Autumn Budget 2025

Frozen Thresholds Extended

Income tax and NICs thresholds will be frozen for a further three years (2028-29, 2029-30 and 2030-31).

The student loan repayment threshold has also been frozen.

Note: Scotland sets its own bands and rates.

EMI Options – Expanded Eligibility

From 6 April 2026 the qualifying criteria for companies to be eligible to issue Enterprise Management Incentives (“EMI”) options will increase:

• The employee limit will increase to 500 (from 250).
• The gross assets test will increase to £120 million (from £30 million).

It will also be possible to issue EMI options over shares with a total value of £6 million (currently £3 million) and the life of an option will be extended to 15 years (currently 10 years). Crucially, existing contracts can be amended without losing the tax advantages of EMI schemes, providing that amendments are made in line with the legislation (i.e., there is no amendment to the fundamental terms of the EMI option).

The requirement to notify HMRC of the grant of EMI options will be completely removed from 6 April 2027, easing some of the administrative burden.

NICs To Be Charged on Salary Sacrificed Pensions From 2029-30

In a measure expected to raise £4.7 billion in 2029-30, salary sacrifice for pension contributions exceeding £2,000 per year will no longer be effective for NICs purposes from 6 April 2029.

As such, employers and employees will pay NICs on any amounts sacrificed into employer pension schemes above £2,000. Although pension contributions will continue to be tax efficient for individuals they will no longer provide any cost benefit for employers nor any employee NICs savings.

Increase in Dividends, Property and Savings Income Tax Rates

This tax rate, applied to some forms of income outside of employment, will be raised by 2%. This increase applies to the basic and higher rate of income tax for dividends and to the basic, higher and additional rate of income tax for property income and savings.

• Dividends will be taxed at rates of 10.75% (basic rate), 35.75% (higher rate) and 39.35% (additional rate, unchanged) from 6 April 2026.
• Property income and Savings income will be taxed at rates of 22% (basic rate), 42% (higher rate) and 47% (additional rate) from 6 April 2027.

Class 2 NICs for Non-Residents Removed

Until now, non-residents of the UK working abroad could make Class 2 NIC contributions (currently £3.45 per week) to maintain access to social security benefits including the state pension. This has now been revoked.

This is valuable for individuals on international secondment, ensuring they can continue to maintain their UK social security links in circumstances where they cannot otherwise contribute to UK NICs and where they may be paying overseas social security.

Anti-Avoidance Measures for Image Rights

In certain industries there have been cases of employed individuals earning money for the use of their image rights – often via a personal holding company. Whilst the Ramsay principle has long meant that any remuneration that is, in fact, for employment duties should be taxed as such, these anti-avoidance measures seek to reduce the use of this structure, with clearer rules on the reclassification of income to employment income.

Ability for Employers to Reimburse Some Expenses Tax Free

From 6 April 2026, the Government will allow employers to reimburse eye tests, home working equipment and flu vaccinations free of income tax and NICs. Currently employers can provide these items tax and NICs free when done so directly but cannot reimburse the costs.

Removal of Tax Relief for Home Working

From 6 April 2026 it will not be possible for employees to claim a tax deduction for homeworking expenses that are not reimbursed by their employer.

Settlement Opportunity for Loan Charge
There will be upcoming legislation to provide a new settlement opportunity for those subject to the Loan Charge who have not yet resolved their position with HMRC.

The “Independent Loan Charge Review 2025” outlined recommendations for individuals and HMRC to agree a reduced settlement amount (subject to conditions and a reduction of no more than £70,000) with more straightforward payment plans ranging from five years by default to ten years with HMRC approval.

Tax for New High-Talent Arrivals to the UK
The Government stated it will seek views as it plans to design and scope a potential enhanced tax offer for high-talent arrivals coming to the UK.

Offshore Anti Avoidance
Various anti-avoidance measures that relate to offshore matters for personal tax will be reformed and simplified. A Call for Evidence was published as the starting point.

