Introduction
Chancellor Rachel Reeves delivered her second Autumn Budget on 26 November 2025, announcing £26 billion in tax increases alongside measures aimed at cutting the cost of living and reducing NHS waiting lists. This marks one of the most significant fiscal events of the year, with far reaching implications for individuals, families, and businesses across the UK.
The Budget comes at a critical time for the UK economy, with the tax burden projected to reach an unprecedented 38% of GDP by 2030-31 – five percentage points higher than pre-pandemic levels. While the government has positioned these changes as necessary to repair public finances and fund essential services, the impact on taxpayers will be substantial.
In this comprehensive guide, we break down the key changes announced in the Budget and explain what they mean for your personal finances and business planning.
Personal Tax Thresholds: The Stealth Tax ContinuesWhat’s Changed?The freeze on income tax and National Insurance thresholds has been extended for a further three years until April 2031. This continues a policy originally introduced by former Chancellor Rishi Sunak in 2021, which was scheduled to end in 2028.
The Impact
This extension represents what economists call “fiscal drag” – as wages rise with inflation, more people are pulled into higher tax brackets without any change in tax rates. By 2029-30, this policy is expected to create:
- 780,000 additional basic rate taxpayers
- 920,000 additional higher rate taxpayers
- 4,000 additional additional rate taxpayers
The Treasury expects this measure alone to raise £7.5 billion annually by 2029-30.
Current Tax Thresholds (Frozen Until 2031)
- Personal Allowance: £12,570
- Basic Rate (20%): £12,571 to £50,270
- Higher Rate (40%): £50,271 to £125,140
- Additional Rate (45%): Over £125,140
What You Should Do
With thresholds frozen for another six years, proactive tax planning becomes essential:
- Review your pension contributions to reduce taxable income
- Consider income splitting with your spouse if you’re approaching a higher threshold
- Maximise available reliefs and allowances before they’re eroded by inflation
- Plan salary and dividend extraction carefully if you’re a business owner
ISA Changes: Reduced Savings Limits
What’s Changed?
From April 2027, the annual cash ISA limit will be reduced from £20,000 to £12,000 for individuals under 65. Those aged 65 and over will retain the full £20,000 allowance for cash ISAs.
The Impact
This 40% reduction in the cash ISA limit will significantly affect savers’ ability to shelter their savings from tax. With interest rates on savings accounts remaining relatively attractive, this change means more of your interest income will be subject to tax.
Example Impact
Consider a basic rate taxpayer who currently saves £20,000 annually in a cash ISA earning 4% interest:
Currently: £800 interest earned tax free annually
From April 2027: Only £480 tax free (on £12,000), with £320 earned on the remaining £8,000 potentially subject to tax (depending on Personal Savings Allowance usage)
What You Should Do
- Maximise your £20,000 ISA allowance for the 2025/26 and 2026/27 tax years while you still can
- Consider transferring to Stocks & Shares ISAs which retain the £20,000 limit
- Review your overall savings strategy to optimise tax efficiency
- Use your spouse’s allowance effectively if you’re a couple
Property Tax Increases: Higher Costs for Landlords and Investors
What’s Changed?
The Budget introduces multiple changes affecting property owners:
- Mansion Tax: A new levy on residential properties valued over £2 million
- Property Income Tax Rate Increase: Tax rates on property, savings, and dividend income will rise by 2 percentage points
- Business Property Tax Reform: Higher rates on commercial properties worth over £500,000, including warehouses used by “online giants”
The Impact on Landlords
The Chancellor highlighted a stark disparity in the current system: “A landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary, because no National Insurance is due on rental income.”
The 2 percentage point increase means:
- Basic rate landlords: Tax on rental income rises from 20% to 22%
- Higher rate landlords: Tax on rental income rises from 40% to 42%
- Additional rate landlords: Tax on rental income rises from 45% to 47%
The Impact on High Value Homeowners
The mansion tax on properties over £2 million adds another layer of cost for owners of high value residential property. While full details are still emerging, this is expected to be an annual charge based on property value.
What You Should Do
Property investors and landlords should:
- Review the viability of your property portfolio under the new tax rates
- Consider corporate structures for holding investment property
- Evaluate whether to sell underperforming properties before the tax increases take effect
- Factor in the additional costs when calculating rental yields
- Explore capital allowances and other available reliefs
Pension Changes: Salary Sacrifice Cap
What’s Changed?
From April 2029, National Insurance relief on salary sacrificed pension contributions will be capped at £2,000 annually. Contributions above this threshold will be subject to employer National Insurance contributions.
The Impact
Salary sacrifice has been a highly tax efficient way to make pension contributions, saving both employer and employee National Insurance. This change significantly reduces that benefit for higher earners.
