £30,000.
- From April 2028: extended to incomes over £20,000.
The government will not proceed with MTD for Corporation Tax at this time.
Enforcement, compliance and tax collection
A range of measures aim to reduce the tax gap and improve collection:
- Further investment in HMRC’s debt management work, alongside a new tax debt strategy targeting a lower tax debt balance as a proportion of receipts.
- From April 2029, Income Tax Self Assessment taxpayers with PAYE income will be required to pay more of their liability in-year via PAYE.
- Investment to modernise HMRC systems and expand data-driven prompts, helping taxpayers to get things right first time.
- An additional £64 million over five years to support HMRC’s partnerships with private sector debt collection agencies.
From April 2029, all businesses will be required to issue e-invoices for VAT, with an implementation roadmap due in 2026.
High Value Council Tax Surcharge (HVCTS)
From April 2028, properties valued at £2 million or more in England will be subject to a new annual surcharge, in addition to existing Council Tax:
| Property value | Annual HVCTS charge |
|---|---|
| £2m – £2.5m | £2,500 |
| £2.5m – £3.5m | £3,500 |
| £3.5m – £5m | £5,000 |
| Over £5m | £7,500 |
Employment enforcement and the “hidden economy”
- Right-to-work checks will be extended to businesses hiring gig-economy and zero-hours workers, restricting the ability of employers to exploit illegal labour and undercut compliant businesses.
- A dedicated “hidden economy” team will be created within the new Fair Work Agency from April 2026, initially targeting sectors such as hand car washes before moving into other high-risk areas.
Electric Vehicle Excise Duty (eVED)
From April 2028, a new mileage-based Electric Vehicle Excise Duty (eVED) will apply to electric and plug-in hybrid cars, payable alongside existing Vehicle Excise Duty (VED):
- Tax for EV drivers will be around half the fuel duty currently paid by typical petrol/diesel drivers.
- Plug-in hybrids will pay a reduced eVED rate.
- An average EV driver is expected to pay roughly £240 per year (about £20 per month).
- Other vehicle types – vans, buses, motorcycles, coaches and HGVs – will initially be out of scope, reflecting slower electrification in these sectors.
Other points
- The £35,000 income threshold for Winter Fuel Payments will be maintained for the duration of this Parliament.
- The government is consulting on how the tax system and existing incentives support business founders and scale-ups, and how to encourage more companies to start, scale and stay in the UK.
Key Rates & Allowances (2026/27)
Below is a concise overview of some of the main tax rates and allowances. Detailed planning should always be based on your specific circumstances.
Income Tax – main UK bands (non-savings, non-dividends)
| Band | Taxable income | Rate |
|---|---|---|
| Basic | £0 – £37,700 | 20% |
| Higher | £37,701 – £125,140 | 40% |
| Additional | Over £125,140 | 45% |
Main personal allowances (2026/27):
- Personal allowance: £12,570 (tapered above £100,000 income).
- Marriage allowance: £1,260.
- Lump Sum Allowance (pensions): £268,275; Lump Sum and Death Benefit Allowance: £1,073,100.
National Insurance – headline rates (2026/27)
Class 1 (employees): 8% on earnings between £242 and £967 per week; 2% above £967 per week.
Class 4 (self-employed): 6% on profits between £12,570 and £50,270; 2% above £50,270.
Corporation Tax (years to 31 March 2026 & 31 March 2027)
| Profits | Rate |
|---|---|
| £0 – £50,000 (small profits rate) | 19% |
| £50,001 – £250,000 (marginal band) | Effective 26.5% with marginal relief |
| Over £250,000 (main rate) | 25% |
Capital Gains Tax (CGT)
- Annual exempt amount – individuals: £3,000; trusts: £1,500.
- Standard CGT rate on most assets: 18% (basic rate band).
- Higher/additional rate on most assets: 24%.
- Business Asset Disposal Relief: qualifying gains up to £1m, taxed at 14% in 2025/26 and 18% in 2026/27.
VAT
- Standard rate: 20%.
- Reduced rate: 5%.
- Registration threshold: £90,000.
- Deregistration threshold: £88,000.
Need help understanding how these changes affect you? Our team at Emery & Co can review your position and help you plan ahead, whether you are an individual, landlord, entrepreneur or an established business.
Emery & Co
The Old Cottage Hospital, Leicester Road
Ashby-de-la-Zouch, LE65 1DB
Tel: 01530 681040
Website: www.emeryandco.co.uk
Disclaimer: This article provides a general overview of measures announced in the Autumn Budget 2025. It is not a complete or definitive statement of the law and does not constitute tax, legal or financial advice. Rates and thresholds are subject to change and some figures may not have been finalised at the time of writing. No responsibility can be accepted for any loss arising from action taken or refrained from as a result of this information. Always seek professional advice specific to your circumstances.