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The Autumn Budget 2025 delivered on 26 November 2025 by Chancellor Rachel Reeves introduced one of the largest revenue-raising packages in recent years, expected to generate up to £26 billion. The government plans to achieve this by extending the freeze on Income Tax thresholds, raising taxes on property, savings and dividend income, introducing stricter National Insurance contribution rules on pension salary sacrifice and applying new charges on high-value properties.
A wide range of reforms will gradually reshape the UK tax landscape between 2026 and 2031, affecting individuals, landlords, investors, employees, pension savers and businesses.
The government confirmed that the basic rate band will remain fixed at £37,700, the higher rate threshold at £50,270 and the additional rate threshold at £125,140. These thresholds originally frozen to 2028, will now remain unchanged until April 2031, bringing more taxpayers into higher tax bands as incomes rise.
National Insurance limits, including the Primary Threshold, Lower Profits Limit and the Upper Earnings and Upper Profits Limits, will stay aligned with these figures, creating a prolonged period of fiscal drag for a large portion of earners.
Taxpayers living in Scotland will continue to be subject to the Scottish Income Tax system for non-savings and non-dividend income, such as employment earnings, rental income and self-employment profits. Scotland will announce its 2026/27 bands separately.
Welsh taxpayers, who have been subject to potential variations since 2019, will continue to pay the same rates as those in England and Northern Ireland for 2025/26 and 2026/27, with no divergence announced.
The personal allowance remains frozen at £12,570 until 2031 and the withdrawal rule continues to apply for higher earners. Individuals with adjusted net income above £100,000 will see their allowance reduced by £1 for every £2 exceeding that threshold, resulting in no allowance at an income level of £125,140.
From April 2026, both the married couple’s allowance and blind person’s allowance will increase in line with the 3.8% CPI rate recorded in September 2025.
Landlords and property investors will face higher taxation from 2027/28, when property income will be taxed separately using new higher rates. Basic rate taxpayers will pay 22%, higher rate taxpayers 42% and additional rate taxpayers 47%.
Individuals will still be able to use the existing £1,000 Property Allowance to offset small-scale rental income, although the increased rates will significantly raise the overall tax burden for most property owners with rental profits.
Savings income, including interest from banks and building societies, remains subject to the Savings Allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers, with no allowance provided for individuals in the additional rate band.
The 0% starting rate for savings remains at £5,000 until 2031, but only applies if an individual’s non-savings income does not exceed this amount.
From April 2027, the tax rates applied to savings income will increase by two percentage points, raising the basic rate to 22%, the higher rate to 42% and the additional rate to 47%.
Dividend income will also become more expensive. Although the £500 Dividend Allowance is retained for 2026/27, dividend tax rates will rise for basic and higher rate taxpayers starting April 2026. Basic rate taxpayers will pay 10.75%, higher rate taxpayers 35.75% and additional rate taxpayers 39.35%, with no change to the top rate.
Dividends continue to be treated as the final category of income for tax purposes, meaning they may push taxpayers into higher bands depending on their total income.
A major structural change will come into effect from April 2027, when the personal allowance will automatically be applied first to employment, trading or pension income.
The current system allows taxpayers to decide how the allowance is allocated to maximise tax efficiency. This flexibility will disappear, potentially resulting in higher tax liabilities for individuals with multiple income sources.
The Annual Allowance for pension contributions remains at £60,000 for 2026/27, with the tapered Annual Allowance reducing contributions for individuals whose threshold income exceeds £200,000 and whose adjusted income surpasses £260,000.
The Lump Sum Allowance stays at £268,275 and the Lump Sum and Death Benefit Allowance remains £1,073,100. ISA limits also remain unchanged until 2031, with the adult ISA limit maintained at £20,000 and Junior ISAs and Child Trust Funds limited to £9,000. However, from April 2027, only £12,000 of an individual’s ISA subscription can be held in cash, unless the saver is over 65, in which case the full £20,000 can remain in a cash ISA.
Employee NIC rates will remain at 8% and 2% for 2025/26, while employer contributions continue at 15%. The self-employed will continue to pay Class 4 NICs at 6% and 2%, while Class 2 NICs effectively become voluntary for those earning below £6,845 but remain credited automatically for higher earners.
From 2026/27, the Lower Earnings Limit and Small Profits Threshold will increase and the voluntary Class 2 and Class 3 weekly rates will rise accordingly.
From April 2029, only the first £2,000 of employee pension contributions made through salary sacrifice will be exempt from NICs. Any contributions above this amount will attract both employer and employee NICs.
Income Tax relief will still apply to all contributions within the usual pension limits. Employers will have to report the total amount of salary sacrifice through payroll, while employer contributions continue to be free of NICs.
The National Living Wage will rise to £12.71 for workers aged 21 and over. Employees aged 18 to 20 will earn £10.85 and those aged 16 to 17 and apprentices will earn £8.00. These increased wage levels aim to support lower-paid workers during rising living costs.