Restriction in the Relief Available for Disposal to Employee Ownership Trusts

Over recent years it has become an increasingly popular option for owners of private companies to sell their companies to employees, through the use of an Employee Ownership Trust. This has often allowed the sellers to enjoy preferential tax treatment through 100% relief from CGT and allow the employees in the business to get tax-free bonuses of up to £3,600 per year.

With immediate effect, the relief is now restricted to 50%, meaning that 50% of sales proceeds will be subject to CGT in the normal manner, whilst potentially still remaining subject to a reduced CGT rate due to business asset disposal relief.

Corporation Tax Rate Unchanged

As expected, the 25% main rate of Corporation Tax will remain unchanged. However, certain minor changes to the operation of the regime have been announced or proposed including:

• Transfer pricing, permanent establishment and Diverted Profits Tax – legislation will be introduced in the Finance Bill 2025-26 to simplify taxation of related party transactions, non-resident companies trading in the UK and profits diverted from the UK, for periods beginning on or after 1 January 2026.
• Research & Development (“R&D”) tax relief – a targeted advance assurance service is to be piloted from Spring 2026, enabling small and medium-sized enterprises to gain clarity on key aspects of their R&D tax relief claims before submitting them to HMRC.
• Corporate Interest Restriction (“CIR”) – legislation will be introduced in Finance Bill 2025-26 to simplify administration in relation to CIR reporting companies and to make technical amendments to the CIR with regards to the relief for certain capital expenditure.
• Pillar II – further technical amendments to the Multinational Top-up Tax and Domestic Top-up Tax legislation will be included in the Finance Bill 2025-26.
• Qualifying Asset Holding Companies (“QAHC”) regime – The Government announced that it will work with industry stakeholders to explore targeted legislative changes aimed at ensuring the QAHC regime continues to operate effectively.

Capital Allowances Changes

While it was confirmed that the full expensing regime for qualifying capital expenditure will be retained, the main rate of capital allowances will be reduced from 18% to 14% from April 2026. In addition, a new 40% first year allowance will be introduced for unused and not second-hand leased assets from January 2026.

Cross Border VAT Grouping Amendment

Following the CJEU’s judgment in Skandia America Corp case (C-7/13), HMRC required businesses with branches or head offices in countries that applied Skandia to treat certain intra-entity supplies as taxable for VAT purposes.

This budget announcement reverses the impact of Skandia. From 26 November 2025, the VAT grouping provisions will bring the whole person into the VAT group. Consequently the supplies between an overseas establishment and a UK establishment of the body within a UK VAT group will not be supplies for UK VAT purposes, as they are transactions within the same taxable person.

Low Value Imports

The Government has announced that customs duty relief on goods imported into the UK valued at £135 or less will be withdrawn, thereby leaving them subject to customs duty. This change will be introduced from March 2029 at the latest.

New Stamp Duty Reserve Tax Listing Relief

The Government announced that a new UK Listing Relief will be introduced from 27 November 2025. This will provide a three-year exemption from Stamp Duty Reserve Tax (“SDRT”) for companies listing in the UK.

Despite recent pronouncements from some quarters clamouring for the abolition of stamp taxes on share transactions, no other changes to Stamp Duty or SDRT were announced.

New High Value Council Tax Charge

As widely trailed in advance of the Budget, a new tax on “high-value” properties – defined as those valued by the Valuation Office in 2026 at over £2 million – will be introduced from April 2028. This new tax will be structured as a recurring annual surcharge levied in addition to existing Council Tax liabilities. The surcharge will range from £2,500 per annum for properties worth between £2 million and £2.5 million to £7,500 per annum for properties valued at over £5 million.

Aside from this, and the announcement of a new Stamp Duty Land Tax (“SDLT”) relief for property transferred within Local Government Pension Schemes, there were no other changes to Council Tax or SDLT, despite much recent speculation about reforms to property taxation.

