Autumn Budget 2025: The Key Tax Changes
Autumn Budget 2025: A clear summary of the key tax changes affecting businesses, directors, landlords and families. Updated with the latest measures.
The Autumn Budget 2025 arrived with more weight than usual — not because of political drama, but because the Office for Budget Responsibility (OBR) accidentally published their full forecast hours before the Chancellor stood up.
That early release made one thing very clear:
Taxes are rising — and businesses, directors, landlords and investors will feel it first.
The OBR’s updated forecast confirms this:
- The UK tax burden is heading to 38.3% of GDP, the highest level in modern British history.
- National growth has been downgraded by 0.3 percentage points.
- Most of the Government’s fiscal plan is funded through tax rises, not spending cuts.
So, what does this mean for you as a business owner, director or individual taxpayer?
Below, we break down the key Autumn Budget 2025 changes in a clear, practical way — using real examples to show the true financial impact.
Our summary is based on information announced on 26th November 2025 and will be updated as more details become available.
Quick Reference: Key Autumn 2025 Budget Changes
| Area | Change |
|---|---|
| Dividend tax | +2 percentage points |
| Property/savings income | +2 percentage points |
| Income tax thresholds | Frozen until 2031 |
| EV taxation | New 3p-per-mile tax |
| ISA cash allowance | Cut to £12,000 (under 65s) |
| Salary sacrifice | NI charged above £2,000 |
| High-value property | £2,500–£7,500 surcharge |
| Business rates | Relief for retail, leisure, hospitality |
1. What Business Owners & Directors Need to Know
This Autumn Budget 2025 places a significant share of the tax burden on limited company directors, SMEs and owner-managed businesses. Here’s how.
a. Dividend Tax Is Increasing
If you draw dividends from your company — as most directors do — your tax bill will rise from April 2026. To illustrate this, here is the most common small-business remuneration model.
Example: £12,570 salary + dividends up to £50,000 total income
Total income
- Salary: £12,570
- Dividends: £37,430
- Total: £50,000
Your salary uses your full Personal Allowance.
All dividends sit in the basic-rate dividend band (after accounting for the £500 dividend allowance).
Dividend Tax Comparison
| Description | 2025/26 | 2026/27 | Difference |
|---|---|---|---|
| Dividends received | £37,430 | £37,430 | – |
| Dividend Allowance | £500 | £500 | – |
| Taxable dividends | £36,930 | £36,930 | – |
| Dividend tax rate | 8.75% | 10.75% | +2% |
| Total dividend tax | £3,231.38 | £3,969.98 | +£738.60 |
Assumption: England & Wales tax bands, no other income, all dividends taxed at the basic rate, no student loan.
What this means for you: A director earning £50,000 through the standard salary/dividend split will now pay £738.60 more tax each year for the exact same remuneration.
Recommendation: This is a good time to reassess your salary–dividend structure. Pension contributions, company profit levels and personal allowances may alter what is most tax-efficient in future years.
b. Corporation Tax Relief is Being Cut (WDA Reduction)
The main Corporation Tax rate isn’t increasing — but the amount of tax relief you get on equipment and machinery is being reduced.
Example: £100,000 equipment purchase
| Description | 2025/26 | 2026/27 | Difference |
|---|---|---|---|
| WDA % | 18% | 15% | –3% |
| Deductible amount | £18,000 | £15,000 | –£3,000 |
| Corporation tax saved @ 19% | £3,420 | £2,850 | –£570 |
| Extra CT payable | – | – | +£570 |
Assumption: Uses 19% small-profits CT rate and excludes AIA or full expensing.
What this means for you: You will receive less tax relief when buying tools, machinery, equipment or vehicles.
Recommendation: AIA and full expensing may override these changes. Review expenditure timing to ensure you are using the most beneficial reliefs.
c. Salary-Sacrifice Pension Contributions Will Be Restricted
From April 2029, only the first £2,000 of salary-sacrifice pension contributions will be exempt from employer and employee National Insurance.
Example: £20,000 salary-sacrifice pension contribution
| Amount | 2025/26 NI Treatment | From 2029 | Difference |
|---|---|---|---|
| First £2,000 | NI-free | NI-free | – |
| Remaining £18,000 | NI-free | Employer NI + Employee NI (~14.8%) | ≈£2,660 NI |
| Total NI impact | £0 | £2,660 | +£2,660 |
Assumption: Based on current NI rates and assumes earnings above the UEL.
What this means for you: Larger salary-sacrifice contributions will become significantly more expensive.
Recommendation: This change affects both directors and employees. Review your pension strategy, especially if you typically sacrifice above £2,000.
d. Electric Vehicle Mileage Tax (From 2028)
From April 2028:
- Electric vehicles → 3p per mile
- Plug-in hybrids → 1.5p per mile
Example: Electric car doing 12,000 miles per year
| Description | Before 2028 | From 2028 | Difference |
|---|---|---|---|
| Rate per mile | 0p | 3p | +3p |
| Annual miles | 12,000 | 12,000 | – |
| Annual charge | £0 | £360 | +£360 |
| Fleet of 15 EVs | £0 | £5,400 | +£5,400 |
Assumption: Assumes all miles are taxable and excludes inflation-linked adjustments.
