Autumn Budget 2025 – Client Summary

November 28, 2025

Autumn Budget 2025 – Client Summary

Introduction

A2Z Accounting – Simple Guide for Clients

This summary explains the main measures in the Autumn Budget 2025 and how they may affect you. It is written for typical A2Z Accounting clients – employees, pensioners, company directors, landlords, savers and investors.

Key Points at a Glance

1. Overall tax burden is set to rise over the rest of the decade.
2. Main income tax and VAT rates stay the same, but thresholds are frozen.
3. Tax on dividends, savings interest and rental income will increase.
4. There is extra support for pensioners and lower–income households.
5. New charges will apply to some high–value homes and future electric–vehicle use.

1. Income Tax Threshold Freeze

The personal allowance and other main income tax thresholds are frozen until at least 2030/31. As your earnings or pension increase, more of that income will fall into higher tax bands. This is often called a ‘stealth tax’ because the rates stay the same but your tax bill can rise.

• Employees and pensioners may see slower growth in take-home pay.
• More people are expected to move into the higher–rate tax band over time.
• It is sensible to plan around pay rises, bonuses and pension withdrawals.

2. Dividend, Savings and Property Income Tax

Dividend Tax – from April 2026

Impact Examples

• If you are a basic–rate taxpayer with £20,000 of dividends, your tax bill increases by about £400 per year.
• If you are a higher–rate taxpayer with £40,000 of dividends, your tax bill increases by about £800 per year.

Company directors who rely on dividends should review how they pay themselves (mix of salary, dividends and pensions).

Savings Interest and Rental Income – from April 2027

From the 2027/28 tax year, tax on most savings interest and property income (such as rent) will rise by 2 percentage points in each band. This affects clients with larger cash savings outside ISAs and those with rental properties.

• Consider using ISAs and other tax–efficient wrappers for savings
• Landlords should recalculate rental yields on a post–tax basis.
• Think carefully about the timing of large withdrawals or property sales.

3. High–Value Property Surcharge

A new annual surcharge applies to homes valued above £2 million. This sits alongside existing council tax and mainly impacts owners of high–value properties.

• Owners of premium homes and portfolios will face higher ongoing property costs.
• This is important when planning for inheritance tax and long–term estate planning.
• Investors in high–value property should include the surcharge in their return calculations.

4. Pensions and Salary–Sacrifice Changes

From April 2029, only the first £2,000 per tax year of pension contributions made via salary sacrifice will be exempt from National Insurance. Contributions above this amount will attract NI, although normal income tax relief on pension contributions remains in place.

• Higher earners who use salary sacrifice heavily will see increased NI costs.
• Employer pension contributions that are not salary sacrifice remain free of NI.
• Now is a good time to review long–term pension funding plans.

5. Electric Vehicle Road Charge – from 2028

From 2028, a new per–mile road charge will apply to electric vehicles and some hybrids. This is intended to replace some of the fuel duty that EV drivers currently do not pay. Fuel duty on petrol and diesel remains frozen for now.

• If you drive an EV, this will add to your running costs from 2028.
• Businesses with vehicle fleets should review their long–term plans for EVs versus petrol or diesel.
• It is worth comparing the full lifetime cost of each vehicle type, including tax changes.

6. Support for Households and Pensioners

• The National Living Wage and minimum wage are set to increase from April 2026.
• The State Pension will rise by around 4.8% under the triple–lock formula.
• Average household energy bills are expected to fall by about £150 a year from April 2026.
  

These measures provide some relief, especially for lower–income households and pensioners, but they may not fully offset the impact of higher taxes for everyone.

7. What You Should Do Now

To stay ahead of these tax changes, we recommend:

• Arrange a Budget review with A2Z Accounting to understand your position.
• If you are a company director, reassess the balance between salary, dividends and pension contributions.
• Landlords should update rental cashflow forecasts, including higher tax on property income.
• Savers and investors should make full use of ISAs and consider pension options.
• Plan early for the changes arriving in 2027, 2028 and 2029 so there are no surprises.

FAQs

Q: What are the key tax changes in the Autumn Budget 2025?

A: The Budget introduces higher taxes on dividends, savings interest and rental income, a freeze on income tax thresholds, a new high-value property surcharge and future EV road charges.

Q: How will the income tax threshold freeze affect my take-home pay?

A: As thresholds remain frozen until 2030/31, you may move into a higher tax band as your income rises, resulting in a reduced increase in take-home pay.

Q: Are dividend tax rates increasing in April 2026?

A: Yes. Basic and higher-rate dividend tax will rise by 2 percentage points, increasing tax bills for company directors and investors who receive dividend income.

Q: Will electric vehicles become more expensive to run?

A: From 2028, EVs will face a new per-mile road charge, increasing running costs and reducing the tax advantage compared to petrol and diesel vehicles.

Q: Does the Budget offer any support for pensioners?

A: Yes. The State Pension will increase by about 4.8%, and household energy bills are expected to fall by around £150 a year from April 2026.

Q: What should company directors do after the Autumn Budget 2025?

A: Directors should review their salary/dividend mix, assess pension contributions, and plan ahead for the 2026–2029 tax changes that impact remuneration.

Q: Is it still tax-efficient to save into ISAs after the Budget?

A: Yes. With rising tax on savings interest, ISAs remain one of the most tax-efficient ways to protect savings from future tax increases.