In 2026/27, the benefit-in-kind charge for zero-emission company cars will rise from 3% to 4%, while cars emitting under 75g/km will see their rate increase by one percentage point. Cars at the maximum 37% rate remain unchanged. Transitional rules will help reduce the impact of tighter emissions standards on plug-in hybrid vehicles.
From April 2027, employers must report all benefits in kind directly through payroll software for both Income Tax and Class 1A NIC purposes. The government will also end contrived car ownership schemes which previously allowed employees to avoid company car tax, although arrangements already in place may continue until 2032 unless changed.
To address widespread non-compliance in the umbrella company sector, the government will make recruitment agencies responsible for ensuring PAYE and NICs are paid correctly when workers are supplied through umbrella companies. End clients will share this responsibility when no agency is involved.
This shift, effective April 2026, allows HMRC to recover unpaid payroll taxes directly and protects workers from unexpected liabilities arising from non-compliant umbrella operators.
Corporation Tax rates remain unchanged, meaning companies with profits over £250,000 will continue to pay 25%, while the 19% small profits rate applies to profits below £50,000. A marginal relief system will continue to smooth the transition between these levels.
The government plans to introduce a targeted R&D advance assurance service in 2026 and a new Advance Tax Certainty Service in 2026 for large-scale investment projects worth £1 billion or more. Limits for Enterprise Investment Scheme and Venture Capital Trust investments will increase significantly from April 2026, while the personal tax relief for VCT investors will reduce from 30% to 20%.
The Enterprise Management Incentives scheme will also expand, doubling the employee and share option limits and extending the exercise period to 15 years, with the new exercise rules applying retrospectively to existing contracts.
CGT rates and the £3,000 annual exemption remain unchanged for 2026/27. From November 2025, only half of the gain realised on a sale to an Employee Ownership Trust will be exempt from CGT, with the remaining portion deferred and deducted from the trustees’ acquisition cost.
Agricultural and Business Property Relief will continue to provide full relief up to £1 million from April 2026, with 50% relief above that level. These allowances refresh every seven years and can be transferred between spouses and civil partners. Unused pension funds and certain death benefits will enter the scope of IHT from April 2027, although pension scheme administrators may settle liabilities directly with HMRC in specific cases.
The VAT registration threshold will remain at £90,000 from April 2026, with deregistration staying at £88,000. Making Tax Digital (MTD) for Income Tax Self Assessment will begin in April 2026 for individuals earning over £50,000, expand to those earning above £30,000 in 2027 and reach those earning above £20,000 in 2028.
The government confirmed it will not proceed with MTD for Corporation Tax. From April 2029, all VAT-registered businesses will be required to issue e-invoices, with full implementation guidance due next year.
From April 2028, properties valued at £2 million or more will be subject to a new High Value Council Tax Surcharge. The annual surcharge will be £2,500 for homes valued between £2 and £2.5 million, £3,500 for properties up to £3.5 million, £5,000 for homes up to £5 million and £7,500 for those above this threshold. These charges will be collected alongside existing Council Tax liabilities.
A new mileage-based tax for electric and plug-in hybrid vehicles will take effect from April 2028, marking the UK’s first move toward a long-term replacement for declining fuel duty revenues. The average electric vehicle driver is expected to pay around £240 per year, with plug-in hybrid drivers charged at a lower rate. Larger vehicles such as vans, buses and HGVs will not be included initially, reflecting the earlier stages of electrification in those sectors.
The 2025 UK Budget represents a substantial shift toward long-term fiscal consolidation. Individuals with rental income, substantial savings or significant pension contributions will face higher tax burdens, while employers and businesses must prepare for expanded compliance obligations, tighter payroll reporting requirements and new rules affecting employment structures and investment planning. At the same time, enhanced investment schemes and innovation-focused measures present opportunities for long-term growth. Careful planning will be essential to navigate the changes coming into force gradually through 2026 to 2031.
With so many tax changes taking effect between now and 2031, understanding your obligations and planning ahead has never been more important. Accace Adept provides expert tax advisory, payroll, accounting and compliance support to help individuals and businesses manage these updates with confidence.
Whether you need guidance on Income Tax changes, property and investment taxation, payroll adjustments or long-term planning, our specialists ensure you stay compliant, efficient and one step ahead of your obligations.
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About Accace Adept UK
We are a joint venture between Accace and Adept Advisory, established to pursue a long-term strategy of providing innovative Business Process Outsourcing (BPO) and advisory services to clients in the United Kingdom and South Africa. We joined forces to augment each other’s valuable insight, knowhow and practices, whilst combining our experience in complementary fields of expertise.
About Accace Circle
Accace Adept operates internationally as Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience and erase the borders of service delivery. Covering over 60 jurisdictions with more than 7,000 professionals, we support over 80,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and process at least 800,000 pay slips globally.
Accace UK Limited (trading as Accace Adept)
Berkeley Suite, 35 Berkeley Square, Mayfair London W1J 5BF, United Kingdom
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