Current vs. Future Position
Example: £10,000 salary sacrifice pension contribution
Currently (2025):
- Employee saves: 12% NI (£1,200) + income tax (20-45%)
- Employer saves: 13.8% NI (£1,380)
From April 2029:
- First £2,000: Full NI relief (as above)
- Remaining £8,000: No employer NI relief (£1,104 additional cost)
What You Should Do
If you currently use salary sacrifice for pension contributions:
- Maximise contributions before April 2029 while full relief is available
- Review your pension strategy with a financial adviser
- Consider alternative contribution methods post-2029
- Calculate the real cost of continuing salary sacrifice above £2,000
- Explore other tax efficient investment vehicles
Investment Income: Higher Tax on Dividends and Savings
What’s Changed?
Tax rates on savings interest and dividend income will increase by 2 percentage points across all bands.
New Rates (From 2026/27)
Dividend Tax:
- Basic rate: 8.75% → 10.75%
- Higher rate: 33.75% → 35.75%
- Additional rate: 39.35% → 41.35%
Savings Interest Tax:
- Basic rate: 20% → 22%
- Higher rate: 40% → 42%
- Additional rate: 45% → 47%
The Impact on Business Owners
Many owner managers of limited companies pay themselves a small salary and take the remainder as dividends to minimise tax. This strategy becomes less attractive with the dividend tax increase.
Example: Business Owner Taking £50,000 in Dividends
Currently: Tax of approximately £16,875 (after dividend allowance)
From 2026/27: Tax of approximately £17,875 (£1,000 additional)
What You Should Do
- Review your income extraction strategy if you’re a company director
- Model different salary/dividend combinations under the new rates
- Consider pension contributions as a more tax efficient alternative
- Evaluate whether incorporation still makes sense for your business
- Plan dividend timing to make best use of tax year allowances
The Positive Changes: Cost of Living Support
While much of the Budget focuses on tax increases, there are several measures designed to ease the cost of living:
Energy Bills
- £150 reduction on household energy bills for all households
Transport
- Rail fares frozen across the UK
- Fuel duty 5p cut retained until September 2026 (though it will then be reversed through a staggered approach)
Families
- Two child benefit cap removed – expected to lift 350,000 children out of poverty and reduce poverty depth for 800,000 more children. This represents a significant policy reversal from Labour’s previous position and will cost an estimated £3 billion by 2029-30.
Healthcare
- 250 new Neighbourhood Health Centres announced
- 5.2 million additional NHS appointments already delivered since the general election
Education
- £5 million for secondary school libraries following representations from backbench MPs
Inheritance Tax: Extended FreezeWhat’s Changed?
The inheritance tax (IHT) nil rate bands will be frozen for a further year until April 2031.
Current IHT Thresholds (Frozen Until 2031)
- Nil rate band: £325,000
- Residence nil rate band: £175,000
- Total potential threshold for family home: £500,000 (or £1 million for married couples)
The Impact
With property values generally rising over time, more estates will be caught by IHT as the thresholds remain static. This particularly affects families in areas with high property values, such as London and the South East.
What You Should Do
- Review your estate planning arrangements regularly
- Consider lifetime gifting strategies (remember the seven year rule)
- Explore business property relief and agricultural property relief where applicable
- Review life insurance policies held in trust
- Consider pension death benefits as part of your estate planning
Electric Vehicles: New Road Tax
What’s Changed?
From April 2028, drivers of battery electric vehicles will pay a new charge of 3 pence per mile, with the rate rising annually with inflation.
The Impact
This represents the government’s response to falling fuel duty revenues as more drivers switch to electric vehicles. Fuel duty raised just under £25 billion in 2024/25, and this revenue stream is under threat from the transition to EVs.
Example Cost
- Average annual mileage (7,400 miles): £222 per year
- High mileage driver (15,000 miles): £450 per year
What You Should Do
- Factor in the future running costs when considering an EV purchase
- Review your vehicle acquisition timing if you’re planning to switch to electric
- Consider the total cost of ownership including this new charge
Business Implications: Key Considerations
Workforce Efficiency Drive
The Chancellor announced plans to deliver almost £5 billion in savings by 2031 through workforce reductions and greater use of AI in public services. While this primarily affects the public sector, it signals the government’s direction on technology adoption and efficiency.
The Overall Tax Burden
With the total tax burden reaching 38% of GDP by 2030-31, businesses need to:
- Review cost structures in light of higher taxes
- Plan for reduced consumer spending power as individuals face higher tax bills
- Consider the impact on recruitment and retention as take home pay is squeezed
- Optimise business structures for tax efficiency
Timeline: When Do These Changes Take Effect?
