We outline the headline changes that may impact you and your financial plan.
After many rumours and an early leak of the Office of Budget Responsibility’s report on their findings, the Chancellor Rachel Reeves delivered her 2025 Budget on 26 November 2025 which she stated took the ‘fair and necessary choices to deliver on the government’s promise of change’.
Although the proposed changes won’t come into play until April 2026 at the earliest, we provide an overview on what these changes could mean for you.
Personal Tax
Income Tax:
The government is extending the freeze of the Income Tax Personal Allowance, higher rate threshold and additional rate threshold from April 2028 to April 2031. For high earners close to the higher tax threshold, any bonuses or wage rises in line with inflation could tip you over into the higher tax bracket and result in less take home pay than expected. For those earning £100,000 or more, there is also the risk of ‘stealth tax’ which you can read about in our recent article here.
Property:
Do you own property worth over £2 million or more? A new High Value Council Tax Surcharge (HVCTS) will commence in 2028/2029 that may impact you.
This new charge will affect owners of residential property in England worth £2 million or more. The charge will be staggered depending on the actual value of your property
For property valued over £2 million in 2026, the annual charge will be £2,500. For property valued between £2.5 – £3.5 million, the annual charge will be £3,500 and for those properties valued between £3.5 – £5 million, the annual charge will be £5,000. Properties valued in excess of £5 million will have an annual charge of £7,500.
The government will also create separate tax rates for property income. From 2027/28, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%.
Dividends:
Starting in the 2026/27 tax year, the ordinary and upper dividend tax rates will each rise by 2%, moving to 10.75% and 35.75% respectively. The additional rate will stay the same at 39.35%.
This means that any dividends you receive above your Dividend Allowance in 2026/27 will be taxed at:
- 10.75% if you’re a basic rate taxpayer
- 35.75% if you’re a higher rate taxpayer
- 39.35% if you’re an additional rate taxpayer
As an example, £1,000 of dividend income in excess of the dividend allowance will be £892.50 net for a basic-rate taxpayer, and £642.50 for a higher-rate taxpayer from April 2026. The net dividend for an additional-rate taxpayer will remain at £606.50.
Keep in mind that dividends within your allowance still use up part of your basic or higher rate band, which can influence the rate you pay on dividends above the allowance. Also, when working out which tax band applies, dividends are always treated as the last type of income to be taxed.
For business owners, these changes could shift the balance between taking income as dividends or as salary, especially since salary can help reduce taxable profits. It’s a good moment to revisit your strategy and seek tailored advice.
Savings:
Looking ahead to the 2027/28 tax year, savings are set to become a little more expensive from a tax point of view. All the main tax rates on savings income will rise by 2%, taking the basic rate to 22%, the higher rate to 42%, and the additional rate to 47%. One thing that isn’t changing, however, is the £5,000 Starting Rate for Savings, which will stay in place until April 2031.
To put this into context, from April 2027 a basic-rate taxpayer will receive £780 net for every £1,000 of savings or property income, a higher-rate taxpayer £580 and an additional-rate taxpayer £530.
There’s also a subtle shift coming in how certain tax reliefs are applied. From April 2027, reliefs that could previously reduce tax on property, savings, and dividend income earlier in the process will now only be used after they’ve been applied to other types of income. It’s a behind-the-scenes adjustment, but one that could influence the overall tax position for clients with diverse income streams.
ISAs are also facing a change; from 6 April 2027, the annual cash ISA limit will be capped at £12,000, although the overall ISA allowance remains £20,000. Savers aged 65 and over will still be able to put the full £20,000 into a cash ISA if they wish. This reduction in terms of how cash can be held tax-efficiently, along with the increased tax rates on savings income appears to be a deterrent on holding large cash balances. However, there are other tax-efficient vehicles for holding wealth that may be useful in light of this change; a financial planner can help provide support with your financial plan.
The other ISA allowances stay as they are: £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds, fixed through to 2031. Please note however, that there will be a consultation period in early 2026 specifically in relation to the Lifetime ISA, with the intention to replace this product with a ‘new, simpler ISA product to support first time buyers to buy a new home’.[1]
And finally, several key National Insurance thresholds, including the Primary Threshold, Lower Profits Limit, and Upper Earnings/Profits Limits, will remain frozen until April 2031. These freezes may not make headlines, but over time they can have a meaningful impact as earnings rise.
