The 2025 Autumn Budget introduces a series of changes that will affect individuals, property owners, employers and business owners over the next few years.
This article summarises the most relevant announcements and highlights where early guidance can help clients understand their options.
Rising taxes on savings and dividends
The Government has confirmed that from April 2026 the tax rates applying to dividends and from April 2027 the tax rates on savings interest will rise by two percentage points. The changes to dividend taxes only apply to the basic rate and higher rate bands. This means higher effective rates across most income bands. The dividend allowance remains at £500, so the increase affects many company directors, investors and individuals who rely on portfolio income.
These rate increases arrive alongside a freeze in personal allowances and tax thresholds until 2031. As incomes rise over time, more individuals will be drawn into higher bands. For clients who take dividends from their own companies, or who receive investment income, this combination of frozen thresholds and rising rates will increase overall tax costs.
Business owners may benefit from reviewing how they draw income from their companies, how their investments are structured and how much income they can shelter through ISAs. Those with savings or investment portfolios may also need to consider whether a shift from income-producing investments to long-term growth investments is appropriate. Even small changes made now can significantly reduce tax exposure in the years ahead.
Higher taxes for landlords
Unincorporated landlords are affected by a similar two percentage point tax rise on rental income, effective from April 2027. The new rates will be 22 percent, 42 percent and 47 percent, depending on the taxpayer’s income level. These increases follow several earlier changes affecting landlords, including the restriction of mortgage interest relief to the basic rate and the gradual expansion of Making Tax Digital for Income Tax.
For many landlords the combined effect will reduce net yields, particularly where borrowing remains high or where rents have not grown at the same pace as costs. People with multiple properties may find it helpful to review their ownership structure, financing arrangements and long-term plans.
Some landlords may benefit from incorporation, particularly where they intend to retain profits inside a company rather than withdraw them. Others may want to consider trimming or restructuring portfolios ahead of the new rates. Every situation is different, so advice based on spending patterns, rental yields and long-term objectives is essential.
Landlords should also be reminded that from April 2026 they must keep quarterly digital records under Making Tax Digital. Early preparation will make the transition easier.
Changes to pension salary sacrifice rules
Salary sacrifice arrangements have been widely used for many years, especially by individuals who wish to reduce income tax, manage National Insurance costs or keep overall income below the higher rate threshold. From April 2029 the rules will change. Only the first £2,000 of annual pension contributions made through salary sacrifice will continue to receive current tax and National Insurance treatment. Any amount sacrificed above that limit will be treated as normal pay.
This change affects many employees and company directors who use sacrifice to boost pension contributions tax efficiently. It also affects employer clients who offer flexible benefits packages built around salary exchange arrangements.
You may need to review how much you contribute to pensions and whether employer contributions or direct personal contributions offer a more effective route. Individuals who use sacrifice to keep income below tapering thresholds, such as the level at which the personal allowance reduces, should consider alternative strategies well before these changes begin.
Minimum Wage and National Living Wage increases
Significant increases to the National Living Wage and National Minimum Wage take effect from April 2026. These increases are aimed at improving earnings for lower paid workers, but they also place upward pressure on payroll costs for employers across hospitality, retail, social care, logistics and other labour-intensive sectors.
The increases will also have a knock-on effect on employer pension contributions, holiday pay calculations and in some cases employer National Insurance costs. Businesses will benefit from reviewing staffing structures, shift patterns and pricing models well before April 2026 to ensure that wage costs remain sustainable.
It is also important for employers to maintain strong payroll records. Minimum wage enforcement has grown more rigorous and errors in timekeeping or deductions remain among the most common reasons for compliance failures. Accountants can support clients by reviewing payroll systems and explaining where risks may arise.
Capital allowances and investment planning
Businesses continue to benefit from generous capital allowances. Companies can claim full expensing on qualifying plant and machinery. This allows them to deduct the full cost of many assets in the year of purchase, which helps manage corporation tax liabilities and supports investment decisions.
For unincorporated businesses, a new 40 percent first year allowance begins on 1 January 2026 for qualifying main pool plant and machinery. The remaining 60 percent of the expenditure is added to the normal capital allowances pool. The Annual Investment Allowance remains at £1 million, which means that many small and medium sized businesses can still obtain full relief on most routine purchases.
Business Directors intending to invest in equipment, technology or machinery should consider whether to bring forward or delay expenditure.
Investment discussions are especially valuable for businesses planning multi-year capital programmes or those considering a change in legal structure.
Business rates and sector specific changes
The Budget launched a consultation on business rate multipliers for the retail, hospitality and leisure sectors. These sectors have faced challenging trading conditions in recent years. Although no immediate changes apply, this consultation signals that reliefs and rate structures may evolve over time.
Accountants can support affected clients by reviewing current business rates positions, checking eligibility for reliefs and encouraging participation in the consultation process. Early involvement helps you respond to future changes more effectively.
The Government has also opened consultations on VAT rules relating to charity shop donations, private hire vehicles and small business simplification. While these consultations do not change the law immediately, they may lead to future adjustments that affect specific industries. Those working with affected businesses should ensure they remain aware of developments.
High value council tax surcharge
A new annual council tax surcharge applies to homes valued at £2 million or more following the 2026 revaluation. The surcharge begins in April 2028 and ranges from £2,500 to £7,500 depending on the property’s value.
For those who own high value residential property, this surcharge represents a recurring cost rather than a one-off event. It may prompt wider conversations about property retention, future plans, estate planning and ownership structure. These discussions are especially helpful for those with complex financial arrangements or for those who wish to consider gifting or downsizing in the years ahead.
Making Tax Digital preparations
Making Tax Digital for Income Tax begins in April 2026 for many landlords and self-employed individuals. Quarterly digital updates will become compulsory. This means business owners need to adopt suitable bookkeeping systems and establish reliable processes well in advance.
Supporting businesses with software selection, training and transition planning will reduce the risk of errors, penalties or delays. Many will appreciate guidance on record keeping, allowable expenses and general workflow improvements.
Why planning early matters
Many of the Budget measures do not take effect immediately, which can tempt clients to wait until the last minute. However, the most effective planning takes place early, when there is time to adjust strategies, review investment plans or prepare for changes in payroll or tax rules.
Those who take advice now will be able to:
• Manage income levels ahead of rising tax rates.
• Understand how changes affect their business or property portfolio.
• Spread investment costs over several years to optimise capital allowances.
• Prepare payroll systems for higher wage rates.
• Transition smoothly into digital record keeping.
• Address the long-term cost of owning high-value property.
Advisory conversations at the start of the year help you take advantage of current tax rules and avoid unnecessary pressure before new rules begin.
How accountants can support business owners
Accountants are well placed to guide businesses through these changes.
Typical areas where business owners may seek help include:
- Income extraction reviews for company directors.
• Rental business planning for landlords facing increased tax and digital filing.
• Pension contribution reviews to prepare for the salary sacrifice limit.
• Payroll cost forecasting and compliance support.
• Decisions about timing of investment in equipment or technology.
• Property planning for individuals with high-value homes.
• Transition support for Making Tax Digital.
A simple review meeting can help understand which changes apply to you and what steps you should consider over the coming year.
Final thoughts
The 2025 Autumn Budget is not defined by sudden changes but by gradual increases and long lead-in measures. Rising taxes, higher wage costs and new digital filing requirements will affect many individuals and businesses. Taking time now to understand these developments will make a significant difference to long term financial outcomes.
We can add real value by helping business owners plan early, reduce risk and make informed decisions. The next eighteen months provide a clear window to take action, review options and put the right strategies in place.
Please call so we can discuss your planning options.