Budget - November 2025

Property Owners and Savers

Budget 2025 announced that, from 6 April 2027, the government will create new separate income tax rates that apply to property income and will increase the rates for these and for the income tax rates on savings income by two percentage points. 

The new rates will be as follows: 

2027/28

Property income* Savings income
Basic rate (£1-£37,700) 22% 22%
Higher rate (£37,701-£125,140) 42% 42%
Additional rate (Over £125,140) 47% 47%

The new property income tax rates will apply to taxpayers in England and Northern Ireland. The Scottish and Welsh governments will have the power to set property tax rates for those jurisdictions. 

Owners of property worth more than £2 million were also affected by the introduction of a high-value council tax surcharge, otherwise known as the ‘mansion tax’. The surcharge will be in addition to the existing council tax and will range from £2,500 to £7,500 depending on the property’s value. Properties will be valued before the introduction of the tax. 

Increase in Dividend Tax 

If you are a company shareholder, from April 2026, the dividends you receive will be subject to higher rates of tax. The basic and higher rates of dividend tax will rise by 2% to 10.75% and 35.75% respectively. 

For owner-managed companies, these increased rates raise an important question: do dividends remain a tax-efficient way to extract funds from the business? Those considering incorporating their business will also want to understand how these changes may influence their decisions. 

We can provide tailored advice to help you plan effectively, ensuring that you continue to extract income in the most tax-efficient way possible. By reviewing your options in advance, you can make informed decisions that protect your hard-earned income and maximise the benefits of any available reliefs. 

Salary Sacrifice for Pension Contributions 

If your business offers salary sacrifice for pension contributions, an important change is coming in 2029. At present, all pension contributions made through salary sacrifice are exempt from employer national insurance contributions (NIC), regardless of the amount. This provides valuable savings for both employees and employers. 

From 6 April 2029, however, the NIC exemption will be capped at £2,000 per year for employee pension contributions made via salary sacrifice. Any contributions above this threshold will continue to receive income tax relief but will become subject to both employer and employee NICs. 

Although this change is still a few years away, it’s worth considering now how it may affect the overall value of your employee pay and benefits packages. 

IHT reliefs for business owners and farmers 

The government is pressing ahead with plans to reform agricultural property relief (APR) and business property relief (BPR) from 6 April 2026. These are important inheritance tax (IHT) reliefs that currently mean that up to 100% relief is available on the full value of qualifying assets. 

As announced in last year’s Budget, from April 2026, this 100% relief will be capped at a combined £1 million of agricultural and business property, with any excess qualifying only for 50% relief. 

However, Budget 2025 did provide an additional allowance. It added that, from 6 April 2026, any unused APR or BPR allowance will become transferable to a surviving spouse or civil partner. As a result, couples may be able to pass on up to £3 million of qualifying agricultural or business property free of IHT. 

Careful planning is essential, though. Transitional rules mean that gifting assets before 6 April 2026 may not necessarily help the situation. Please speak with us for personalised advice on the best way to organise your estate where business or agricultural assets are involved. 

Capital Allowances 

For 2026/27, the annual investment allowance (AIA) means that qualifying new capital expenditure you make of up to £1 million can be relieved in full against the taxable profits of your business. 

Budget 2025 announced that the rate of writing down allowance applicable to qualifying capital expenditure that is classed as main rate pool will drop from 18% to 14% on 1 April 2026 for companies and 6 April 2026 for unincorporated businesses, such as sole traders and partnerships. 

However, this reduction may be partially offset by a new 40% first year allowance (FYA) that will be available from 1 January 2026. Its usefulness to your business may be limited, though, as it will only really be of benefit where the AIA or other FYAs are unavailable. 

If you are considering buying electric vehicles for your business, Budget 2025 confirmed that FYAs that give 100% relief for qualifying expenditure on electric vehicles and charging points will be extended to April 2027. 

Business Rates 

As announced in the 2024 Budget, two new lower business rates multipliers for eligible retail, hospitality and leisure (RHL) properties with a rateable value (RV) below £500,000 will come into effect from 1 April 2026. 

These new multipliers will replace the 40% RHL relief available in 2025/26 and will be funded by introducing a higher multiplier for properties with an RV above £500,000. 

Legislation and local authority guidance have already set out the eligibility criteria for RHL properties, but Budget 2025 has now confirmed that each of the new multipliers will be 5p lower than the standard multiplier for a property with the same RV.