Employment
Salary sacrifice rules are changing and from April 2029 the government will charge employer and employee NICs on pension contributions above £2,000 per annum made via salary sacrifice.
Employers and employees can still make contributions above £2,000 through salary sacrifice for pensions from April 2029, however, employee contributions above this amount will be subject to employer and employee NICs like other employee workplace pension contributions.
The government will also extend the employer NICs relief for employers hiring veterans in their first civilian role to April 2028.
The expectation is that funding a pension via a salary sacrifice scheme will remain beneficial up to the maximum amount that an employer will honour in terms of their contribution, and funding via salary sacrifice will continue to have the advantage of all reliefs being claimed at source rather than via completion of a tax return. However, contributions in excess of these amounts may be better directed into a pension of choice, for example, one with greater investment flexibility or benefit options.
Capital Taxes
The Inheritance Tax nil rate bands are already set at current levels until April 2030 and will stay fixed at these levels for a further year 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. Any unused £1 million allowance will be transferable between spouses and civil partners from 6 April 2026, including if the first death was before 6 April 2026. This change aligns the treatment of this allowance with that of the nil-rate band and residence nil-rate band.
The government will reduce the Capital Gains Tax relief available on qualifying disposals to Employee Ownership Trusts from 100% of the gain to 50%. This will take effect from 26 November 2025.
Business owners
A new 40% First Year Allowance (FYA) for main rate expenditure (including most expenditure on assets for leasing and expenditure by unincorporated businesses) will come into force from 1 January 2026.
From 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax, the main writing-down allowance rate will drop from 18% to 14%.
After last year’s rise in employers’ National Insurance, along with other recent changes, we now also have to consider the increases to dividend tax rates coming in April 2026. Because of this, business owners and their advisers will benefit from planning ahead somewhat more strategically.
The government will extend for a further year the 100% FYA for qualifying expenditure on zero emission cars and electric vehicle (EV) charge points until 31 March 2027 for corporation tax purposes and 5 April 2027 for Income Tax purposes. From April 2028, battery-electric car drivers will pay a road charge of 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile. These rates will increase each year in line with inflation.
Eligibility of companies for the EMI scheme will be expanded. The government will increase the employee limit to 500, the gross assets test to £120 million, and the company share option limit to £6 million from April 2026.
What does this mean for business owners? A fresh look at how much EMI capacity you’ll have under the new £6 million company cap and 500-employee limit would be beneficial. This will give you a clearer picture of what you can offer going forward.
If you’re considering any non–tax-advantaged grants, it may be worth holding off until April 2026 when the new rules come into effect. Waiting could give you more flexibility and better tax outcomes.
Access to the Venture Capital Trust (VCT) and Enterprise Investment Schemes (EIS) will also be extended to more companies. The government will increase the VCT and EIS company investment limit to £10 million (£20 million for Knowledge Intensive Companies (KICs)) and increase the lifetime company investment limit to £24 million, and £40 million for KICs – creating an initial boost for those fast-growth companies.
The gross assets test will increase to £30 million before share issue, and £35 million after, from April 2026. However, the rate of VCT Income Tax relief will decrease to 20% from 30%.
A new UK Listing Relief will be introduced which provides a three-year exemption from Stamp Duty Reserve Tax for companies listing in the UK, effective from 27 November 2025.
Our guidance to you
With a series of fiscal measures mapped out that will impact the road ahead, it’s important to remain focused on the long-term and understand that there are no immediate actions needed to be taken for most people following the measures announced.
Keep your end goal in mind and review your financial plan with an expert regularly to make sure you are on track for the future ahead.
[1] Budget 2025: lifetime Isa to be scrapped- https://www.ftadviser.com/budget/2025/11/26/budget-2025-lifetime-isa-to-be-scrapped/ – November 2026
Important Note
The information contained within this document is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
This article is distributed for educational purposes only. This communication does not constitute financial advice. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner to take into account your particular investment objectives, financial situation and individual needs.
The opinions stated in this document are those of the author and do not necessarily represent the view of Progeny and should not be relied upon to make a financial decision.
Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
Please note
Tax treatment depends upon individual circumstances and is based on current UK tax legislation, that is subject to change at any time.
Past performance is no guarantee of future performance.
The value of an investment and the income from it can fall as well as rise and investors may get back less than they invested. Your capital is therefore always at risk. It should be noted that stock market investing is intended for the longer term.
