Chancellor Rachel Reeves delivered the Autumn Budget 2025 on 26 November 2025. Whilst it avoided the sweeping reforms to Capital Gains Tax and Inheritance Tax that some had feared, it introduced significant changes to dividend taxation, frozen income tax thresholds, employer National Insurance, and the timeline for Making Tax Digital. The overall tax burden is forecast to reach a post-1945 high of 38.5% of GDP by 2030/31.
Key changes at a glance
Dividend tax rates increase by 2%
The basic rate of dividend tax rises from 8.75% to 10.75%. The higher rate rises from 33.75% to 35.75%. The additional rate remains at 39.35%. This is particularly significant for limited company directors who take income via dividends.
Income tax thresholds frozen for a further three years
The personal allowance (£12,570) and all income tax thresholds will remain frozen until April 2031. This extends the freeze announced in 2022 by three additional years, continuing the fiscal drag effect as wages rise but thresholds stay static.
Capital allowances writing down allowance cut to 14%
The main rate of writing down allowances (WDA) falls from 18% to 14% from 1 April 2026 for companies and 6 April 2026 for unincorporated businesses. A new 40% first-year allowance is available for plant and machinery with an expected life of 25 years or less.
MTD ITSA launches for income above £50,000
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) goes live for sole traders and landlords with annual income above £50,000. A soft landing applies: no penalty points for the first four missed quarterly updates in 2026/27.
Savings and property income tax rises by 2%
Tax on savings income and property income will rise by two percentage points at all rates from April 2027. This affects basic rate taxpayers, higher rate taxpayers, and additional rate taxpayers alike.
Employee Ownership Trust CGT relief reduced to 50%
The Capital Gains Tax exemption on qualifying sales to Employee Ownership Trusts (EOTs) reduced from 100% to 50% with immediate effect from 26 November 2025. Business owners considering an EOT sale should take advice promptly.
Corporation Tax: no changes
Corporation Tax rates were left unchanged. The main rate remains at 25% for profits over £250,000. The small profits rate stays at 19% for profits up to £50,000. Marginal relief continues to apply between £50,000 and £250,000.
National Insurance changes
The employer National Insurance rate for 2025/26 is 15%, following the increase announced in Budget 2024. The Secondary Threshold (the point at which employers start paying NIC on an employee's earnings) is set at £5,000 and is confirmed to remain at this level until April 2031. The Employment Allowance remains at £10,500.
For the self-employed, Class 4 NIC rates for 2025/26 and 2026/27 remain at 6% (on profits between £12,570 and £50,270) and 2% on profits above £50,270. Class 2 NIC was abolished in the 2024 Budget and does not apply in 2025/26.
Dividend tax rates: 2026/27 compared to 2025/26
| Rate band | 2025/26 | 2026/27 |
|---|---|---|
| Basic rate (up to £50,270) | 8.75% | 10.75% |
| Higher rate (£50,271 to £125,140) | 33.75% | 35.75% |
| Additional rate (above £125,140) | 39.35% | 39.35% |
| Dividend allowance | £500 | £500 |
Capital Gains Tax
No new CGT rates were announced in the Autumn Budget 2025. The increases announced in Budget 2024 (main rates rising to 18% and 24%) remain in place. Business Asset Disposal Relief (BADR) is still available at the current rates.
Inheritance Tax
The IHT nil-rate band (£325,000) and residence nil-rate band (£175,000) remain frozen until at least 2030. The Business Property Relief and Agricultural Property Relief changes announced in the 2024 Budget were confirmed, with 100% relief available on the first £2.5 million of qualifying assets (revised upwards from the original £1 million proposal), and 50% relief on the excess. These changes take effect from April 2026.
Salary sacrifice pension cap
From April 2029, a £2,000 annual cap will be introduced on the amount of salary that can be sacrificed for pension contributions and benefit from full National Insurance relief. Contributions above £2,000 will attract NIC. This affects both employees and employers who use salary sacrifice as part of their remuneration strategy.
Corporation Tax filing penalty doubles
The fixed penalty for submitting a Corporation Tax return one day late will double from £100 to £200 from 1 April 2026. The second-stage penalty (for returns over three months late) will also increase accordingly.
What accountants should do now
- Review all limited company director clients' salary and dividend structures before 5 April 2026 to optimise the final year at current dividend tax rates.
- Advise sole trader and landlord clients earning above £50,000 that MTD ITSA registration is required by 6 April 2026.
- Review capital allowances planning for clients investing in plant and machinery, taking into account the lower 14% WDA and the new 40% first-year allowance.
- Alert clients with agricultural or business property interests to seek IHT advice ahead of the April 2026 changes to APR and BPR.
- Review salary sacrifice pension arrangements for any clients who may be affected by the 2029 cap.