UK Autumn Budget 2025: Key Tax Changes for Taxpayers
London, 6 January 2026 – Chancellor Rachel Reeves unveiled the Autumn Budget 2025 in November, introducing sweeping tax measures designed to raise revenue amid economic pressures. Key changes include freezing income tax and National Insurance thresholds until 2031, increasing rates on dividends, savings, and property income, and reducing capital allowances. These reforms aim to generate billions in additional revenue while addressing welfare and pension policies.
Income Tax and National Insurance Reforms
The budget froze the personal allowance at £12,570 and higher rate thresholds at £50,270 until April 2031, potentially creating millions of new taxpayers. National Insurance thresholds were similarly frozen, with the upper earnings limit capped at £50,270. Rates on dividend, savings, and rental income rose by 2 percentage points, while inheritance tax nil-rate bands remained at £325,000 for the main band and £175,000 for the residence nil-rate band until 2031. Venture Capital Trust relief fell to 20% from April 2026.
Business and Investment Impacts
Capital allowances saw reductions, with the main rate dropping to 14% from 1 April 2026 for companies and 6 April 2026 for other businesses. Business Property Relief and Agricultural Property Relief were capped at £1 million for 100% relief from April 2026. Pension contribution limits via salary sacrifice were restricted, and Self-Assessment liabilities will be collected through PAYE from April 2029. Corporation tax late filing penalties doubled, and HMRC invested £59 million in digital prompts for VAT and corporation tax filings from 2027.
Key Facts / Stats
| Measure | Details |
|---|---|
| Income Tax Threshold Freeze | Personal allowance £12,570; higher rate £50,270 until April 2031 |
| Capital Allowances Reduction | Main rate to 14% from April 2026; blended for straddling periods |
| Dividend/Savings Tax Increase | 2 percentage points higher from April 2026 |
| Pension Annual Allowance | £60,000 for 2025/26; tapered for high earners |
| Revenue Raised | Projected £26.1 billion by 2030 |
Frequently Asked Questions
What is the impact of the income tax threshold freeze?
The freeze until April 2031 means more individuals will enter higher tax brackets sooner, potentially increasing tax liabilities for middle-income earners. The Institute for Fiscal Studies estimates this could add £12.7 billion annually by 2030/31.
How do the capital allowances changes affect businesses?
The reduction to 14% slows depreciation claims, increasing short-term tax burdens for companies investing in assets. Businesses with accounting periods crossing the change dates will use a blended rate.
What about pension contributions and reliefs?
Tax relief on pension contributions remains at 20% for basic-rate taxpayers, but salary sacrifice arrangements face new limits. The annual allowance is £60,000, tapered for those earning over £150,000.