The Autumn Budget 2025 delivered by the Chancellor introduced a series of tax measures focused on stealth taxation and adjustments to allowances and reliefs, rather than headline rate rises. These changes will impact individuals, savers, property owners, and businesses in the coming years.
1) The Stealth Tax Continues
The freeze on Income Tax thresholds and National Insurance contribution (NIC) thresholds has been extended for an extra three years, now running until April 5, 2031.
Impact: The Personal Allowance (£12,570), the Higher Rate threshold (£50,270), and the Additional Rate threshold (£125,140) remain unchanged. This policy, known as 'fiscal drag,' pulls more people into paying tax, or into higher tax bands, as wages rise with inflation.
Effective Date: The extension is until April 5, 2031.
2) New National Insurance Cap on Pension Salary Sacrifice Schemes
A significant change affects the tax-efficient nature of pension contributions made through salary sacrifice.
Change: Only the first £2,000 of an employee's annual pension contribution made via a salary sacrifice scheme will be exempt from National Insurance Contributions (NICs).
Impact: Any amount sacrificed above the £2,000 threshold will now be subject to both employer and employee NICs. This is an extra cost for higher earners and their employers who utilise this benefit.
Effective Date: April 2029
3) Savings and Dividend Tax Hikes from 2026/2027
Savers and investors will see an increase in the tax rates applied to both savings income and dividends.
Dividend Tax: The basic and higher rates of dividend tax will increase by 2 percentage points.
Basic Rate: Rises from 8.75% to 10.75%.
Higher Rate: Rises from 33.75% to 35.75%.
Effective Date: April 6, 2026
Savings Income Tax (non-ISA): The basic, higher, and additional rates of tax on savings income will also increase by 2 percentage points across all bands.
Effective Date: April 6, 2027.
4) Cash ISA Allowance Reduction for Under 65s
The annual limit for contributions into Cash ISAs has been cut for the majority of adults.
Change: The maximum amount you can pay into a Cash ISA each year will be reduced from £20,000 to £12,000.
Note: The overall £20,000 annual ISA allowance remains, meaning savers may need to allocate more of their allowance to Stocks and Shares ISAs or other types of ISA. This change does not affect individuals aged 65 and over.
Effective Date: April 2027.
5) 2% Surcharge on Rental Income: Higher Tax for UK Landlords
The most significant change for property owners operating as individuals (unincorporated landlords) is the introduction of separate, higher rates of tax on rental profits.
Change: Tax rates on property income will increase by 2 percentage points across all bands. This creates a new, distinct rate structure for rental profits compared to salary income.
New Property Income Tax Rates (from April 2027):
Basic Rate: Rises from 20% to 22%.
Higher Rate: Rises from 40% to 42%.
Additional Rate: Rises from 45% to 47%.
Impact: This increases the tax bill for every individual landlord with taxable rental income. For higher-rate taxpayers, this compounds the existing restrictions on mortgage interest relief (Section 24), which only allows relief at the basic rate (now 22%).
Effective Date: April 6, 2027.
6) New Annual 'Mansion Tax' Surcharge on Properties Over £2 Million
A new annual levy, officially named the High Value Council Tax Surcharge, will be introduced for owners of England's most expensive residential properties.
Change: An annual surcharge will be added to the standard Council Tax bill for residential properties valued over £2 million.
Surcharge Bands (Examples):
Properties over £2 million: £2,500 per year.
Properties over £5 million: £7,500 per year.
Impact: While affecting less than 1% of property owners, this introduces a new, recurring annual tax burden on landlords with high-value assets, particularly in London and the South East.
Effective Date: April 2028.
7) Capital Gains Tax for Landlords: The 24% Rate Is Here to Stay
From 6 April 2026, the higher rate of CGT on gains from residential property sales will reduce from 28% to 24%. The basic rate (18%) remains unchanged.
8) Self Assessment Filing Threshold Raised
From 2026/27, individuals earning up to £150,000 (from employment only) will no longer need to file a Self Assessment tax return, up from the current £100,000 threshold.
9) VAT Threshold Frozen at £90,000 (Again)
The Chancellor confirmed a measure that, while seemingly static, will have a major long-term impact on the smallest businesses: the freezing of the VAT registration threshold.
Change: The VAT registration threshold will remain at £90,000 for the foreseeable future.
Impact: Economists refer to this as "fiscal drag" for businesses. As inflation continues to push turnover higher, more and more small businesses will cross the £90,000 limit and be forced to register for VAT. This brings increased compliance costs, administrative burdens, and potentially forces them to raise prices by 20% to non-VAT-registered customers.
Effective Date: The freeze is effectively permanent until a future budget announces a rise.
The 2025 Autumn Budget implements several changes that will gradually raise the UK's overall tax burden. While Income Tax rates remain untouched, the extended threshold freezes and targeted increases to dividend, savings, and NICs relief will have a cumulative effect on personal finances over the next few years.
