2025 UK Budget: Key Highlights and What They Mean for You

The UK Chancellor, Rachel Reeves, delivered the 2025 Autumn Budget on 26 November 2025 setting out one of the most significant tax and spending packages in recent years. While headline rates of income tax, VAT and National insurance remain unchanged, the Budget introduced a series of measures that will affect households, businesses and investors across the UK.

The UK government’s focus is on fiscal stability and revenue generation with changes designed to tackle the cost of living, fund public services and manage long-term debt. However, many of these measures will increase the overall tax burden through “stealth” mechanisms such as frozen thresholds and targeted levies.

Key Highlights at a Glance

• Income tax and National insurance contribution (NIC) thresholds will be frozen until April 2031. This will pull more taxpayers into higher tax bands over time
• No changes in UK income tax rates on earnings from employment and self-employment (note the Scottish tax rates for these types of income are different from the UK)
• Higher taxes on investment income: Dividend tax rates will rise by 2% from April 2026 and savings and property income tax rates will increase by 2% from April 2027. Note that at the moment the property income tax rate increase of 2% applies only in England and Northern Ireland with the devolved administrations in Scotland and Wales retaining the power to set their own property income tax rates
• Salary Sacrifice Cap: From April 2029 only the first £2,000 of pension contributions made via salary sacrifice will be exempt from NIC
• National Living and National Minimum wage increases from April 2026: Up to £12.71 per hour for over-21s, £10.85 per hour for 18–20-year-olds and £8.00 per hour for 16-17 year olds and apprentices
• Corporation tax rates and thresholds remain unchanged
• VAT rates and registration and deregistration thresholds remain unchanged
• Cash ISA Allowance Cut: From April 2027 the annual cash ISA limit will fall to £12,000 (with the remainder of the £20,000 allowance reserved for investment ISAs) for under 65’s.
• Two-Child Benefit Cap Scrapped from April 2026, a major welfare reform aimed at reducing child poverty
• Mileage-Based Tax for EVs: From April 2028 electric vehicles will incur a per-mile charge (3p for EVs, 1.5p for hybrids)

Scottish Considerations

While many measures apply UK-wide, Scotland retains devolved powers over some income tax rates and bands. The freeze on thresholds will still affect some Scottish taxpayers, but any future divergence in rates could amplify the impact.  Note that the Scottish Budget will take place on 13 January 2026 and we will post a further blog about this then.

Please read our UK Autumn 2025 Budget newsletter for the full details.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.