UK Autumn Budget 2025: what tax measures were announced?

The chancellor, Rachel Reeves, delivered her Autumn Budget on 26 November 2025. Despite no income tax rate rises, a substantial number of smaller tax measures were announced and policy documents and consultations were published, intended to improve economic growth and investment and strengthen the tax base.

The chancellor extended the freeze on income tax and national insurance contribution (NICs) thresholds for a further year to April 2031 as well as reducing the generosity of salary sacrifice schemes.   

Several widely-rumoured measures were ultimately not announced, including proposals for employer NICs on partnership profits, the imposition of a capital gains "exit tax" on individuals permanently leaving the UK and an increase in taxes for banks.  

Business tax

Venture Capital Trust and Enterprise Investment Scheme 

To help promote economic growth, the chancellor announced that the Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) limits will increase.

From 6 April 2026 the VCT and EIS company investment limit will increase to £10 million (and £20 million for Knowledge Intensive Companies (KICs)) and the lifetime company investment limit will increase to £24 million (and £40 million for KICs). The gross assets test will increase to £30 million before share issue, and £35 million after.

The government is, however, reducing the upfront VCT income tax relief from 30% to 20% from 6 April 2026 to better balance the amount of upfront tax relief offered by VCTs compared to the EIS.

It has also published a call for evidence (which closes on 28 February 2026) that seeks views on the effectiveness of existing tax incentives, and the wider tax system for entrepreneurs and scaling firms, and how the UK can better support these companies to start, scale and stay in the UK. 

Stamp duty

The government has introduced a temporary stamp duty reserve tax (SDRT) "holiday" (of three years) for investors on buying shares in newly-listed companies in the UK from 27 November 2025. This is positive news for investors and companies and signals the government's intent to revitalise UK capital markets and attract new issuers.

The government will also legislate in the Finance Bill (which is expected next week) to introduce a power allowing regulations that enable the testing of the new digital service for the "Securities Transfer Charge", which will replace stamp duty and SDRT as part of the modernisation of the Stamp Taxes on Shares framework.

Capital allowances 

The government will introduce (from 1 January 2026) a new first-year writing down allowance (WDA) of 40% for main rate expenditure while reducing, from 1 April 2026, the main rate WDA from 18% to 14% for assets not qualifying for full expensing (such as leased assets, second hand assets and cars).

It will also extend for a further year the 100% first year allowances for qualifying expenditure on zero emission cars and qualifying expenditure on plant or machinery for electric vehicle chargepoints.

VAT on private hire vehicle services

The government has responded to the consultation on the VAT treatment of private hire vehicles to confirm that it will not make wholesale changes to VAT rules for private hire operators (PHVOs) – other than announcing that from 2 January 2026 the Tour Operators' Margin Scheme (TOMS) will not apply to the supply of private hire vehicle and taxi services unless “they are supplied in conjunction with certain other travel services”.

Therefore, there will still be inconsistency in the market between London – where PHVOs cannot act as agents, so all fares will be subject to 20% VAT unless the limited TOMS exemption applies – and the rest of the country where PHVOs are likely to maintain or move to a disclosed agency model to minimise VAT on fares. 

Gambling duties

The chancellor has stood by her comments that gambling companies "should pay their fair share of taxes" by increasing remote gaming duty from 21% to 40% from 1 April 2026. A new remote betting rate (within general betting duty) will be introduced at 25% from 1 April 2027 (but will exclude remote bets on horseracing which will remain at 15%).

Bingo duty will be abolished from 1 April 2026. 

Real estate taxes

No substantial reform of the real estate tax landscape was announced. Instead a targeted revenue-raising measure was announced to introduce a High Value Council Tax Surcharge in England for residential properties worth £2 million or more, from 1 April 2028. This charge will be based on updated valuations to identify properties above the threshold and will be in addition to existing council tax. The new charges start at £2,500 per year, rising to £7,500 per year for properties valued above £5 million, and will be levied on property owners rather than occupiers.

The government will also shortly consult on the reform of VAT rules to incentivise the development of land intended for social housing. This is good news for developers with the hope that zero-rating could be extended in this sector.

The government will publish regulations, for technical consultation, aimed at simplifying and improving the administration of the Construction Industry Scheme. This is welcome, especially if it will address areas of simplification highlighted in response to the most recent consultation on CIS reform. This will be legislated for in the next Finance Bill and will take effect from 6 April 2026.

Personal taxes 

Income tax and national insurance

As widely expected, income tax and NICs thresholds will be maintained at their current levels for a further three years from April 2028 to April 2031 (income tax personal allowance £12,570; higher rate threshold £50,270; additional rate threshold £125,140). The government is also maintaining the NIC Secondary Threshold (£5,000) at its current level during this time.

While these measures technically maintain the manifesto pledge not to increase the rates of income tax, more workers will be pulled into paying tax, or into higher tax brackets, as wages rise due to inflation (fiscal drag). 

Pensions

Although the chancellor did not touch income tax relief on pension contributions or the tax-free lump-sum allowance of £268,275, she did announce a significant change to salary sacrifice for pension contributions.

From 6 April 2029 a new £2,000 threshold will apply, above which the salary sacrificed will incur employees' and employer's NICs. The change will only affect salary sacrifice arrangements; normal employer pension contributions will remain NICs-free.

After the freezing of tax and NICs thresholds, this is anticipated by the Office of Budget Responsibility to be the highest revenue-raising change announced in the Budget. (For more on the Budget's implications for pensions, see our Insight.)

Property income

The government will create separate tax rates for property income. From 6 April 2027, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%. These rates will apply across England, Wales and Northern Ireland.

It also appears that the new basic rate of property income tax will apply to withholding under the Non-Resident Landlords Scheme (increasing the rate to 22%).

