The Chancellor delivered her second Budget on 26 November 2025, setting out a series of tax and policy changes that will impact households and businesses over the next few years. With ongoing economic pressures and the continued freeze on many tax thresholds, this Budget introduces a mix of tax rises, relief reforms and digital reporting changes that everyone should be aware of.
Income Tax & Personal Finances
Many of the core tax thresholds—such as the personal allowance and income tax bands—will remain frozen until 2031. As wages rise, this “fiscal drag” will pull more people into higher tax brackets over time.
Other announcements include:
- Dividend tax rates increase by 2 percentage points from April 2026.
- Savings and property income tax rates rise by 2 percentage points from April 2027.
- From April 2027, a new £12,000 cap will apply to annual cash ISA contributions for those under 65.
- A new mansion tax-style council tax surcharge is being introduced for properties valued above £2 million.
These changes mean most households can expect to pay more tax in the coming years, particularly on income outside of PAYE.
Making Tax Digital (MTD)
HMRC’s Making Tax Digital for Income Tax (“MTD for IT”) moves forward from April 2026 for:
- Sole traders
- Landlords
- Anyone with qualifying income above £50,000
Those required to join the system will need to submit quarterly digital updates through compliant software. However, the government has confirmed that late filing penalties will not apply in the first year for quarterly submissions.
Business & Employer Updates
This year’s Budget introduced several key measures for employers and company directors:
- Minimum wage increases from April 2026 across all age groups.
- Employer-provided benefits relief expanded to include eye tests, home working equipment, and flu vaccinations.
- Enterprise Management Incentive (EMI) scheme limits are increasing from April 2026, widening access for growing companies.
- Mandatory payrolling of benefits will now come into effect from April 2027.
Corporation tax rates remain unchanged, but penalties for late filing will double from April 2026.
Capital Gains Tax & Investment Schemes
For business owners and investors, the Budget brought several important changes:
- The Business Asset Disposal Relief (BADR) rate increases from 14% to 18% (April 2026).
- Employee Ownership Trust CGT relief has been halved, with only 50% relief available going forward.
- Changes to EIS and VCT schemes raise eligibility thresholds for companies but reduce VCT income tax relief to 20% from April 2026.
These changes could affect timing decisions for business sales or investment planning, so early advice is recommended.
Inheritance Tax Reform
Significant changes are planned for IHT reliefs from April 2026:
- Agricultural and business property relief will be capped at £1 million per person.
- Unused relief can now be transferred to a spouse or civil partner.
- BPR on AIM shares reduces from 100% to 50%.
- The IHT nil rate bands remain frozen until 2031.
This makes estate planning more important than ever, particularly for business and agricultural property owners.
Property and Landlords
In addition to the new council tax surcharge, landlords will see:
- Higher property income tax rates from 2027
- Increased pressure from the frozen income tax bands
- Potential increases in operating costs
If you let property—or plan to—these changes may affect net returns over time.
Capital Allowances & VAT
The Annual Investment Allowance (AIA) remains at £1 million, and a new 40% first-year allowance will be introduced from January 2026.
VAT thresholds remain frozen at £90,000 for registration and £88,000 for deregistration.
In Summary
This Budget reinforces the direction of travel set in 2024: frozen thresholds, increasing tax rates on non-employment income, and broader reforms that require forward planning. Many individuals and businesses may need to revisit their tax strategy for 2026 and beyond.
If you’d like personalised guidance or support with planning ahead, our team is here to help.