Gambling Duty Reforms

The Government announced a range of changes to the system of taxation of betting and gaming, including:

• Remote Gaming Duty is to be increased from 21% to 40% from 1 April 2026.
• A new Remote Betting Rate of 25% within the General Betting Duty will be introduced from 1 April 2027, but will not apply to self-service betting terminals, spread betting or pool betting.
• Remote bets on horseracing will be excluded from these changes and remain taxed at 15%.
• Bingo Duty, currently levied at a rate of 10%, will be abolished from April 2026.

Increases to “Sin Taxes”

The Government has announced increases to the rates and an extension to the scope of several so-called “sin taxes” and other indirect taxes:

• Air Passenger Duty (“APD”) – rates will increase in line with RPI from 1 April 2027 and the higher APD rate will be extended to private jets over 5.7 tonnes.
• Alcohol Duty – all rates will increase in line with RPI inflation from 1 February 2026.
• Climate Change Levy (“CCL”) – the main rates for gas, electricity and solid fuels will increase in line with RPI from 1 April 2027, with the main rate for liquified petroleum gas continuing to be frozen.
• Fuel Duty – the temporary 5p fuel duty cut has been extended for a further five months but will then be reversed in three stages – 1p on 1 September 2026, 2p on 1 December 2026 and 2p on 1 March 2027.
• Plastic Packaging Tax (“PPT”) – the rate for 2026-27 will rise in line with CPI inflation.
• Soft Drinks Industry Levy (“SDIL”) – will increase from 1 April 2026 in line with the Consumer Price Index plus a “catch-up” increment. In addition, from 1 January 2028, the threshold at which the SDIL applies will be reduced from 5g to 4.5g sugar per 100ml, with exemptions for milk-based and milk substitute drinks with added sugar withdrawn.
• Tobacco Duty – rates will increase by RPI inflation plus 2% from 6pm on 26 November 2025.
• Vaping Products Duty – will be introduced from 1 October 2026 at a flat rate of £2.20 per 10ml applied to all vaping liquid, as previously announced.

Landfill Tax

The standard rate of Landfill Tax will increase in line with RPI, while the lower rate will increase by the cash amount of the increase in the standard rate to maintain the differential between the two rates in cash terms.

Additional Measures to Close the Tax Gap

The administration, compliance and debt collection measures announced by the Chancellor are expected to raise an additional £2.4 billion by 2029-30. The measures include:

• A new reward scheme offering up to 30% of tax collected for informants of high value tax fraud.
• Strengthening HMRC powers to tackle fraud within the Construction Industry Scheme.
• Introducing new powers to help prevent promoters of tax avoidance and tax adviser facilitated non-compliance.
• Multinational company transfer pricing.
• A new criminal offence for fraudulently evading direct taxes will be introduced, similar to that existing for indirect taxes.
• Increased requirements for earlier payment of self-assessment tax, VAT and PAYE.

Advance Tax Certainty for Major Projects

Following consultation earlier in 2025, the Government confirmed that a new free Advance Tax Certainty Service will be launched in July 2026. From this date, taxpayers considering investing in a “major project” (i.e. a project in the UK with expenditure of over £1 billion that is not a continuation of ordinary spend) and believe they meet the entry requirements can apply for the service.

Where clearance is given, this will apply for an initial period of up to five years (in line with existing forward assurance mechanisms such as Advance Pricing Agreements and treaty relief clearances), with renewal possible if the project extends beyond this period. The clearance will be binding on HMRC unless there is a change in law.

Both UK and non-UK resident entities will be eligible to apply. The clearance will apply to the investing entity and will remain in place even in the event of a change in ownership, provided the salient aspects of the clearance remain materially unchanged. Technical guidance will be provided, which will include an example of the format to be used for applications, as is the case for statutory clearances. Clearance decisions will not be published to ensure that commercially sensitive information remains confidential.

The Government is keen that the clearance service is available to as wide a range of taxes as possible and confirmed that it will be available for issues relating to Corporation Tax, VAT, stamp taxes, PAYE and the Construction Industry Scheme. However, it will not be possible to seek clearance on transfer pricing, purpose tests (such as the unallowable purpose rules) and hypothetical scenarios.