How the 2025-26 UK Budget Changes Affect Individuals and Businesses?

Chancellor Rachel Reeves delivered the 2025 Autumn Budget on 26 November, outlining a significant set of UK personal and business tax changes for the 2025–26 financial year. The UK Budget focused on fiscal responsibility and long-term growth, combining steady rates with targeted reforms. While headline rates of income tax, National Insurance and VAT remain unchanged, frozen income tax thresholds and adjustments to dividend tax rates, savings tax rates and property income tax will increase the tax burden for many households.

On the business side, the government prioritised productivity and investment. Stability in the corporation tax rate is accompanied by enhanced capital allowances and new tax relief for businesses, especially in green sectors, such as EV charging points tax relief and incentives linked to sustainability projects. The Budget also detailed corporate tax changes through transfer pricing changes, updates to capital allowances and selective SDRT exemptions aimed at encouraging financial market activity and inward investment.

The budget summary highlights a sector-by-sector overview of what happened in the Budget 2025: targeted inheritance tax changes, measures on tax on landfill (Landfill Tax) and renewed focus on UK tax planning for both individuals and corporations. This budget summary example breaks down everything from UK business tax changes and environmental levies to oversight of property income tax and wealth management rules.

This comprehensive guide explores how these 2025–26 reforms impact your finances, business operations and tax strategy, covering personal allowances, company reliefs, corporate structures and long-term planning considerations across the UK.

Understanding the 2025 Budget Summary

Chancellor Rachel Reeves delivered a 2025 UK Budget focused on balancing economic stability with sustainable public service investment. The measures announced mark a notable shift in how various forms of income, such as employment, dividend tax rates and property income tax, will be treated in the coming years.

The UK Budget introduced a series of reforms aimed at protecting public services while encouraging business competitiveness. These include adjustments to income tax thresholds, updated corporate tax changes and continued support through capital allowances and tax relief for businesses, particularly for innovation and green initiatives like EV charging points tax relief.

With borrowing projected to fall each year and a £21.7 billion fiscal buffer, the government is meeting its fiscal rules while pursuing an investment-driven recovery. The budget summary also highlights environmental and regulatory adjustments such as updates to tax on landfill (Landfill Tax) and ongoing transfer pricing changes to align corporate taxation with global standards.

According to the Office for Budget Responsibility (OBR), the UK remains on track to meet both its stability and investment rule targets by 2029–30. The OBR’s Economic and Fiscal Outlook report (PDF) provides a full budget summary example, explaining how the measures impact UK personal tax changes, corporation tax rate stability and UK business tax changes, reinforcing the government’s shift toward a fairer and more predictable tax system.

Income Tax Thresholds

The continued freeze on income tax thresholds remains one of the most consequential 2025–26 UK tax changes, significantly influencing personal finances over the coming decade. This measure will deepen fiscal drag, where rising wages gradually push more taxpayers into higher-rate bands, even though the headline income tax rates themselves remain unchanged. Understanding how these changes affect taxable income is central to effective UK tax planning for individuals and households.

Frozen Tax Bands Extended

Among the most impactful announcements in the UK Budget 2025, the Chancellor confirmed that the personal allowance (£12,570) and higher-rate threshold (£50,270) will remain frozen until the 2030–31 tax year, three years beyond the previously planned timeline. This extended freeze is expected to bring millions more people into higher tax brackets as salaries rise.

The Office for Budget Responsibility (OBR) estimates this freeze could raise around £8 billion a year by 2029–30, with the total number of higher-rate taxpayers exceeding 10 million, more than twice the number expected under regular inflation adjustments since 2021.

New Tax Rates for Different Income Types

The 2025–26 UK tax changes also introduced updated rates for property income, dividends and savings income, reflecting the government’s effort to ensure fairness across income types while maintaining fiscal discipline.

• Property Income Tax (from April 2027):
  • Basic rate: 22% (up from 20%)
  • Higher rate: 42% (up from 40%)
  • Additional rate: 47% (up from 45%)
• Dividend Tax Rates (from April 2026):
  • Basic rate: 10.75% (up from 8.75%)
  • Higher rate: 35.75% (up from 33.75%)
  • Additional rate: 39.35% (unchanged)
• Savings Tax Rates (from April 2027):
  • All bands will rise by 2 percentage points across the board.

