Autumn Budget 2025 - Summary

Welcome to our Autumn Budget 2025 update, where the tax take is higher than your step count on marathon day and the fiscal drag is doing more heavy lifting than your personal trainer. In a Parliament still squabbling like a badly behaved teenagers, the Chancellor, Rachel Reeves has served up a concoction of frozen thresholds, plethora of tweaks and ‘tough choices’ that will leave payslips lighter, spreadsheets busier and accountants in permanent peak season. 

As anticipated the income tax thresholds including the personal allowance of £12,570 will remain frozen for a further three years until April 2031. Thus, creating fiscal drag and due to inflationary increases in the state pension, will bring most pensioners into the tax net from 2027, or earlier if they have a private pension or other income. 

On wider income tax, there has been a broad 2% increase in all threshold rates for ‘passive income’, with the trilogy of dividends, property and savings income being impacted. 

The first increase comes into effect from 6 April 2026, with basic and higher rates of tax on dividends being increased to 10.75% and 35.75%. Whereas the basic, higher and additional rates of tax on property and saving income will increase to 22%, 42% and 47%, respectively, from 6 April 2027. 

Contrary to the predictions, the ISA limit will remain at £20,000 per year, however the cash ISA limit will be reduced to £12,000 a year from April 2027, with only those over 65 being able to avail of full £20,000 Cash ISA Limit.  The remaining £8,000 will be ring-fenced into stocks & shares ISAs. 

There were more relief restrictions for those saving for the future, with a new annual £2,000 cap that will be introduced to employee pension contributions made via salary sacrifice. While all contributions will continue to be exempt from income tax, from April 2029, only the first £2,000 of employee pension contributions made via salary sacrifice each year will be exempt from National Insurance Contributions (NIC). 

Employers and employees can still make contributions above £2,000 through salary sacrifice arrangements. However, employee contributions above this amount will be subject to employer and employee NIC’s like other employee workplace pension contributions. It is worth noting that all employer pension contributions will continue to be free of NICs, therefore employers and employees alike may wish to plan how their remuneration package will look from 2029 onwards. 

As expected, and to add more pressure to employee costs, it was confirmed that the National Minimum Wage thresholds will increase by 4.1% from April 2026, with an even larger increase for younger workers. 

  • Over-21s will increase by 50p per hour, to £12.71 (4.1% increase).   

  • Workers aged 18 to 20 will increase by 85p per hour to £10.85 (8.5% increase). 

  • 16- and 17-year-olds will increase by 45 p per hour to £8. (6.5% increase). 

The corporation tax rate will remain unchanged, and stay at the small rate of 19% and the main rate of 25%.  

There was a little relief for businesses investing in capital assets, with the introduction from January 2026 of a new First Year Allowance at 40% for main rate expenditure, including most expenditure for leasing trades and unincorporated businesses. This will allow businesses to get relief if full expensing or the annual investment allowance does not apply, particularly for Groups that hold their plant within one entity and lease to other related entities. Conversely, from April 2026 the main rate of writing down allowances will decrease from 18% to 14%, reducing the speed of relief for expenditure that does not qualify for full expensing (including most second‑hand assets and cars). The special rate pool and the structures & building pool writing down allowances remain constant, at 6% and 3%, respectively. 

Capital Gains Tax (CGT) and Inheritance Tax (IHT) had taken a battering last Autumn and were largely left as is in this year’s announcement. It is worth noting that the generous CGT relief of 100%, when you sell your business to an Employee Ownership Trust (EOT), a  type of transaction that is building momentum here in Northern Ireland and a good option where succession or private equity does not fit the business model, will be reduced to 50%. The government have also outlined that HMRC will be stricter on providing clearance for some re-organisations or share for share exchanges, if the potential motive is to avoid CGT. 

On the IHT side of things, there was some slight relief provided to many impacted by the Business and Agricultural Property limits imposed of £1million from April 2026, with the ability now to transfer these between spouses on death, similar to the Nil Rate Band of £325,000. 

There is still much more detail to delve into, and the tax team at BDO NI will be here to help assist you understand how these changes impact you and your businesses tax position.