2025 Autumn Budget: Essential Insights for Individuals and Businesses

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Overview

The 2025 Autumn Budget introduces several measures aimed at increasing tax revenues without changing the main rates of Income Tax or Corporation Tax. The focus is on extending threshold freezes and adjusting specific tax areas including dividends, savings, property income, pensions and business investment reliefs. These updates will influence individuals, landlords, investors, employers and business owners, making forward planning increasingly important.

Fiscal Drag Explained

A central theme of the Budget is the continued use of fiscal drag. When tax thresholds remain frozen while incomes rise, more income gradually moves into higher tax bands. This increases the tax paid by individuals even though headline rates remain unchanged. Understanding this effect is essential as it may influence long term financial planning.

Personal Tax Changes

- Income Tax and National Insurance thresholds will remain frozen until 2031, meaning taxpayers could face higher effective rates as salaries increase.

- Dividend tax rates will rise by 2 percent from April 2026, which may reduce net income for those who receive dividends through investments or owner-managed companies. From April 2027, the tax on rental income and savings income will also increase by 2 percent, affecting landlords and savers.

- A new £2,000 cap on pension contributions made through salary sacrifice will take effect from April 2029, and this may require employers and employees to adjust how contributions are structured.

- Additional measures include an extra council tax charge on properties valued above £2 million from April 2028 and the introduction of a 3p per mile road charge for electric vehicles starting in the same year.

Business Tax and Investment Measures

The banded Corporation Tax system, where companies pay between 19 and 25 percent depending on profit levels, will remain in place. From April 2026, the writing down allowance for main pool assets will reduce from 18 percent to 14 percent, which will slow the rate of tax relief on long term capital expenditure.

A new 40 percent First Year Allowance will also be introduced, enabling businesses to claim a larger portion of qualifying investment costs upfront. These changes mean that the timing of capital purchases, profit extraction strategies and wider cashflow planning will become more important for business owners.

Recommended Actions

Individuals and businesses may benefit from reviewing their current financial structures in light of the upcoming changes. This includes considering the balance between salary, dividends and benefits, reassessing pension arrangements ahead of the salary sacrifice cap, planning capital expenditure to take advantage of the new First Year Allowance and forecasting rental, investment and savings income to understand how tax liabilities may shift in future years.

Conclusion

The 2025 Autumn Budget increases tax pressures through threshold freezes and targeted adjustments rather than through changes to headline rates. For individuals and businesses alike, proactive planning and regular financial reviews will help ensure tax efficiency over the coming years. Mitchell Associates is available to provide personalised guidance and support for clients who want to understand how these changes may affect their financial position and long term planning.