Budget 2025

2025 Budget

Following the Budget announcement today, please see the following key takeaways:

Business implications

  • Capital allowances – writing down allowance main rate is being reduced. This was previously at 18% however we are awaiting confirmation of level & timing of the decrease.
  • Business rates – From April 2026, lower rates to be introduced for over 750,000 retail, hospitality & leisure properties, however higher rates for any properties worth over £500,000.
  • Apprenticeships – Funding released to make training for people under 25 on apprenticeships free for small & medium sized enterprises. It is unclear currently if this takes place immediately or from April 2026.
  • Employee ownership trusts – There was previously 100% capital gains tax relief on sales of businesses to employee ownership trusts (EOTs) however this has been cut to 50% meaning 50% of the gain is chargeable immediately on sale, from today.
  • Tax on dividend income – From April 2026, basic, higher and additional rate tax on dividend income has increased by 2%.
  • Minimum wage increases from April 2026:
    • 16–17-year-olds & apprentices – £8.00 per hour (increase of 45p per hour)
    • 18–20-year-olds – £10.86 per hour (increase of 85p per hour)
    • Over 21-year-olds – £12.71 per hour (increase of 50p per hour)

Personal tax implications

  • Income tax thresholds – The income tax thresholds have been frozen for another 3 years until 2031. Although this doesn’t mean increased tax rates, it will push more earners into higher bands of tax.
  • Pension contributions – From April 2029, here is a new cap on pension contributions made by salary sacrifice set at £2,000 meaning any contributions above this level will have national insurance applied.

Savings & investments

  • From April 2027, the annual cash ISA allowance will reduce from £20,000 to £12,000 for under 65-year-olds. The overall ISA allowance remains at £20,000 however the remaining £8,000 is reserved for stocks & shares ISAs only.

Therefore, look to fully utilise your £20,000 cash allowance for the next 2 tax years if possible.

  • Tax on property, savings & dividend income – Basic and higher rate tax on property, savings & dividend income has increased by an addition 2%, as well as an additional 2% on additional rate tax for dividend & property income. This applies from April 2026 for dividend income and April 2027 for property & savings income.

Property

  • Council tax – From 2028 there will be a high value council tax surcharge introduced. This consists of an annual £2,500 charge for properties worth over £2m, rising to a £7,500 charge for properties worth over £7m. This is in addition to normal council tax fees.

Electric vehicle (EV) changes

  • From April 2028, a mileage-based EV tax will be introduced meaning EV drivers will pay 3p per mile & plug in hybrids will pay 1.5p per mile annually.
  • The government will invest £200 million to extend the roll out of EV charging points across the country, with 100% business rates relief for EV charging points.
  • EV car grants have been extended until 2030 to encourage drivers to buy electric vehicles.

Other

  • From April 2026, the 2 child benefit cap has been abolished meaning this can now be claimed for the total number of children you have.
  • Student loan repayment thresholds frozen until 2029 meaning more people repaying their loans as wages increase.
  • Customs duty will be applied on parcels of any value by March 2029, there is a formal consultation underway in the meantime. Currently there is relief for any low value imports (under £135 in value) which will be abolished.