Chancellor Rachel Reeves has delivered her second Budget to Parliament, focused on “cutting the cost of living, cutting NHS waiting lists and cutting the cost of debt.” Here are some of the main announcements.
Personal Tax
- Personal Allowances: Income tax thresholds frozen until April 2031
- Property and Savings Income: From April 2027, tax rates will increase by 2% (Basic 22%, Higher 42% and Additional 47%)
- Individual Savings Accounts: From April 2027, cash ISA contributions for under-65s will be capped at £12,000 a year, with the rest of the £20,000 annual allowance reserved for investments
National Insurance
- Current Rates: Employee and self-employed NI rates remain unchanged
- Thresholds: Frozen for a further 3 years, until April 2031
- Voluntary Class 3 Contributions: From April 2026, only voluntary Class 3 contributions can be paid for periods abroad
Company Tax
- Main Corporation Tax Rate: To remain unchanged at 25% for profits over £250,000
- Marginal Relief: To continue for profits between £50,000 and £250,00
- Small Profits Rate: To remain at 19% for profits up to £50,000
- Late Filing Penalties: For returns due from 1 April 2026, penalties will range from £200 to £2,000 depending on lateness and frequency
Salary Sacrifice
- Pension Contributions: From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice will be exempt from NI
- Above £2,000: Both employee and employer NI will apply
- Employer Contributions: Will continue to be free of NI
Dividend Rate Bands
- Dividend Allowance: To remain at £500 from 6 April 2026
- Dividend Ordinary and Upper Tax Rates: Each to increase by 2% from April 2026
- Additional Dividend Tax Rate: To remain the same
National Minimum Wage From 1 April 2026
- Workers Aged Over 21: To increase from £12.21 to £12.71
- Workers Aged Between 18 to 20: To increase from £10.00 to £10.85
- Workers Aged Under 18: To increase from £7.55 to £8.00
- Apprentices: To increase from £7.55 to £8.00
Pensions
- Annual Allowance: The amount individuals can contribute to their pension schemes will remain at £60,000 for 2026/27
- Tapered Annual Allowance: For individuals whose income is £260,000 or more, this will remain at £10,000 from April 2026
- Tax-Free Lump Sum: The percentage that can be withdrawn on retirement will remain at 25% of the pension value, up to a maximum of £268,275
- Unused Pension Funds: Unused pension funds and death benefits payable from a pension will be brought into a person’s estate for Inheritance Tax purposes from 6 April 2027
- State Pension: Under the triple lock, the State Pension will rise in line with the highest of average earnings, inflation or 2.5%
- State Pension Increase: This will increase from £230.25 to £241.30 per week from April 2026
- Basic State Pension: This will rise from £176.45 to £184.90 per week from April 2026
Capital Gains Tax
- CGT Rates and Allowances: To remain the same for 2026/27
- Business Asset Disposal Relief and Investors Relief: Rate increases from 14% for disposals on or after 6 April 2025 to 18% from 6 April 2026
- Annual Exempt Amount: No change to the tax-free allowance available against taxable gains
- Employee Ownership Trusts: CGT relief will be restricted to 50% of the gain. The remaining 50% of the gain will be held over
- Incorporation Relief: From April 2026 this will need to be claimed by the transferor in their self-assessment tax return for the tax year in which the transfer to a company took place
- Share Exchanges or Reorganisations: Share exchanges or reorganisations performed on or after 26 November 2025 where tax advantage is a motivation, will not benefit from the reorganisation rules
Inheritance Tax
- IHT Rates: To remain unchanged, with the main rate staying at 40%
- Nil Rate Band: The £325,000 Nil Rate Band, the £175,000 Residence Nil Rate Band (RNRB) and the tapering limit for RNRB to be retained at £2 million until 5 April 2031
- Agricultural Property Relief and Business Property Relief: To be restricted to the first £1 million of combined agricultural and business property, with the excess relieved at 50% from 6 April 2026. The £1 million limit is fixed until 5 April 2031
- Infected Blood Compensation Payments: Those made in respect of an infected or affected person who has already died, will be IHT exempt on the death of the first living recipient of the compensation payment
- Business Property Relief: A relief from IHT on the value of certain business assets
Capital Allowances
- 40% First Year Allowance: A new 40% FYA was announced, allowing many more claims, including from sole traders and partnerships or in respect of assets bought to lease out and will be available for expenditure incurred from 1 January 2026
- 100% First Year Allowance: No change
- Main Rate: To fall from the rate of 18% to 14% from 1 April 2026 for companies and from 6 April 2026 for sole traders and partnerships
Benefits
- Two Child Cap: The limit on Universal Credit and Child Tax Credit for third and subsequent children will be scrapped from April 2026
Transport
- Fuel Duty: 5p “temporary” cut on petrol and diesel extended again, until September 2026
- Electric Vehicles: A new mileage based tax for electric and plug-in hybrid cars to be introduced from 2028
- Motability Scheme: Premium cars to be excluded, which allows people on certain benefits to lease vehicles more cheaply
Drinking and Smoking
- Sugary Drinks Tax: Extended to include pre-packaged milkshakes and lattes, from 2028
- Tobacco Duty: To increase by 2% above the higher RPI rate of inflation
- Alcohol Duty: To also increase by the higher RPI measure in February
Research & Development
- There are no changes to the R&D rules following the merger of the R&D tax relief scheme for small and medium sized companies and the R&D Expenditure Credit (RDEC) used by large companies for accounting periods beginning on or after 1 April 2024
To discuss the 2025 Autumn Budget, or the accountancy and tax support you need, please call our friendly team on 01249 712074 or email theteam@cvag.co.uk
The full publication can be found on the GOV.UK website