November 2025 Budget

No changes are being made to the tax rates of Employment and Self-employment income. However, Dividends and Savings income tax will rise by 2%, to reflect that no National Insurance is paid from these sources. From April 2026: 

• the Dividends ordinary rate will rise from 8.75% to 10.75% 

• the upper rate from 33.75% to 35.75% 

• the additional rate will remain unchanged at 39.35%. 

From April 2027 the rate of tax savings income will increase:   

• basic rate from 20% to 22% 

• higher rate from 40% to 42%,  

• additional rate from 45% to 47%  

The government is creating separate tax rates for property income. Income tax is already charged on property income. These separate rates mean property income will have its own individual tax rates (as already occurs for the taxation of savings and dividend income). From April 2027, property rates will be: 

• basic rate 22% 

• higher rate 42%  

• additional rate 47%.  

• Finance cost relief will be provided at the separate property basic rate (22%). 

The income tax ordering rules will also be changed from April 2027 so that the Personal Allowance will be deducted against employment, trading or pension income first. 

The way individuals report and pay tax on property, savings and dividend income will remain the same – only the rates of tax charged will change. 

Companies listing their securities on a UK exchange on or after 27 November 2025, will have an exemption from the 0.5% Stamp Duty Reserve Tax (SDRT) for 3 years from the date of listing. This will support companies listing to secure higher initial valuations, and encourage secondary market trading to increase liquidity in their funds 

From January 2027 inflation protection for pre-1997 Defined Benefit pensions in the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS) will be introduced. Where schemes originally provided this benefit, CPI-linked increases so that scheme members pension funds keep up with inflation will be capped at 2.5% per annum and apply to pre 1997 accruals. 

Another indirect change to pension limits is the change to salary sacrifice; the Treasury is introducing a new threshold of £2,000, over which any salary sacrifice contribution will be subject to Class 1 National Insurance. Clients will most feel this change in their ability to invest into their occupational defined contribution schemes.  

The treasury has estimated that in 2030-2031 this will raise £4.9bn, and just above half that in 2028-2029. This may result in a slowing of occupational scheme contributions as the threshold comes into effect, but could potentially increase relief at source contributions once the £2k limit is reached.  

The chancellor announced new restrictions for those living abroad and their ability to make Class 2 voluntary National Insurance contributions to upkeep their state pension entitlement. Class 2 VNICs can be paid by those in self-employment and with certain levels of income or making investments. The system will be changing whereby the residency requirement will be increase to 10 years for those looking to bolster their qualifying years.   

From April 2027 well-funded Defined Benefit (DB) pension schemes will be able to pay any surplus funds to eligible members (where permitted by Trustees and the rules of the scheme). This could boost clients’ retirement income, and perhaps offer an opportunity to review their general retirement provision. 

As part of the upcoming changes regarding the treatment of unused pension funds and death benefits (which come into effect from 6 April 2027), personal representatives of an estate will be able to instruct scheme administrators to withhold up to 50% of taxable benefits for up to 15 months. They will also be able to request that the scheme administrator pays any IHT due in some circumstances.  The representatives will also have no liability for any pensions discovered after receiving clearance from HMRC.  Further detail on how this will work in practice and who will have liability for these funds is expected in the Finance Bill 2025-26.  

The government, as expected, made changes to the Cash ISA limits setting this at £12,000 from April 2027. However a concession was made for those aged 65 or over who are able to continue to save up to £20,000. 

The overall annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2031. 

The government also confirmed a consultation will be published in early 2026 on a replacement to the Lifetime ISA. 

The government is tightening anti-avoidance provisions that apply when companies restructure or shareholders exchange shares. These rules prevent businesses from using reorganisations to defer or avoid paying Capital Gains Tax (CGT). These changes take effect immediately and will be included in the Finance Bill 2025-26. 

There are a number of potential implications of this change: 

• Companies planning reorganisations could be impacted immediately  

• Tax planning strategies that relied on older interpretations may no longer be valid. 

• The increased scrutiny from HMRC could also mean higher compliance costs and potential penalties for non-compliance. 

Amended rules for non-resident investors specifically around rules for protected cell companies (often used in offshore jurisdictions). They will also be clarifying legislation for investors to reduce ambiguity and formalising administrative processes. These changes will apply immediately, with further administrative reforms from 6 April 2026 and will be legislated in the Finance Bill 2025-26. 

These changes could mean offshore investment vehicles will face tighter rules, reducing opportunities for tax avoidance. 

The government has announced changes to the VCT and EIS schemes as part of the 2025 Budget. From April 2026, the income tax relief available on new VCT investments will reduce from 30% to 20%. This is a notable reduction and may impact the attractiveness of VCTs for some investors.

In addition, the annual, lifetime, and gross asset limits for companies eligible for EIS and VCT investment have been increased. The gross assets limit is now £30 million before investment and £35 million after investment. The annual investment limit is now £10 million for standard companies and £20 million for knowledge-intensive companies. The lifetime investment limit is now £24 million for standard companies and £40 million for knowledge-intensive companies. These changes are intended to support the growth of scaling businesses and broaden the pool of companies able to benefit from these schemes.

Both the EIS and VCT schemes have been extended to 5 April 2035, providing longer-term certainty for investors and companies. No changes were announced for the Seed Enterprise Investment Scheme (SEIS).

• NHS prescription charges are being frozen at £9.90 per charge for one year. 

• A new mileage-based charge for electric and plug-in hybrid cars will apply from 1 April 2028, set at half the rate of the Fuel Duty equivalent. The average EV driver is expected to pay around £240 per year (approx. £20 per month). Plug-in hybrids will pay a reduced rate, with vans, buses, motorcycles, coaches, and HGVs out of scope initially. Mileage is to be self-reported. 

• The threshold for zero-emission vehicles increased from £40,000 to £50,000 from 1 April 2026, saving eligible motorists up to £440 per year. 

• The 100% First Year Allowance for zero-emission cars and EV ChargePoint infrastructure is extended to 31 March 2027 (Corporation Tax) and 5 April 2027 (Income Tax). 

• The government also announced measures to reduce both household and business energy bills. This will be achieved through the government funding 75% of the domestic cost of the legacy Renewables Obligation from 2026-27 to 2028-29 and ending the Energy Company Obligation which is currently funded through energy bills.  Household bills are expected to come down by £150 on average from April 2026. 

• The Warm Home Discount has been expanded meaning around six million households will receive £150 off their energy bills this winter.