Autumn Budget 2025: What you need to know

The economy and fiscal forecasts

• The Budget will raise taxes by £26bn.
• The Office for Budget Responsibility (OBR) projects CPI inflation will average 3.5% this year and 2.5% in 2026. From 2027 onwards, inflation is expected to gradually return toward the target 2.0%.
• The cost of government borrowing will decrease, with the OBR forecasting that the government will spend less than it collects in tax by 2027.
• The UK economy is set to grow by 1.5% in 2025. However, this is set to slow to 1.4% next year.

Taxes and duties

• An increase in tax on dividend, savings and property income will apply to the basic and higher-rate tax brackets from April 2026.
• The basic rate of dividend income will rise from 8.75% to 10.75%, while the higher rate will move from 33.75% to 35.75%.
• Income tax rates on interest and property profits will rise from 20% to 22% in the basic rate, and 40% to 42% in the higher rate.
• Income Tax thresholds and the Personal Allowance will be frozen until April 2031. This “fiscal drag” is expected to result in more taxpayers being drawn into higher tax bands over time.
• A new high-value property surcharge (“mansion tax”) will apply to properties valued over £2 million, ranging from £2,500 to £7,500 per annum.
• From April 2026, the National Minimum Wage for workers aged 21 and over will increase to £12.71 per hour, up from £12.21. Rates for 18- to 20-year-olds will rise from £10.00 to £10.85, and the rate for apprentices will increase from £7.55 to £8.00 per hour.
• From the 2027/28 tax year, the annual Cash ISA subscription limit will be reduced from £20,000 to £12,000. The remaining £8,000 of the existing £20,000 ISA allowance will continue to be available only for investments (e.g. Stocks & Shares ISAs), rather than cash holdings. For people over 65, the annual Cash ISA remains at £20,000.
• A three-year stamp duty holiday will apply to newly listed UK companies, exempting investors from the 0.5% stamp duty on share purchases made in the three years following an initial public offering (IPO).
• Voluntary Class 2 NICs for individuals living abroad have been abolished, with those who remain eligible now required to pay Class 3 NICs (currently £17.75 per week, compared with £3.50 per week under Class 2) to maintain their state pension entitlement.
• The eligibility criteria to make voluntary National Insurance contributions has been extended from three to 10 years of living and working in the UK to qualify.
• Pension contributions made via salary sacrifice schemes will start incurring NI on contributions made in excess of £2,000 a year from April 2029.
• The Basic and New state pension payments will increase by 4.8% from April 2026.
• The two-child cap, which limited households on universal or child tax credit from receiving payments for a third or subsequent child, is to be scrapped from April 2026.
• Fuel duty is being frozen to September 2026, followed by a staged increase.
• A new mileage-based tax for electric vehicles (3p per mile) and plug-in hybrid (1.5p per mile) cars is to be introduced from 2028.
• Regulated rail fares for journeys in England are to be frozen next year.
• The cost of a single NHS prescription in England is to be kept at £9.90.
• Tax on sugary drinks is being extended to pre-packaged milkshakes and lattes from 2028.

Public sectors and government spending

• Defence spending in the UK is set to reach 3.5% of GDP by 2035. An additional £32 billion in today’s money.
• Regional mayors in England are to be given powers to tax overnight stays in hotels and holiday lets.
• NHS funding is set to increase at an annual rate of 2.6%.

If you have any questions about any of the topics in this summary do not hesitate to get in touch with our SME accounting team. Our expert advisors can help you make the right decision. Give us a call on +44 (0) 20 7759 7553 or email [email protected].