Autumn Budget 2025: What You Need to Know

Date: 26 November 2025

After months of speculation, policy testing and several late U-turns, Chancellor Rachel Reeves has delivered her second Budget, announced as late in the year as politically possible.

The 2025 Autumn Budget comes against a challenging economic backdrop of low growth, stubborn inflation, rising unemployment and elevated interest rates. With welfare spending increasing and the fiscal deficit widening, the Chancellor has opted for a series of structural and targeted tax measures to raise revenue without headline rate increases.

Key Headlines

• No change to income tax, National Insurance or VAT rates.
• Threshold freezes extended to 2031, raising the overall tax burden.
• Two-child benefit cap removed from April 2026.
• National Living Wage to increase from £12.21 to £12.71, a 4.1% increase.
• New property, pension and vehicle-related taxes to fund welfare and spending measures.
• Fuel duty frozen until April 2026 (5p cut retained).
• National debt expected to exceed £3 trillion.

Economic Overview

Reeves has focused on fiscal discipline while avoiding direct tax rate rises. The Budget aims to balance welfare commitments with longer-term structural tax reforms, leaning heavily on freezes and new levies rather than rate changes.

While the approach avoids an immediate inflation spike, many measures extend or create new forms of indirect taxation, particularly for property owners, investors, and higher earners.

Tax Measures

Income Tax and Allowances

• No rise in income tax, NI or VAT rates.
• Income tax thresholds frozen for a further three years to 2031.

Minimum Wage Increases

• From April 2026, the National Living Wage (NLW) will rise from £12.21 to £12.71 per hour, a 4.1% increase.
• The National Minimum Wage (NMW) for 18–20-year-olds will rise from £10.00 to £10.85. 
• While rates for 16–17-year-olds and apprentices will increase from £7.55 to £8.00.

Pensions

• From April 2029, salary-sacrificed contributions above £2,000 per year will lose NIC exemptions.
• From April 2029, only the first £2,000 of salary-sacrificed pension contributions will be exempt from National Insurance.
• Employer NICs: 15%; employee NICs: 8% (under £50,270) and 2% above that.
• No changes to the 25% tax-free lump sum or contribution relief.

Property & IHT

• High-value property tax introduced from April 2028, the lowest band being £2m to £2.5m, £2,500 annual surcharge and the highest being £5m+ £7,500 annual surcharge.
• Separate tax rates for property income from April 2027: Basic 22%, Higher 42%, Additional 47%.
• CGT Business Asset Disposal Relief rises from 14% to 18% (April 2026).
• 100% Agricultural/Business Property Relief capped at £1m from April 2026, transferable between spouses.
• Pension pots to be brought into Inheritance Tax from April 2027.
• The government plans to make permanent lower business rates for over 750,000 retail, hospitality and leisure properties amounting to nearly £900 million per year from April 2026.
• A support package worth £4.3 billion will help businesses with rate bill increases following revaluations from April 2026.
• For film studios, 40 per cent business rates relief will be maintained for ten years, until 2034. 

Savings and Dividends

• Dividend tax rates to rise by 2% to 10.75% and 35.75% (April 2026).
• Savings income tax rates to increase by 2% across all bands (April 2027).
• ISAs: £20,000 annual limit retained, but from April 2027, £8,000 must be held in investments (exemption for over-65s).

Corporation Tax

• Capped at 25% for the remainder of the current Parliament.
• Writing-down allowances (the tax relief businesses claim when they buy capital items not qualifying for “full expensing”) will be reduced from 18 per cent to 14 per cent from April 2026, making it marginally less attractive to invest in some capital items unless they fall under the full expensing rules.
• From 1 January 2026, the government will introduce a new 40 per cent First Year Allowance for main rate expenditure. This will apply to most spending on assets for leasing and expenditure by unincorporated businesses.

Business and Investment

• Writing-down allowances main rate reduced to 14% (from April 2026).
• New 40% first-year allowance from January 2026 for eligible assets.
• Making Tax Digital for Income Tax to start in April 2026.
• EMI scheme made more generous.

Other Tax Changes

• Electric vehicles: 3p per mile charge from 2028/29; hybrids 1.5p.
• Soft drinks levy extended to high-sugar milk-based drinks.
• Tourist tax introduced on overnight stays.
• Fuel duty frozen until September 2026; 5p cut retained.
• Tobacco, vaping, and alcohol duties to rise with inflation.
• Gambling tax to increase on remote gambling; bingo duty abolished.
• Low-value import relief (£135 or less) abolished from March 2029.
• Student loan thresholds frozen for three years from 2026/27.
• Some changes to Capital Gains Tax for non-resident individuals, share exchange/reorganisation rules, and inheritance-related trust charges for former non-domicile residents were also announced.

Spending and Welfare

• Two-child benefit cap lifted from April 2026.
• Welfare spending projected to be £16bn higher by 2029/30 (OBR).
• State pension to rise under the triple lock.
• Energy bills to fall by £150 on average from April 2026 (green levies removed).
• Additional funding for tax and benefits fraud prevention, devolved governments, and sanctions enforcement.
• Rail fares frozen.

Economic Context and Outlook

The Office for Budget Responsibility (OBR) forecasts the overall tax burden will continue to rise, reaching 38.3% of GDP by 2031, the highest level in over 70 years. The Chancellor’s approach signals a continued focus on fiscal repair through gradual, indirect measures rather than major rate changes.

While the government has announced measures to ease pressure on households, including an average £150 cut to energy bills, rail fare freezes, and the removal of the two-child benefit cap, the broader direction of travel remains one of fiscal restraint and a shift towards taxing wealth, assets and investment income. Whether further tax increases will follow in 2026 remains an open question.

Further Information

HMRC Budget 2025: https://www.gov.uk/government/publications

Need Advice?

If you’d like to discuss how the 2025 Autumn Budget could impact your personal or business finances, our team of tax and financial specialists can help.

Contact Grenfell James to arrange a consultation.

📞 01789 294484

📧 enquiries@grenfelljames.co.uk

🌐 www.grenfelljames.co.uk