Autumn Budget 2025: What the Key Announcements Mean

Personal Tax: Threshold Freezes Continue to Bite

The biggest headline from the Budget is the extension of frozen income tax thresholds for another three years to 2031. This freeze, in place since 2021, has already resulted in a substantial real‑terms tax rise for both basic and higher‑rate taxpayers.

The Government estimates that, by 2031:

• 5 million more people will be pushed into the basic rate of tax; and
• 5 million more into the higher rate.

Combined with rising wages, this fiscal drag means many individuals will pay more tax despite no increase in nominal tax rates.

Investment Income Tax Rates Increasing

From April 2026, tax on savings and dividends will rise, with property income tax increases following in 2027. For owner-managed businesses, this may change the optimal balance between salary and dividends. Landlords may also need to reassess whether property remains a viable long-term investment.

Inheritance Tax (IHT)

IHT bands remain frozen until 2031, continuing the steady expansion of the tax net. However, some rumoured IHT reforms—particularly changes to lifetime gifting—did not materialise, and there is no new wealth tax.

Capital Gains Tax (CGT): What’s Changing?

Business Asset Disposal Relief (BADR)

BADR is increasing to 18%, but this change was announced last year and confirmed in the latest Budget.

Employee Ownership Trusts (EOTs)

A major shift for those considering EOT exits: relief on disposals to EOTs will now only be available on 50% of the gain (down from 100%), meaning the remaining 12% becomes chargeable to CGT. This significantly reduces their tax advantage, likely making EOTs a less attractive succession option.

No Changes to Key Reliefs

• Private residence relief (PPR) remains untouched.
• No changes to the CGT uplift on death.
• No new exit charges for individuals who become non‑resident.

Mansion Tax: A New Levy on High‑Value Homes

A new so‑called mansion tax will apply to homes valued above £2 million, charged via a council tax surcharge:

• £2m–£2.5m: £2,500
• £2.5m–£3.5m: £3,500
• £3.5m–£5m: £5,000
• £5m+: £7,500

Revenue will go to central government. A consultation is planned on how to support homeowners who are asset‑rich but cash‑poor—potentially through deferring the charge until sale or death.

Much media chatter has speculated about homeowners selling properties for below the £2m threshold to avoid the levy. In reality, sacrificing £100k+ of value to avoid a £2,500 fee simply doesn’t stack up mathematically.

ISA Reforms

While the total ISA allowance remains £20,000, younger savers will see significant restrictions from April 2027:

• Under‑65s may only put £12,000 into Cash ISAs.
• The remaining £8,000 must go into Stocks & Shares ISAs.
• Over‑65s retain full flexibility.

These changes increase the need for holistic financial planning to ensure investment choices align with individual goals, not just tax rules.

Investment Incentives and Pensions

VCT Relief Reduced

From April 2026, income tax relief on Venture Capital Trust (VCT) investments will drop from 30% to 20%, a move expected to hit the sector hard.

Salary Sacrifice Pensions Targeted

From 2029, personal salary sacrifice contributions will be capped at £2,000 for NI relief. Anything above this will attract employee NICs. Employer contributions will still receive full NI relief, which may lead to reconsideration of employment contract structures.

The annual allowance remains at £60,000.