Autumn Budget 2025 – How am I Affected?

On Wednesday 26th November, the Chancellor of the Exchequer delivered this Labour government’s second budget. But what changes have been laid out? And how will they affect you and your business?

National Minimum Wage Increase

Much like the announcement in last year’s budget, the National Living Wage will be increasing from April 2026 for those over 21 years of age. The rate will be raised from £12.21 to £12.71 – a 4.1% increase.

For 18–20-year-olds, an increase of 8.5% will bring their minimum wage to £10.85 an hour. This larger increase is an effort to bring earnings closer to that of older workers.

The minimum wage for under 18s and apprentices is also increasing. A 5.6% increase sees this rate rise from £7.55 to £8.00.

Income Tax and National Insurance Freezes

The freeze of Income Tax and National Insurance thresholds has been extended to April 2031. By this date, the thresholds will have remained the same for 10 years.

As the National Minimum Wage is increasing whilst the tax thresholds stay the same, more individuals will be pushed into higher tax bands, resulting in them paying more tax.

Taxing Salary Sacrifice Pensions

A salary sacrifice pension is where an employee accepts a lower salary with a contractual agreement that their employer pays the difference directly into their pension tax-free. As their salary is lower, they in turn pay less Income Tax and National Insurance on their wages.

This budget has announced that an annual cap of £2,000 will be applied to salary sacrifice pensions from April 2029. This means that any amount over this cap will be taxed in the same way as other employee pension contributions.

Increases to Non-Employment Tax Rates

Basic and higher tax rates for dividend income will increase by 2% from April 2026. The additional rate will remain at 39.35%

Tax on savings and property income will also increase by 2% across all bands (including the additional rate) from April 2027.

Changes to ISAs

April 2027 will see reforms to the current ISA Allowances. Currently, investors can put up to £20,000 each tax year into an ISA (or split the amount over several ISAs). The new changes stipulate that only £12,000 of the original allowance will be allowed into cash ISAs. The remaining £8,000 can still be invested, but only into an investment ISA (i.e., a stocks and shares ISA).

Those aged over 65 are exempt from this change and may continue to put the full £20,000 into a cash ISA if they would prefer.

Electric Vehicle Duty

A new excise duty will apply to electric and hybrid vehicles from April 2028. This will be charged at £0.03 per mile for fully electric cars, and £0.015 per mile for plug-in hybrids. These rates will be subject to increases with inflation.

This measure could be seen as disincentivising electric vehicles, but increased funding for EV charging and business rate relief being applied for charging points is hoped to encourage drivers to still make the switch.

Introduction of Mansion Tax

The budget has announced a high-value surcharge, known as Mansion Tax, will be introduced in 2028. This will see an additional £2,500 charge on properties valued over £2 million, or £7,500 for properties valued over £5 million. The surcharge will be collected alongside council tax. It is expected to raise over £400 million by 2031 whilst only affecting the top 1% of properties in the country.

Two-Child Benefit Cap Scrapped

Since 2017 parents have only been able to claim universal credit and other benefits for their first two children. The 2025 Budget has declared that this cap will be scrapped from April 2026. This hopes to reduce the number of children currently living in poverty in the UK.

Additional Changes

  • Increases in funding should ensure that apprenticeships for under 25s will be free for small and medium sized businesses
  • A 40% allowance will be given to allow businesses to write of more of their initial investment costs
  • Higher business rates will be imposed on properties worth over £500,000 (i.e., warehouses owed by online retail giants) to allow rates to be lowered for an estimated 750,000 hospitality, leisure, and retail businesses
  • Customs duty will apply to all parcels – should be implemented by March 2029 at the latest
  • Gambling duty reform will take place from April 2026. The highest increase will be on remote gaming (online casinos), which will be applied at 40%
  • Fuel duty will remain frozen until September 2026
  • Tobacco and alcohol duties will increase again in the next tax year
  • The sugar tax will now include dairy-based drinks (such as milkshakes)

 

If you require any advice regarding changes announced in the budget, or you require help with accounting, tax preparation, or payroll, please do not hesitate to contact us.

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Autumn Budget 2024 – How Will it Affect Me?

On Wednesday 30th October, Rachel Reeves delivered her first budget as Chancellor of the Exchequer, and Labour’s first budget in 14 years. But what changes have been announced in the Autumn Budget? And how will those changes affect you?

