The Chancellor has delivered the Autumn Budget, finally providing some clarity for individuals and businesses following weeks of speculation in the media. Interpreting the announcements from a Budget can be a bit daunting, but you don’t have to wade through all the detail. In this feature, we’ve picked out the key headlines and explained them in a simple, straightforward way – so you can feel confident about what lies ahead for you and your business.
Tax Thresholds Frozen
One of the most significant announcements is the extension of the freeze on income tax thresholds until 2031. While thresholds remaining static might sound neutral, the reality is more nuanced. As wages increase over time – whether through cost-of-living adjustments or career progression – more and more taxpayers will find themselves dragged into higher tax bands.
Income Tax on Property and Savings Income Rising
Income tax rates on property and savings income is increasing, with rates changing as follows:
- Basic rate: from 20% to 22%
- Higher rate: from 40% to 42%
- Additional rate: from 45% to 47%
These changes underscore the importance of considering tax-efficient structures where appropriate.
Increase in Dividend Tax rates
Income tax rates on dividend income will increase by 2%. The ordinary rate rises to 10.75%, while the higher rate will climb to 35.75%. If dividends form a significant part of your income, this will have a noticeable impact on your net returns.
Increase to the National Living Wage and National Minimum Wage
The chancellor announced increases to the National Living Wage and National Minimum Wage:
- Age 21 and over: 4.1% increase to £12.71 per hour
- Age 18-20: 8.5% increase to £10.85 per hour
- Under 18 and apprentices: 6% increase to £8.00 per hour
High Value Council Tax Surcharge
This is a new measure targeting owners of high-value residential properties. The High Value Council Tax Surcharge introduces:
- An annual charge of £2,500 for properties valued over £2 million
- An annual charge of £7,500 for properties valued over £5 million
This represents a significant additional cost for owners and may influence decisions around property holdings.
Retirement Planning: Changes to Pension Savings and ISAs
Two crucial changes will affect how people save for the future:
Pension Salary Sacrifice Schemes will face new restrictions from 2029. The annual cap will be set at £2,000, with both employers and employees liable for National Insurance Contributions on any amount exceeding this limit. If you currently optimise contributions using salary sacrifice arrangements, you’ll want to review your pension strategy well ahead of this change.
Cash ISA Limits are being reduced from £20,000 to £12,000 per year, though savers will receive an additional £8,000 allowance specifically for long-term investments. It’s worth noting that individuals aged over 65 are exempt from this change, protecting those already in or approaching retirement.
New Pay-Per-Mile Tax for EV users
The government is introducing a pay-per-mile system for electric vehicles:
- Pure electric vehicles: 3p per mile
- Plug-in hybrid vehicles: 1.5p per mile
While these rates sound relatively modest, they do represent an additional running cost that owners – and prospective owners – of EVs, will need to factor in to their calculations.
Cuts to Capital Gains Tax Relief and Capital Allowances
Several changes will affect business owners and investors:
Capital Gains Tax Relief for qualifying disposals to Employee Ownership Trusts will be reduced from 100% to 50%.
Capital Allowances are being restructured. The main rate writing-down allowance decreases from 18% to 14%, though this is partially offset by the introduction of a new 40% first-year allowance to encourage investment in qualifying assets.
Corporation Tax compliance is being taken more seriously, with late filing penalties doubling from April 2026. Timely submission of returns will be more important than ever.
Taking Action: What Should You Do?
These changes represent a significant shift in the tax landscape but, as always, which of the measures are most significant will depend on individual circumstances.
We’d recommend:
- Reviewing your financial position in light of these changes
- Planning ahead for changes taking effect in 2026, 2029, and 2031
- Maximizing available allowances and reliefs before they’re reduced or removed
The key is to stay informed and proactive. Understanding how these measures affect you and your business puts you in the best position to make sound financial decisions for the years ahead.
If you’d like to discuss how any of these changes might impact your specific situation, we’re here to help guide you through the detail – get in touch today!