Despite these increases, most taxpayers and pensioners remain unaffected, over 90% still pay no tax on savings income, thanks to continued use of allowances such as the Personal Savings Allowance and Dividend Allowance.

Corporation Tax Rate and Business Changes

The 2025–26 UK business tax changes focus on providing stability for companies while fine-tuning incentive structures to support productivity and investment. Businesses will welcome the continuity in corporation tax rates, which offers much-needed certainty for long-term financial and strategic planning. However, modifications to capital allowances and new forms of tax relief for businesses will require organisations to reassess the timing and structure of their future investments. Overall, the government has attempted to balance corporate tax changes that raise revenue with the need to maintain international competitiveness.

Corporation Tax Remains Stable

Positive news for businesses: the main Corporation Tax Rate remains at 25%, while the small profits rate continues at 19%, as confirmed in the Budget 2025 Overview of Tax Legislation and Rates. This stability aligns with the government’s strategy for long-term growth through predictability and investor confidence.

The BBC’s business analysis also notes that this consistency supports firms planning capital projects and expansions over the next five years. Additionally, attention to transfer pricing changes and SDRT exemptions signals a continued focus on aligning the UK’s corporate tax framework with global standards while supporting cross-border trade.

Capital Allowances Adjustments

Major updates to capital allowances will take effect from April 2026, shaping how businesses invest in key assets, machinery and technology. According to the Budget 2025 Overview of Tax Legislation and Rates, the changes include:

The new 40% first-year allowance is particularly notable, as it extends eligibility to leased assets, previously excluded from full expensing. These measures aim to retain investment incentives while generating modest additional revenue. Businesses engaged in green technology sectors, such as electric infrastructure and EV charging points tax relief, may find fresh opportunities under the restructured allowance rules.

Business Rates Relief

Over 750,000 retail, hospitality and leisure properties will benefit from permanent business rates relief beginning April 2026. The standard multiplier will decrease from 55.5p to 48p, while the small business multiplier falls from 49.9p to 43.2p. This change complements the broader UK tax planning framework, reinforcing the government’s aim to support SMEs and high-street recovery while sustaining fair returns from large corporations.

Tax Relief for Businesses and Investors

The 2025–26 UK business tax changes continue the government’s focus on supporting innovation, sustainability and investment through a range of tax relief for businesses and investors. These targeted incentives aim to keep the UK globally competitive while encouraging capital deployment into research, clean energy and technology-driven sectors. From R&D tax incentives to EV charging points tax relief, the Budget highlights new and extended opportunities for organisations to reduce their tax liabilities and plan more strategically under the evolving corporate tax changes.

Research and Development Support

The R&D Expenditure Credit (RDEC) regime remains at the heart of the UK’s innovation agenda. Businesses can still claim a cash tax credit of up to 16.2%, preserving one of the most generous innovation incentives among OECD nations. To enhance transparency for smaller companies, an advance clearance programme will launch in Spring 2026, allowing SMEs to gain pre-approval and clarity for their R&D claims, reducing uncertainty and compliance risks. This approach supports long-term UK tax planning around innovation-led investment.

New UK Listing Relief

Starting 27 November 2025, a new Stamp Duty Reserve Tax (SDRT) exemption applies for three years on shares of companies newly listed on the London Stock Exchange. As SDRT typically applies at 0.5% on share purchases, this temporary relief will encourage IPO activity and attract new listings to UK markets. The measure, part of broader corporate tax changes, aims to deepen capital market participation and reinforce London’s competitiveness as a global financial hub.

EV Charging Points Tax Relief

Green investment receives a strong boost through extended incentives. The Budget introduces a 10-year, 100% business rates relief for eligible EV charging points and EV-only forecourts, supporting the transition to zero-emission transport infrastructure. In addition, the 100% first-year allowances for both zero-emission vehicles and EV charging point infrastructure have been extended to April 2027. Together, these tax relief for businesses measures strengthen the UK’s ambition for a low-carbon economy and reward early investment in sustainable technologies.