Understanding the implementation timeline is crucial for effective planning:
| Date | Change |
| April 2026 | Property, savings, and dividend tax rates increase by 2% |
| September 2026 | 5p fuel duty cut reversed (staggered approach begins) |
| April 2027 | Cash ISA limit reduced to £12,000 for under 65s |
| April 2028 | EV mileage charge introduced (3p per mile) |
| April 2029 | Salary sacrifice NI relief capped at £2,000 |
| April 2031 | Tax threshold freeze ends (current commitment) |
What Should You Do Now?
The changes announced in this Budget require proactive planning. Here are the key actions to consider:
Immediate Actions (Before April 2026)
- Review your income and expenditure in light of coming changes
- Maximise your ISA allowances while the £20,000 limit remains
- Consider accelerating dividend payments before rates increase
- Review your property portfolio strategy
Medium Term Planning (2026-2028)
- Restructure income extraction if you’re a business owner
- Optimise pension contributions before the salary sacrifice cap
- Review investment strategies considering higher tax on returns
- Plan for frozen tax thresholds as your income rises
Long Term Considerations (2028+)
- Estate planning in light of extended IHT freezes
- Retirement planning factoring in new pension tax rules
- Business succession planning with new tax landscape in mind
- Multi generational wealth strategies
How FMY Chartered Accountants Can Help
At FMY Chartered Accountants, we combine Big 4 expertise with mid market focus and transparent, fixed fee pricing. Our team can help you:
Tax Planning & Optimisation
- Comprehensive tax position review in light of Budget changes
- Income extraction strategy for business owners
- Investment portfolio tax efficiency analysis
- Estate and inheritance tax planning
Business Advisory
- Business structure optimisation
- Dividend vs. salary planning
- Corporate tax strategy
- Succession planning
Compliance & Peace of Mind
- Accurate tax return preparation
- Real time tax position monitoring
- Regulatory compliance assurance
- Year round support (not just at tax deadline)
Our Approach
- Partner led service – you’ll work directly with experienced professionals
- Fixed fee pricing – no surprises, transparent costs
- Plain English communication – we explain complex tax matters clearly
- Proactive advice – we identify opportunities before they’re missed
Conclusion
The 2025 Autumn Budget represents one of the most significant tax events in recent years, with £26 billion in tax increases set to reshape the financial landscape for individuals and businesses alike. While some measures – such as the two child benefit cap removal and energy bill support – provide welcome relief, the overall direction is clear: the tax burden is rising substantially.
The key to navigating these changes successfully is proactive planning. The timeline of implementation gives us a window to optimise tax positions, restructure where beneficial, and ensure you’re positioned as efficiently as possible under the new regime.
The frozen tax thresholds, reduced ISA limits, higher taxes on property and investment income, and pension changes all require careful consideration and strategic response. Those who plan ahead will be in a far stronger position than those who react only when changes take effect.
Get Expert Advice
Don’t navigate these changes alone. Our team at FMY Chartered Accountants is ready to help you understand the implications for your specific situation and develop a comprehensive strategy to optimise your position.
Contact us today for a consultation:
Email: info@fmyaccountants.co.uk
Website: www.fmyaccountants.co.uk
Phone: +44 330 043 5088
Recently Asked Questions
Q: When do I need to take action on these Budget changes?
A: Different changes take effect at different times. The earliest significant changes (property, savings, and dividend tax increases) begin in April 2026, giving you time to plan. However, the sooner you start planning, the more options you’ll have available.
Q: Will the ISA limit reduction affect my existing ISA savings?
A: No, existing ISA savings are protected. The £12,000 limit only affects new contributions from April 2027 onwards. Your existing ISA pot remains tax free regardless of size.
Q: Should I still use salary sacrifice for pension contributions after 2029?
A: It depends on your circumstances. The first £2,000 will still benefit from full NI relief. Above that, you’ll need to weigh the reduced benefits against alternative strategies. We can help you model the best approach.
Q: How will the property tax changes affect my buy to let investment?
A: The 2% rate increase will reduce your net rental yield. You should recalculate your returns under the new rates and consider whether restructuring your holdings could improve efficiency. Each situation is different, and we can provide specific advice based on your portfolio.
Q: Can I avoid the frozen threshold impact?
A: You can’t avoid it entirely, but you can mitigate the impact through pension contributions, use of allowances, income splitting with a spouse, and other planning strategies. We can help identify the most effective approaches for your situation.
Disclaimer: This article is for general information purposes only and does not constitute financial or tax advice. Tax rules and rates may change, and your personal circumstances will affect how they apply to you. For specific advice tailored to your situation, please contact FMY Chartered Accountants.
Contact FMY Accountants today at info@fmyaccountants.co.uk for tailored advice and a personalised plan for your business.