National Minimum Wage Increase

The National Minimum Wage (NMW) will increase from April 2025. The hourly rate will rise by 6.7% for those aged 21 and over. The current NMW hourly rate is £11.44, this will rise to £12.21 next year.

Under 18s and apprentices will see their rate increase to £7.55 from £6.40.

The rate for 18–20-year-olds will increase by 16.3% to £10 per hour. This has been implemented as part of a long-term goal to consolidate NMW rates. This plan will see everyone over the age of 18 having the same minimum rate in the future, much like how the 21-22 age bracket was scrapped in April 2024.

Employer National Insurance Increase

From April 2025, the Employer National Insurance (NI) rate will increase from 13.8% to 15%.

Employer NI is the tax contribution made by employers on their employees’ earnings. These contributions are due on earnings which exceed the employer NI threshold. The budget announced that this threshold is now set to reduce from £9,100 to £5,000; employers will be paying a higher rate of tax on more earnings.

Employment Allowance Increase

To combat the impact of the changes to Employer NI, the Autumn Budget did announce an increase in Employment Allowance from £5,000 to £10,500.

Employment Allowance is a government scheme which allows eligible employers to reduce their National Insurance costs by the allotted amount each year. This means that an employer who claims the allowance in April 2025 can reduce their total ER NI contributions for the year by £10,500.

Capital Gains Tax Increases

The autumn budget also announces increases to Capital Gains Tax (CGT) rates in the next financial year. The lower rate will increase from 10% to 18%, whilst the higher rate will increase from 20% to 24%. The new rates match the tax rates for capital gains on property sales.

These rates are in effect from 30th October 2024. Remember that the rate used is dependent on when the sale occurred; sales made before the budget will not be taxed at the new rates. You can find more information on capital gains here.

Inheritance Tax

Currently, the tax-free threshold for inheritance tax (ITH) is £325,000. This increases to £500,000 if the estate is left to children or grandchildren. It was announced in the budget that these thresholds would remain frozen until 2030.

The largest change to IHT is that, from April 2027, inherited pensions will be included within the estate; they will be taxed.

Exemptions on IHT that previously applied to agricultural property have been reviewed. Previously, no IHT applied to agricultural land. The reformed relief will see the first £1m in combined assets be tax-free, but tax on value exceeding this will see a relief of 50%. This means that the IHT rate will be 20%, rather than the usual 40%.

If you need support or resources regarding inheritance tax, you can learn more here.

Carer’s Allowance

Carer’s allowance is a form of government support given to unpaid carers who provide care for a minimum of 35 hours per week. The allowance is currently £81.90 per week. However, you can only claim the allowance if you are earning below the weekly earnings limit. Once this limit is surpassed, you cannot claim the allowance and must repay any allowance claimed that year.

In the autumn budget, it was announced that the weekly earnings limit would be increasing from £151 per week to £181 per week. This will allow carers to work more hours a week without needing to forfeit their benefits.

Additional Announcements

  • Employee National Insurance, VAT, and income tax will not increase. The personal tax thresholds, which are used for income tax and Employee NI, are currently frozen until the 2027/28 tax year, but it will increase in line with inflation after this.
  • The corporation tax main rate (for companies with profits over £250,000) will remain at 25% for the duration of this Labour government.
  • Plans have been made for HMRC to hire additional compliance officers, update their IT systems, and enhance their app services.
  • Businesses in the retail, leisure and hospitality sectors will receive 40% relief on business rates from the 2026/27 tax year, up to a £110,000 cap.
  • “Non-Dom” status will be abolished from April. A new residence-based scheme will be introduced in its place.
  • Benefits will rise by 1.7%, in line with inflation, in April.
  • Stamp duty on purchases of second homes and residential property purchases by companies will increase to 5%
  • Fuel duty will remain frozen for the next tax year. The 5p cut will also continue.
  • Air passenger duty will see small increases, apart from on private jets, which will see a 50% increase.
  • A vaping liquid levy will be introduced, and tax on tobacco will continue to rise.
  • VAT will be applied to private school fees from 1st January 2024.
  • The bus fare cap will remain for another year, but it will be increasing to £3.

 

If you require any advice regarding changes announced in the budget, or you require help with accounting, tax preparation, or payroll, please do not hesitate to contact us.

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