What this means for you: EVs remain cheaper than petrol or diesel, but no longer “tax-free” to operate. Fleet-heavy businesses will see noticeable cost increases.
e. Business Rates Relief for Retail, Hospitality & Leisure
One of the few business-friendly measures:
- Over 750,000 premises will receive permanently lower business rates.
- Worth £4.3bn nationally.
What this means for you: If you operate a shop, café, salon, bar, restaurant or leisure venue, expect lower fixed costs.
2. What High-Net-Worth Individuals Need to Know
This Budget materially affects those with substantial property or investment income.
a. High-Value Property Surcharge (“Mansion Tax”)
From 2028:
| Property Value | Before | From 2028 | Increase |
|---|---|---|---|
| £2m–£5m | £0 | £2,500 | +£2,500 |
| £5m+ | £0 | £7,500 | +£7,500 |
Assumption: Applies to England; this is a fixed annual levy.
What this means for you: High-value UK properties now incur an ongoing annual cost, in addition to standard council tax.
b. Savings, Rental & Investment Income Increase by 2%
Example: £12,000 rental profit
| Description | 2025/26 | 2026/27 | Difference |
|---|---|---|---|
| Tax rate | 20% | 22% | +2% |
| Tax due | £2,400 | £2,640 | +£240 |
Assumption: Example is for a basic-rate taxpayer with fully taxable rental profit.
What this means for you: Landlords and investors with larger portfolios may feel a cumulative annual increase across multiple properties or investment income streams.
c. Cash ISA Allowance Cut (Under 65s)
| Age Group | Old Allowance | New Allowance | Change |
|---|---|---|---|
| Under 65 | £20,000 cash | £12,000 cash | –£8,000 |
| 65+ | £20,000 cash | £20,000 cash | No change |
Assumption: Overall ISA allowance remains £20,000; reduction applies only to cash for under-65s.
What this means for you: You can still save or invest up to £20,000 annually — but if you’re under 65, only £12,000 can be held in cash. The remainder must be invested to use your full allowance.
d. Inheritance Tax Relief Transfer Expanded
Spouses can now transfer 100% of their IHT relief allowance, simplifying estate planning and reducing taxable estate value.
What this means for you: Couples with significant estates may now preserve more wealth for the next generation through more flexible use of allowances.
What Everyone Else Should Know
a. Income Tax Threshold Freeze Until 2031
Tax bands will remain fixed until 2031, dragging more income into higher-rate tax bands as wages rise.
Illustrative Example: £30,000 → £35,000 salary increase
| Description | £30,000 salary | £35,000 salary | Change |
|---|---|---|---|
| Gross salary | £30,000 | £35,000 | +£5,000 |
| Taxable income (after £12,570 PA) | £17,430 | £22,430 | +£5,000 |
| Income tax @ 20% | £3,486 | £4,486 | +£1,000 |
| Take-home (before NI) | £26,514 | £30,514 | +£4,000 |
Assumption: England & Wales income tax bands, salary only, ignoring National Insurance for simplicity.
What this means for you: Even if you remain in the basic-rate band, more of your income becomes taxable each year because the Personal Allowance is frozen. You still take home more after a pay rise, but a larger share of that rise is taxed than would be the case if thresholds increased with inflation.
In this example, a £5,000 pay rise results in £1,000 of extra tax — a 20% bite. This is why frozen thresholds are often called a “stealth tax”: more people are steadily pulled into paying 20% and eventually 40% tax, even if their real spending power hasn’t grown much.
b. Two-Child Benefit Cap Scrapped (From April 2026)
From April 2026, families will receive Child Benefit for all children, not just the first two.
c. Student Loan Threshold Freeze
With thresholds frozen, graduates will repay more each year as more of their income becomes liable.
d. Fuel Duty Frozen Until September 2026
A freeze avoids further increases but does not reduce the cost of fuel.
A Summary of all Key Tax Changes
- Income tax: Thresholds frozen until 2031 — stealth tax rise.
- Dividend tax: +2 percentage points — directors and investors pay more.
- Property income: +2 percentage points — landlords pay more.
- Electric vehicles: 3p per mile — higher running costs.
- ISA (under 65): Cash limit cut to £12k — reduced tax-free saving.
- Salary sacrifice: NI charged above £2k — higher pension contribution cost.
- High-value property: £2,500–£7,500 surcharge — High Net Worth households pay more.
Our Final Thoughts
This Autumn Budget 2025 represents the largest shift towards higher taxation in years. The changes significantly impact business owners, directors, landlords and investors — often by increasing tax without altering headline rates.
Planning ahead as always, around dividends, pensions, investment strategy, expenditure timing and electric vehicle usage — is now essential, we wouldn’t delay looking at this.
Nichols & Co will continue monitoring developments, explaining changes clearly and helping clients remain tax-efficient and if you would like to get in touch, please contact us.
Published: 26 November 2025 | Last Updated: 26 November 2025, 15:00
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