Savings income

The government is increasing the rates of income tax applicable to savings income. From 6 April 2027, savings income tax rates will increase by two percentage points across all bands to 22% (basic rate), 42% (higher rate) and 47% (additional rate).

Dividend income and cash ISAs

Dividend tax rates will increase from 6 April 2026 to 10.75% for basic rate taxpayers (up from 8.75%) and 35.75% for higher rate taxpayers (up from 33.75%). For additional rate taxpayers the rate will remain unchanged (at 39.35%).

The government will also change how non-UK residents are charged to income tax where they receive both UK dividends and UK property or partnership income. From 6 April 2026, there will be two options as to how they will be taxed: one which preserves the dividend tax credit and one which does not. This is designed to align their treatment more closely with UK residents.

The chancellor announced that from 6 April 2027 the annual ISA cash limit (for those under 65 years of age) will be set at £12,000, within the overall annual ISA limit of £20,000. 

Inheritance tax

The chancellor also extended the freeze on the inheritance tax nil-rate band until April 2031. The forthcoming combined allowance for the 100% rate of agricultural property relief and business property relief will also be fixed at £1 million for a further year until 5 April 2031.

The next Finance Bill will also include provisions (taking effect from 6 April 2026) to allow any unused portion of the £1 million allowance for the 100% rate of agricultural property relief and business property relief to be transferable between spouses and civil partners, including where the first death occurred before 6 April 2026.

Electric vehicle excise duty 

The government is introducing Electric Vehicle Excise Duty, a new mileage charge for electric and plug-in hybrid cars, which will come into effect from April 2028 and will be paid in addition to existing road tax. It will be set at half of the equivalent rate of fuel duty for electric cars, and half again for plug-in hybrid cars. A consultation on the new levy has been published. 

Employee incentives

In welcome news for employers and smaller businesses, the chancellor announced significant improvements to Enterprise Management Incentive (EMI) arrangements from 6 April 2026. 

For EMI contracts granted on or after 6 April 2026, the government will increase: 

• the employee limit from 250 to 500;
• the gross assets test from £30 million to £120 million; and
• the company share option limit from £3 million to £6 million.

These changes significantly extend the number of companies that will be able to take advantage of EMI.

The limit on the exercise period of an EMI option will be increased from 10 years to 15 years (including in respect of existing EMI contracts). HMRC is expected to publish guidance on these measures soon.   

It was also announced that the EMI notification requirement will be removed from April 2027. This will be a welcome administrative simplification for companies operating EMI plans. In the meantime, it is important that companies continue to notify the grant of EMI options to HMRC by the current deadline (by 6 July following the end of the tax year in which the EMI option is granted).

In less welcome news, the government will reduce the capital gains tax (CGT) relief available on qualifying disposals to Employee Ownership Trusts from 100% of the gain to 50% from 26 November 2025.

A summary of responses to the 2023 call for evidence on the Share Incentive Plan (SIP) and Save As You Earn (SAYE) plan was also published alongside the Budget although little (if any) change is expected to flow from this call for evidence.

Closing the tax gap 

The chancellor confirmed the introduction of a new US-style reward scheme for whistleblowers of high-value fraud (previously outlined at the Spring Statement) which will take immediate effect. For cases where tax over £1.5 million is recovered, the scheme will pay rewards up to 30% of any taxes collected as a result of tip-offs.

Specific details of the scheme are yet to be announced – HMRC will need to strike the right balance between incentivising those with evidence of serious non-compliance and those who might seek to make frivolous claims. Responding to whistleblower claims could result in huge costs to businesses, even if a claim is ultimately dismissed. Businesses will also need to be alive to the added reputational risks if, having filed a claim with HMRC, a whistleblower tips off the media as part of a broader campaign.

Further measures to close the tax gap were also announced (in addition to those already announced at the Spring Statement), including (among many others), a new "recklessness" criminal offence for direct taxes, reform of the publication of details of deliberate taxpayers, a fraud crackdown in the Construction Industry Scheme and further investment in HMRC debt collection.

The government will also publish a consultation early next year on proposals to enhance the current regime for uncertain tax treatments (following recent data suggesting a further decline by large businesses in formal engagement with those rules). 

The government also intends to press on with the reform of behavioural penalties (as previously consulted on), in particular those designed to create further incentives for taxpayers to make voluntary disclosures. 

Tax administration 

Finally, several other tax simplification measures were also announced (which included some consultation responses). These included: 

• The reform of diverted profits tax, transfer pricing and permanent establishments to simplify the taxation of related party transactions, non-resident companies trading in the UK, and profits diverted from the UK, for chargeable periods beginning on or after 1 January 2026.
• The pilot of a targeted research and development (R&D) advance assurance service from spring 2026 to enable small and medium-sized enterprises to gain clarity on key aspects of their R&D tax relief claims before submitting to HMRC.
• A review of the UK's Digital Services Tax.
• A new service to provide major investment projects with advance tax certainty to be launched in July 2026.

Osborne Clarke comment

The Budget was delivered against a backdrop of instability, with policy reversals in the weeks preceding the announcement – including a U-turn on income tax rate increases – unsettling markets and undermining business confidence.

While there was some welcome news for businesses – the expansion of EMI arrangements and VCT and EIS limits –  and the call for evidence on tax support for entrepreneurs represents a positive step to support business growth, the tax burden on businesses remains high. Some of the measures announced in the Budget, such as the changes to salary sacrifice schemes, will lead employers to reconsider the benefit packages they offer to their employees.

The tax burden on individuals is also rising through stealth measures rather than headline rate increases. Middle and higher earners will bear the brunt of these changes through frozen thresholds, higher property and savings taxes, and reduced pension tax advantages while the impact on lower earners will in part be offset by the benefits and wage measures announced.