Autumn Budget 2025: The Key Changes that will impact you and your busines

Introduction to the 2025 Autumn Budget

It feels like it has been a long time coming, given that it has been mentioned in the news regularly since July. And with an unprecedented leak of the OBR report ahead of time, it will no doubt stay in the news for some weeks to come.

The Chancellor, Rachel Reeves, has always said that the Budget's goal is to "deliver on the priorities of the British people: Cutting NHS waiting lists, cutting the national debt and cutting the cost of living".

Economic Situation

The UK economy has been expanding slowly, at an average annual rate of about 1.5% since mid-2024. Although the overall national output (GDP) is 5.3% higher than before the pandemic, GDP per head is only 0.8% higher over nearly six years.

The OBR is likely to reduce its forecast for how fast the economy can grow sustainably. This downgrade is due to persistently low productivity growth, and it will likely lead to lower OBR forecasts for GDP growth and expected tax revenues. Inflation remains high at 3.6%, which is above the Bank of England's 2% target.

Current Public Finances and Headroom

The government is currently borrowing to fund about 10% of its spending, and the total debt is about 95% of UK GDP. The Chancellor faces pressure due to inherited problems, including large existing debts and public services that have had years of squeezed spending.

To meet fiscal rules, the Chancellor relies on a small financial buffer called "headroom". In the previous Budget, Ms Reeves left herself only £9 billion of this headroom. However, the OBR has since downgraded its economic outlook, calculating that this small buffer has now been wiped out. This leaves the Chancellor short of cash and under pressure from financial markets not to borrow any more.

Changes Announced in the Autumn Budget 2025

Income Tax

Tax thresholds on personal tax and employer National Insurance contributions thresholds frozen for a further three years until 2031. The OBR estimates that 780,000 more people will be paying income tax in 2029-30, mainly as a result of the extensions to the freezes.

Business Rates

The government will introduce "permanently lower tax rates" for more than 750,000 retail, hospitality and leisure properties.

A new tourist tax on overnight stays will be introduced.

Capital Gains Tax – employee-owned trusts

The Capital gains relief if a company sells shares to employee-owned trusts is being reduced from 100% to 50%.

Custom Duties

It will be applied to parcels of any value.

National Living Wage and National Minimum Wage Increases

To take place from April 2026:

Apprenticeships

Funding for training for under-25-year-old apprenticeships will be completely free for small- to medium-sized businesses.

Student Loans

The repayment and interest rate thresholds will be frozen for three years from 2028.

Pension Tax Relief

A £2,000 cap on the amount workers can put into their pensions under "salary sacrifice" schemes without paying National Insurance from 2029. Contributions above this amount will be taxed at the normal level.

Abolish voluntary pension contributions to those living abroad and increase the minimum time working in the UK to ten years.

ISA Reform

Whilst the maximum investment in ISAs will remain at £20,000, it will be restricted to £8,000 in cash ISAs and £12,000 in investment ISAs. This will apply to all savers under 65 from April 2027.

Inheritance Tax

All payments from the Infected Blood Scheme will be exempt from Inheritance Tax.

Property and Landlords

A "mansion tax" has been introduced on properties worth over £2 million. This will be an annual surcharge ranging from £2,500 to £7,500, depending on the property's value.

The tax rates on dividends, property and savings income will increase by 2%.

Electric Vehicles

Electric vehicle drivers will be charged 3p a mile, and 1.5p for plug-in hybrids from April 2028.

Rail Fares

Regulated rail fares for journeys in England will be frozen next year for the first time since 1996 (there have been periods when prices rose by less than inflation)

Fuel Duty

The fuel duty remains frozen until March 2026. From April 2027, fuel duty will then increase annually in line with the RPI.

VAT

No change.

Sugar Tax

From January 2028, the number of drinks which will fall within the Soft Drinks Industry Levy.

It currently applies to packaged drinks with more than 5g of sugar per 100ml, and milk-based drinks are exempt.

Pre-packaged milkshakes and lattes will be included in the tax from April 2027. The threshold for the sugar tax on soft drinks will be lowered from 5g sugar to 4.5g per 100ml.

Tobacco and Alcohol

Duties will rise for tobacco, vaping and alcohol in line with inflation.

Gambling Taxes

Remote gaming Duty will increase from 21% to 40%, and duty on online gambling will increase from 15% to 25%.

The tax on bingo will be abolished.

Welfare Benefits

The two-child benefit cap will be removed from April 2026, affecting 560,000 families.

Next Steps

The details are published in full on the gov.uk website.

If you have any concerns about your commitments, your business or your financial security, please do give us a call.