Autumn Budget 2025 summary: What you need to know
After months of speculation, market jitters and shifting policy signals, Rachel Reeves has finally delivered her long-awaited second Budget, and she’s pushed it as late into the year as she realistically could.
It lands against a challenging economic backdrop. Growth remains sluggish, inflation is still stubbornly high, unemployment is rising, and higher interest rates continue to put pressure on households and businesses alike. With welfare spending increasing and the fiscal gap widening, Reeves has chosen a blend of quieter tax rises and structural reforms to bring in additional revenue.
Despite expectations, the Chancellor stepped back from her proposed increase to income tax rates a move that would have marked the first rise since 1975. Instead, she has leaned on less visible but equally costly measures, including continued threshold freezes, higher property-related taxes and a stronger focus on taxing wealth.
To avoid fuelling inflation, the freeze on fuel duty will stay in place until April 2026 and the 5p cut will remain. However, the national living wage will increase from £12.21 to £12.71, which will inevitably place more pressure on employers already preparing for the rise in employer national insurance from April 2025.
Looking ahead, the two-child benefit cap will end from April 2026, and welfare benefits will rise in line with inflation. The cost of these commitments will be covered through a wide range of tax changes — from frozen income tax thresholds and tighter rules on pension contributions to per-mile charging for electric vehicles, a mansion tax on higher-value homes, and new levies on gambling and tourism. Collectively, these measures add yet another layer of complexity to an already complicated tax system.
With so many indirect tax rises announced today, the question is whether the Chancellor will be back next year asking for more when a straightforward income tax rise might have delivered the same result with far less difficulty.
See Treasury Budget 2025 page and HMRC's Budget 2025 tax related documents.
Tax measures
Among the tax measures announced in the speech were:
extension of the personal tax bands for three further years
national insurance on pension salary sacrifice
reduction in capital gains tax relief on employee ownership trusts
mileage-based charge on electric vehicles
a high-value council tax surcharge on properties worth over £2m
freeze on fuel duty for five months
expansion of the sugar levy to milk products like lattes and milkshakes
increase in the national minimum wage and living wage
introduction of a tourism tax for local authorities
introduction of a gambling duty reform
a reform of the ISA allowance
tackling construction industry scheme fraud
pursuing promoters of tax avoidance
publication of the government’s response to the loan charge review.
Announcements in Detail
Personal tax & thresholds
Reeves confirmed that the freeze on personal tax thresholds will now run until 2030/31, extending her pledge from last year to unfreeze them from 2028. What began as a temporary measure under Rishi Sunak in 2021 (originally due to end in 2025/26) has now become a long-term feature of the tax system.
The Chancellor acknowledged the impact on working households, noting she wants to “keep that contribution as low as possible” while promising further reforms to the wider tax system. She also announced that from April 2027, anyone receiving only the basic or new state pension will no longer be required to pay tax through simple assessment.
From April 2026 Income Tax rates for dividend income will be increased by 2 percent for basic and higher tax rates, increasing them to 10.75 and 35.75 percent. From April 2027 Income Tax rates for savings and property income will be increased by 2 percent for basic, higher and additional tax rates, increasing them to 22, 42 and 47 percent.
£2,000 cap on salary sacrifice
Salary sacrifice for pensions has been a clear target for the Treasury, and Reeves has now introduced a £2,000 annual cap. Pension contributions made through salary sacrifice above this level will be taxed in the same way as standard employee pension contributions.
Reeves described the change as a “pragmatic step”, arguing that high earners using large salary sacrifice contributions gain far more than low-paid workers or those without access to such schemes. The measure is designed to curb a growing cost to the public finances and will take effect from 2029.
CGT and employee ownership trusts
The attractiveness of employee ownership trusts was reduced almost immediately, with the government cutting CGT relief on disposals from 100% to 50% from this month. Half of any disposal will now be treated as a chargeable gain. Reeves said the original rules had created “a route for gains to go completely untapped when businesses are sold”.
Property taxes
Property-related taxes saw further increases. The basic and higher rates applied to savings and dividend income linked to property will rise by 2%. Reeves highlighted that many landlords currently pay significantly less tax than tenants with equivalent income, largely because property, savings and dividend income is not subject to National Insurance.
In England, a new high-value council tax surcharge will also apply. Properties worth more than £2m will face an annual £2,500 charge, rising to £7,500 for homes valued above £5m, collected alongside normal council tax.
Vehicles
The government has confirmed a new mileage-based tax for electric vehicles from April 2028. Battery electric cars will be taxed at £0.03 per mile and hybrid vehicles at £0.015 per mile. With an estimates 8,500 miles driven each year by EV drivers, this adds an additional £255 charge to households adopting EVs on top of luxury car tax. However, From April 2026, the list price threshold at which electric cars are subject to the tax increases from £40,000 to £50,000, meaning a lot more buyers of new EVs can avoid the charge
For non-electric vehicles, fuel duty will remain frozen for five months before staged increases begin from September 2026.
National minimum wage and apprenticeships
From April, the national minimum wage for 18–20-year-olds will rise from £10.00 to £10.85 per hour, while the national living wage increases from £12.21 to £12.71. These changes will bring additional costs for employers.
To offset some of this, the Chancellor announced fully funded apprenticeships for SMEs — support that could be particularly helpful for smaller firms looking to grow and bring in new talent.
Business rates
Business rates will undergo several adjustments. The government is changing the multiplier used to uprate rates and introducing permanently lower tax rates for retail, hospitality and leisure, affecting more than 750,000 properties across the UK.
Economy
Underpinning many of these decisions is the wider economic picture. The Office for Budget Responsibility (whose report was accidentally published early) expects GDP to grow by an average of 1.5%, slightly below previous forecasts due to weaker productivity. Growth for this year has been revised up to 1%.
The OBR estimates the measures announced today leave the government with £22bn of fiscal headroom, £12m more than forecast in March.
Umbrella companies
As expected, rules will be introduced from April 2026 with regards to the use of umbrella companies within the supply chain. Under these rules parties further up the contractual chain, including end users in some cases, will be jointly and severally liable to any PAYE failure by the umbrella company.
Car benefits
The Government will delay changes to benefit-in-kind rules for Employee Car Ownership Schemes until April 2030. For those still in contracts at that time, transitional arrangements will also be put in place to provide additional support.
The Government will introduce a temporary benefit in kind tax easement for plugin hybrid electric vehicles (PHEVs) in the Benefit in Kind system to prevent their tax charge increasing significantly due to new emissions standards. This easement will be in place from 1 January 2025 to 5 April 2028.
The expansion of workplace benefits relief
The income tax and National Insurance exemption for employer-provided benefits will be extended to cover reimbursements for eye tests, home working equipment and flu vaccinations. This will be legislated for in Finance Bill 2025-26 and this will take effect from 6 April 2026.
Non-reimbursed employment expenses for homeworking
The Government will remove the deduction from Income Tax for non-reimbursed home working expenses. Employers can still reimburse employees for these costs where eligible without deducting income tax and National Insurance contributions. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2026.
Understand the Autumn Budget impact on you and your business
If you would like to discuss how these changes in tax policy may affect you and/or your business, please contact your usual Alera Accounting & Advisory contact or alternatively contact the team.