What was in the 2025 Budget
We’ve included below a summary of the key points of the Chancellor Rachel Reeves Budget which was announced yesterday in the House of Commons.
Personal Taxation – income tax threshold freeze and ISA changes
National Insurance and income tax thresholds were frozen by the previous government until April 2028, they will now not change for a further 3 years until April 2031.
The income tax thresholds will remain at £12,570, £50,270, and £125,140, so when wages rise over time then more people will find themselves paying higher rates of tax.
The amount under-65s can put into cash ISAs (Individual Savings Accounts) will be capped at £12,000 a year from April 2027. The £20,000 annual ISA allowance will remain with £8,000 of the annual allowance reserved for investments.
From April 2027 tax charged on income from property, savings and dividends will increase by 2%.
Wages, Pensions and Benefits
National minimum wage increases per hour are as follows from April 2026:
- Over 21s – £12.71 (a 50p increase)
- 18 – 20 year-olds – £10.85 (an 85p increase)
- 16–17-year-olds – £8 (a 45p increase)
The government’s stated plan is to have just one adult rate over time so we can see the top two rates are moving closer.
The two child cap limiting households from receiving universal or child tax credits for a third or subsequent child will no longer apply from April 2026.
Basic state pensions to go up by 4.8% April under the “triple-lock” policy.
From 2029 the government is introducing an annual salary sacrifice, national insurance exemption threshold of £2,000. This will mean contributions above this amount will be treated in the same way as workplace pensions, with both employee and employer subject to National Insurance contributions.
The Help to Save scheme, which offers people on universal credit a bonus on savings, will be extended and expanded beyond 2027.
Transport
Regulated rail fares for journeys in England will be frozen next year for the first time in 30 years.
Despite requirements for dealers to see more electric vehicles there will be a new mileage-based tax for electric vehicles and plug-in hybrids cars from April 2028. The electric car grant is being expanded and will now continue through to 2029-30.
The temporary 5p cut in fuel duty on petrol and diesel has now been extended until September next year, it will then be removed over a 6 month period.
Entrepreneur Support for Fast-Growing Companies
For companies choosing to list in the UK, there’s a new three-year stamp duty reserve tax exemption on the horizon, which should improve market liquidity and make British stock exchanges more attractive. They could also benefit from potential increased ISA investment following those changes.
Enterprise tax incentives are being expanded to cover double the number of eligible scale-ups, making it easier for these companies to secure funding and recruit talent during their critical growth phases.
Property and Housing
Properties worth over £2 million in England to face a new High Value Council Tax Surcharge from April 2028. The annual charge will come on top of existing council tax, and will increase depending on the price of a property – with four separate bands as follows:-
- Properties valued from £2m to £2.5m will pay £2,500
- Properties valued from £2.5m to £3.5m will pay £3,500
- Properties valued from £3.5m to £5m will pay £5,000
- Properties valued at more than £5m will pay £7,500
Business tax Relief Changes for Employee Ownership Trust purchases
If you are involved in a purchase or a sale of a business to an Employee Ownership Trust (EOT) there are immediate changes to the exemption that existed from Capital Gains Tax. Previously there was 100% relief but in future this will be cut to 50% which will impact those businesses going through the process as well as those who plan to.
Updates relating to Business Taxes
NI Thresholds paid by employers are also frozen until 2031 so when wages rise this will need to be taken into account.
Full expensing for Corporation Tax hasn’t been changed and there is a new allowance for first-year businesses of 40% to write off more upfront investment costs.
From 2029 Tax exemptions for small packages from overseas retailers worth under £135 will be scrapped which can help UK businesses.
Household bills and expenses
Tax on tobacco to increase by 2% above RPI rate of inflation. Similarly tax on alcohol including draught drinks will increase by the higher RPI measure in February 2026.
Tax on sugary drinks will be extended to pre-packaged milkshakes and lattes from 2026 to remove the exemption for these.
There is a stated £59 saving to be made by scrapping a customer-funded scheme helping low-income households insulate their homes.
Green levies will be taken off energy bills and paid through general taxation whish can save households £88 a year.
The cost of a single NHS prescription in England frozen at £9.90 for another year (they remain free in Wales, Scotland and Northern Ireland).
If any of this gives rise to concern that you think we may be able to help you with please drop us an email or give us a call.