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 Statement 2023

On 22nd November 2023, the Chancellor of the Exchequer, Jeremy Hunt, set out the UK Government’s plans for the country’s economic growth in the 2023 Autumn Statement. This blog will outline the effects of these announcements on the public.

Growth, Inflation & GDP

It has been announced that forecasts produced by the Office for Budget Responsibility (OBR) show that the UK economy will grow by 0.6% this year and is now 1.8% larger than it was pre-pandemic. This is despite predictions in March that it would shrink by 0.2%. The rate of growth predicted earlier this year, however, was higher, meaning that the current forecast sees only a 0.6% improvement in growth for 2027 when compared with the March projections.

Inflation is currently at 4.6% and it is expected to fall to 2.8% by the end of 2024. A target of 2% has been set for 2025.

The Autumn Statement shows that GDP is expected to rise over the next four years, reaching 2% in 2027.

National Living Wage

From April 2024, the National Living Wage will increase to £11.44 per hour. This is a 9.8% increase from the current rate of £10.42. It is important to note that from April 2024, the rate bracket for ages 21-22 will be scrapped; workers aged 21 and over will be entitled to the National Living Wage.

Rates for the 2024 National Minimum Wage (workers aged 20 and under) are as follows:

  • Under 18s and apprentice rates – £6.40 per hour
  • 18–20 year-olds – £8.60 per hour

Please note that the apprentice rate only applies during the first year of the apprenticeship if the apprentice is aged 19 or over.

Employee National Insurance

Starting on 6th January 2024, Employee National Insurance will be cut to 10%. This is a 2% decrease from the current rate of NI. On an average salary of £35,000 a year, there will be a saving of £450. The government believes that decreasing employment taxes will increase employment rates as a higher net wage acts as an incentive to find work.

Taxing the Self-Employed

Self-Employed individuals currently pay Class 2 National Insurance at £3.45 per week (if your profits are over £12,570) and Class 4 National Insurance at 9% on profits between £12,570 and £50,270. The Chancellor has announced a reform for how the self employed are taxed. This means that, from April 2024, the Class 4 NI rate will be reduced to 8%. Class 2 NI will be abolished.

Pensions

In line with the pensions triple lock, the state pension will increase by 8.5% to £221.20 per week.

A call for evidence has been launched by the government relating to a “lifetime provider model” of pension schemes. This would allow contributions to be paid into an existing scheme when changing employers, rather than having several “small pot” pensions.

Benefits & Back to Work Scheme

It has been announced that Universal Credit and other benefits will be increasing by 6.7% from April 2024. This is in line with the September 2023 inflation figure.

£1.3 billion is set to be invested over the next five years to help those with health conditions find work. A new “Back to Work” scheme will also be introduced which will implement mandatory work placement for claimants who have been unemployed for 18 months. If this is not engaged with the claimant may have their benefits claim closed.

Full Expensing

Full expensing is a form of relief which allows businesses to claim 100% of capital allowances on investments in qualifying fixed assets. This was originally intended to cease in March 2026; however, it has been announced today that it will now be implemented permanently.

Research and Development

The Research and Development Expenditure and SME relief schemes will be merged in an effort to simplify tax. The tax rate applied to losses will be reduced to 19%. This will apply to R&D expenditure incurred during accounting periods beginning on or after 1st April 2024.

Additional Announcements

The following information has also been announced within the Autumn Statement:

  • The local housing allowance, which has been frozen for three years, will increase, being raised to the 30th percentile of local market rents.
  • The Small Business Procurement Act means that 30-day payment terms will now apply throughout the subcontract chain.
  • The small business multiplier has been frozen for another year. It has remained at 49.9 pence since the 2020-21 tax year.
  • Business rates relief for hospitality, retail and leisure has been extended for another year.
  • Alcohol duty will be frozen until August 2024.
  • Tobacco duty will increase from 22nd November 2023.
  • A further four investment zones will be introduced. These will be in the East Midlands, West Midlands, Greater Manchester and Wrexham, Wales. They hope to increase employment in those areas.
  • Increased funding has been proposed for apprenticeships, technology and AI development, and regeneration projects.
  • £4.5 billion has been proposed for supporting companies on the approach to the Net Zero deadline over the next 5 years.

If you have any concerns regarding the changes set out in the Autumn Statement and how they could impact you and your business, do not hesitate to contact us. You can find our contact information here.

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