Chancellor Rachel Reeves delivered the Labour Government’s 2025 Autumn Budget on November 26th. This marks the government’s second meaningful budget since committing to hold only one significant fiscal event per year.
The Budget brought with it a fresh set of fiscal measures and tax changes, impacting both individuals and businesses. Updates to taxation, freezes on thresholds and changes to salary sacrifice are likely to impact both the day-to-day operations and long-term planning of many.
Below, we break down the key changes affecting individual and corporate taxation and provide clear, practical insight into how they may impact you and your business.
The Key Taxation Changes from the 2025 Autumn Budget
A 2% rise on dividends, savings and property income taxes
The Chancellor announced that April 2026 will see a 2% increase in the tax rates applied to income from dividends – rising to 10.75% for basic rate payers and 35.75% for higher rate payers.
This change will be followed in April 2027 by a 2% increase in the basic, higher and additional rates for both savings and property income tax. This will increase the rates to 22% (basic), 42% (higher) and 47% (additional) for both savings income and property income tax.
This will have a significant impact on company directors receiving a portion of their renumeration via dividends, who will likely see a notable rise in their tax liability from April 2026.
As a result, it is recommended that company directors review their income structure ahead of this date to explore more tax-efficient ways to draw an income.
A further 3-year freeze on personal tax rates
The Autumn Budget confirmed that the personal allowance, higher-rate and additional-rate thresholds will remain frozen for a further three years, extending the freeze until the 2030/31 tax year. The current thresholds are:
- Personal Allowance: £12,570 – 0%
- Basic Rate: £12,571 to £50,270 – 20%
- Higher Rate: £50,271 to £125,140 – 40%
- Additional Rate: Over £125,140 – 45%
According to the Office for Budget Responsibility (OBR), maintaining these thresholds plays a significant role in its forecast of a 5.1% annual increase in Income Tax receipts. Because the thresholds will not rise in line with inflation, more taxpayers will gradually move into higher tax brackets as wages increase, a phenomenon often referred to as “fiscal drag”.
The OBR estimates that the cumulative impact of this and earlier freezes will be substantial. Between 2012/13 and 2030/31, an additional 5.2 million people are expected to be brought into paying Income Tax, 4.8 million more will enter the higher-rate band, and around 600,000 will fall into the additional-rate bracket.
Employers National Insurance on salary sacrifice.
The Budget outlined a considerable shift for salary sacrifice schemes, with a cap of £2,000 being placed on the amount of an employee’s salary that they can sacrifice before National Insurance Contributions are incurred.
The employers NIC due would be due at the standard rate of 15% on earning above the secondary threshold of £5,000 per year.
For employers offering salary sacrifice schemes as part of their incentives package, this additional tax liability may result in the need to reassess the tax-efficiency of their benefits package.
New mileage-based charge on electric and hybrid cars.
Employers utilising company car schemes and providing their employees with electric vehicles for tax efficiency need to be aware of the change to EV road tax outlined in the budget.
While EVs have traditionally been a tax-efficient way of providing company cars to employees, the Chancellor has now announced a new mileage-based charge for electric vehicles to combat the “wear and tear” on the UK’s roads.
EVs are also a popular choice amongst sole traders and employed individuals who also may need to be aware of the reduced benefits of owning and running electric vehicles.
Battery electric vehicles will be subject to a 3p per mile charge while plug-in hybrid vehicles will be subject to a 1.5p per mile charge, both subject to annual increases in line with CPI inflation.
As a result, company directors may need to further reconsider the tax-efficiency of their benefits schemes.
Commenting on the taxation changes announcement at the Autumn Budget, Kevin Parsons, Managing Director of Cooper Associates Accountancy, said:
“After all the speculation of frightening tax rises and cuts to thresholds, in the end there was very little change other than the introduction of a 2% increase in pensions saving and dividend income over the next couple of years.
If anyone would like to know more about how this affects them, please contact us and our team of advisers will be more than happy to help.”
How Can Cooper Associates Accountancy Help You?
This article outlines the key measures introduced in the Autumn Budget, but it is important to be aware of additional changes that may impact you. Follow these links to discover how the announcement impacts your mortgage and affects your personal finances.
If you are concerned about any of the changes announced at this year’s Autumn budget, our team of friendly expert accountants are here to help.
Get in touch today to book your initial consultation and discover how Cooper Associates Accountancy can assist you.