Property and Wealth Tax Changes

The 2025–26 UK tax changes introduce new property and wealth measures aimed at a “fairer” contribution system. These shifts will impact landlords, property owners and high-net-worth individuals, requiring careful UK tax planning as fiscal drag and asset-based taxes expand.

High Value Council Tax Surcharge

From April 2028, properties in England worth over £2 million will face a High Value Council Tax Surcharge, affecting fewer than 1% of homes:

Property Value	Annual Surcharge
£2 million – £2.5 million	£2,500
£2.5 million – £3.5 million	£3,500
£3.5 million – £5 million	£4,500
Over £5 million	£7,500

This complements existing property income tax measures and increases the tax burden on luxury homes.

Inheritance Tax Changes

Key inheritance tax changes extend the freeze on the nil-rate band (£325,000) and residence nil-rate band (£175,000) until 2030–31. From April 2027, unspent pension pots will become subject to inheritance tax, ending the ability to use pensions as tax-free estate transfers, prompting renewed focus on estate UK tax planning.

Capital Gains Tax Updates

While capital gains tax (CGT) rates remain unchanged overall, two targeted increases apply:

• From April 2026, Business Asset Disposal Relief and Investors’ Relief will rise to 18%, matching the main lower rate.
• CGT relief for Employee Ownership Trusts will fall from 100% to 50%.

These adjustments align UK personal tax changes toward equity between earned and asset-based income while strengthening long-term fiscal sustainability.

Pension and Savings Changes

The 2025–26 UK tax changes bring notable updates for pensions, ISAs and retirement savings, altering how individuals plan for the future. While the government upholds its state pension triple lock pledge, it is also tightening certain tax reliefs and limits, requiring smarter UK tax planning for those under 65 and higher earners.

Salary Sacrifice Restrictions

From the 2029–30 tax year, a £2,000 cap will apply to the portion of earnings eligible for National Insurance exemption under pension salary sacrifice arrangements.

The rule mainly impacts individuals earning above £40,000 contributing at least 5% to workplace pensions, though 74% of basic-rate taxpayers using salary sacrifice will remain unaffected.

ISA Changes

From 2027–28, savers under 65 will see the annual Cash ISA allowance cut to £12,000, while the overall ISA limit stays at £20,000. This still allows up to £8,000 in a Stocks & Shares ISA, encouraging diversification and long-term savings despite growing savings tax rates pressure.

State Pension Increase

Honouring the Triple Lock, the state pension will rise by 4.8% from April 2026, giving pensioners up to £575 more per year. This adjustment helps offset inflation and supports retirees as other UK personal tax changes narrow savings advantages across income types.

Cost of Living Support Measures

Acknowledging continued pressure on households, the 2025–26 UK Budget introduces targeted measures to reduce day-to-day costs. From lower energy bills to transport savings, these initiatives are designed to ease inflationary pressures, delivering what the government calls the biggest policy-driven fall in inflation in decades.

Energy Bill Reductions

From April 2026, average household energy bills in Great Britain will fall by around £150. The reduction is funded through government coverage of 75% of the domestic Legacy Renewables Obligation cost for three years, helping families manage essential living expenses.

Transport Cost Savings

Households will also benefit from a series of transport cost cuts:

• Rail fares freeze for one year from March 2026, saving commuters up to £300 on the priciest routes.
• Fuel duty cut of 5p per litre extended until August 2026.
• £3 bus fare cap continued to March 2027, covering over 5,000 routes nationwide.

Other Living Cost Support

Additional actions support vulnerable groups and low-income families:

• Prescription charges frozen at £9.90 from April 2026.
• Two-child limit removed on Universal Credit’s Child Element, lifting an estimated 450,000 children out of poverty.
• Free school meals expanded to reach 100,000 additional pupils across England.

Together, these measures form the social pillar of the UK Budget 2025, aimed at stabilising family budgets while broader UK personal tax changes and fiscal reforms take effect.

