Budget Summary for 26 November 2025: Key changes explained

The Chancellor’s Autumn Budget, delivered on Wednesday, 26 November, introduced a range of measures affecting individuals, businesses and property owners. While some changes take effect immediately, others are being phased in over the next few years.

Here’s a clear summary of the most important points, and what they could mean for you.

Income tax and allowances frozen again

Personal allowances and higher-rate thresholds will stay frozen until April 2031. This means more people will move into higher tax bands over time as wages rise, increasing their tax bills without any change to rates or bands.

From April 2026, tax on dividend income will rise:

• Basic rate – 10.75% (up from 8.75%)
• Higher rate – 35.75% (up from 33.75%)
• Additional rate – remains 39.35%

From April 2027, 2% increase will apply to basic, higher and additional rate bands for savings and property income. ISAs will remain tax-free, making them even more valuable for higher earners.

Inheritance Tax – Relief restrictions on the way

From April 2026, 100% Agricultural and Business Property Relief will apply only to the first £1 million of qualifying assets. Relief on any excess will be limited to 50%. This £1 million allowance is transferable between spouses or civil partners and will be fixed until 2031.

Also from April 2026, shares traded on AIM and similar ‘unlisted’ markets will only attract 50% relief, not 100% as before. This could increase IHT liabilities for many family businesses and farming estates.

Capital Gains Tax changes

From 26 November 2025, Capital Gains Tax relief on the sale of shares to Employee Ownership Trusts has been reduced from 100% to 50%.

From April 2026:

• The Business Asset Disposal Relief rate increases from 14% to 18%
• Incorporation relief will need to be claimed, rather than applied automatically
• Carried interest will be taxed as income, not as a capital gain

Pensions and ISAs

There are no immediate changes to pension tax reliefs, but from April 2029, salary sacrifice contributions above £2,000 will be subject to NICs, although they’ll remain income tax free.

The ISA limit remains £20,000, but from April 2027, only £12,000 can be held in cash for those under 65. The rest must be in stocks and shares ISAs.

Business and Corporation Tax

Corporation Tax rates remain unchanged, but there are some important updates:

From January 2026:

• A new 40% First Year Allowance will apply to certain plant and machinery where full expensing or the Annual Investment Allowance isn't available

From April 2026:

• Writing Down Allowances on main pool expenditure will reduce from 18% to 14%
• Late filing penalties will double for Corporation Tax returns

The 100% First Year Allowance for zero-emission cars and chargepoints has been extended to March 2027.

National Insurance and employee benefits

The Employer NIC threshold will remain frozen at £5,000 until 2031, and the Upper Earnings Limit stays aligned with the higher-rate tax threshold.

Other changes from April 2026:

• Employees can no longer claim homeworking expenses unless reimbursed
• Tax-free reimbursements will now include eye tests, homeworking equipment and flu jabs
• Increases to company car and fuel benefit charges in line with inflation
• Expanded Enterprise Management Incentive (EMI) limits for qualifying companies

VAT and digital tax updates

From 2 January 2026, private hire vehicle operators (like Uber) will no longer be able to use the Tour Operators Margin Scheme, meaning VAT will apply to the full fare.

Other updates:

• A new VAT relief for donations of goods to charity will apply from 1 April 2026
• From April 2029, all VAT invoices must be electronic

Other key announcements

• Making Tax Digital for Income Tax starts 6 April 2026 for self-employed people and landlords with income over £50,000, extending to £30,000 from April 2027. Quarterly updates won’t face late filing penalties in the first year
• A Council Tax Surcharge will apply from April 2028 to properties worth over £2 million
• A new mileage-based tax will be introduced for electric and hybrid vehicles from April 2028
• The State Pension will rise by 4.8% in April 2026, and the National Living Wage will increase to £12.71 an hour
• The two-child benefit cap for Universal Credit will be removed from April 2026

Need help?

This Budget confirms the government’s intention to increase tax revenues gradually over time, largely through rate rises and allowance freezes. There’s a lot to take in – and many of the changes will need forward planning to manage their impact.

Whether it’s income tax, pensions, inheritance planning, or business investment, we’re here to help you navigate what’s ahead.

Get in touch with your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk

Sally Farrow