Transfer Pricing Changes

Multinational companies operating in the UK face stricter transfer pricing changes under the 2025–26 UK business tax changes. These reforms are designed to enhance transparency and ensure large businesses pay their fair share on cross-border transactions, aligning with international tax standards and supporting the government’s broader corporate tax changes agenda.

A key measure is the introduction of the International Controlled Transactions Schedule (ICTS), requiring in-scope multinationals to report related-party cross-border transactions annually. Around 75,000 taxpayers will be affected, significantly increasing compliance obligations for businesses with international operations. The reforms also include updates to UK law on Permanent Establishments, strengthening enforcement and clarifying tax residency rules for foreign entities.

These changes reflect the UK’s commitment to fair taxation and will require affected businesses to update their UK tax planning and reporting systems accordingly.

Gambling Tax Increases

The 2025–26 UK Budget significantly increases gambling taxes, particularly for the fast-growing online sector, to address gambling-related harm and raise additional revenue. Remote operators will see materially higher effective tax rates, while traditional bingo businesses receive relief, reflecting a policy shift towards taxing online play more heavily.

From April 2026, Remote Gaming Duty will rise from 21% to 40%, almost doubling the tax burden on online casino-style games. From April 2027, a new 25% remote betting rate will be introduced within General Betting Duty for most forms of online betting, up from the existing 15% rate, while remote bets on horseracing remain at 15%, preserving a preferential rate for the racing sector. At the same time, Bingo Duty, currently charged at 10% on land-based bingo, will be abolished from April 2026, providing targeted support to physical bingo halls.

Electric Vehicle Excise Duty

The 2025–26 UK Budget introduces a new mileage-based Electric Vehicle Excise Duty (eVED) from April 2028, marking a major shift in how EV drivers contribute to road maintenance as fuel duty receipts decline. The government states that the new charge will be roughly half what petrol and diesel drivers currently pay, with average EV owners expected to pay about £240 per year (or £20 per month), ensuring fairness as the UK transitions to electric transport.

To support the shift to electric vehicles, the Electric Car Grant has been extended to 2029–30 with an additional £1.3 billion in funding. Additionally, the VED Expensive Car Supplement threshold will rise from £40,000 to £50,000 from April 2026, reducing the tax burden on higher-priced EVs and encouraging more consumers to make the switch.

UK Tax Planning Considerations

With the 2025–26 UK Budget ushering in a wave of new tax rules, strategic UK tax planning is essential for individuals, businesses and property owners to minimise liabilities and maximise opportunities.

For Individuals

• Maximise ISA allowances before the Cash ISA limit drops in 2027.
• Review pension contribution strategies ahead of the 2029 salary sacrifice cap.
• Plan dividend and property income timing to manage tax liabilities under new rates from 2026 and 2027.

For Businesses

• Review capital investment timing to take advantage of the new 40% first-year allowance.
• Assess eligibility for R&D tax credits and other reliefs.
• Consider business rates relief if operating in retail, hospitality, or leisure sectors.
• Re-evaluate profit extraction strategies, as dividend tax increases may impact tax-efficiency calculations.

Review your tax return using our checklist to avoid common errors.

For Property Owners

• Budget for property income tax increases from April 2027.
• Assess exposure to the High Value Council Tax Surcharge if properties exceed £2 million.
• Review rental yield assumptions under the new property income tax regime.

Proactive planning around these changes can help all groups navigate the evolving tax landscape and optimise their financial outcomes.

Conclusion

The 2025–26 UK Budget introduces major changes for individuals and businesses. While headline rates for income tax, National Insurance and VAT remain unchanged, frozen thresholds and new rates for property, dividend and savings income will increase the tax burden for many. The Chancellor aims to protect working people while asking higher earners to contribute more.

Businesses benefit from stable corporation tax and continued investment incentives, though some allowances have been adjusted. The Budget prioritises reducing inflation, cutting living costs and strengthening public finances, with record infrastructure and public service investment.

Understanding the 2025-26 UK tax changes is essential for individuals and businesses to navigate the evolving tax landscape and plan their finances accordingly.

Want to take the next step? Contact Daniel Wolfson & Co via email [email protected] or call at 01923856008 to discuss your personal or corporate tax planning needs today.

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