The Budget delivered on 26 November 2025 introduces a wide range of tax, employment and regulatory measures that will affect individuals, landlords, employers and business owners. Much of the Budget continues the recent pattern of threshold freezes, long lead-in consultations and targeted reforms rather than dramatic changes in rates. However, this does not reduce the importance of the measures. Small technical adjustments, combined with fiscal drag, will have a meaningful effect on many taxpayers over the coming years.
This report sets out the main announcements in a clear and accessible way, including the increased tax rates for savings, dividends and property income, new limits on salary sacrifice pensions, the forthcoming increase in minimum wage rates, capital allowance reforms, and the introduction of a high value council tax surcharge.
Economic context
The wider economic picture helps explain the direction of the Budget. The Office for Budget Responsibility forecasts modest growth during 2026 and 2027, with no rapid return to pre-pandemic trend levels. Public finances remain under pressure due to long running demands in health, education, social care and infrastructure. In that environment the Government has chosen to maintain tight control over tax thresholds, expand enforcement measures and progress targeted reforms that either raise revenue gradually or encourage investment in priority areas.
Most allowance freezes now extend to 2031, meaning that rising earnings will continue to push more taxpayers into higher bands. This effect is particularly strong for individuals with investment income, landlords with rising rents, and businesses whose profits exceed long standing corporation tax limits.
Personal tax changes
Income tax thresholds
Personal allowances and income tax thresholds remain frozen until 2031. The personal allowance stays at £12,570, the higher rate threshold stays at £50,270, and the additional rate threshold remains £125,140. With wages expected to rise during that period, the effect of fiscal drag will be significant. Many will pay higher tax in future years even if their income increases only modestly.
Savings and dividend income
In addition to the reduced allowances already in force, the Government has confirmed that all dividend tax rates and savings income tax rates will rise by two percentage points from 6 April 2026.
From that date dividend tax rates will be:
• Basic rate 10.75 percent
• Higher rate 35.75 percent
• Additional rate 41.35 percent
Tax on interest that falls outside the personal savings allowance will also rise by two percentage points across all bands.
The dividend allowance remains £500 for 2026 to 2027 and the personal savings allowance remains unchanged. Tax payers with portfolios that rely on dividend distributions or taxable interest should review overall income levels, especially since frozen thresholds will push more individuals into higher bands. ISA use becomes increasingly important in this environment.
Property taxation
The Government has confirmed a two percentage point increase in the tax rate applied to property income. This applies to landlords and individuals receiving rental income and begins on 6 April 2026.
From that date:
• Basic rate property income becomes 22 percent
• Higher rate property income becomes 42 percent
• Additional rate property income becomes 47 percent
Mortgage interest relief for unincorporated landlords remains limited to the basic rate. There is no indication of any reversal of this approach.
Making Tax Digital for Income Tax begins in April 2026 for most landlords and self employed individuals. Landlords will therefore need to maintain quarterly digital records regardless of the size of their portfolio.
A consultation has also been opened on possible changes to council tax for high value homes, separate from the new surcharge set out later in this report. Property owners with homes at the upper end of local valuation bands should monitor this closely.
Salary sacrifice pensions reforms
This Budget introduces a new limit on salary sacrifice pension contributions. From 6 April 2026 the first £2,000 of employee pension contributions made via salary sacrifice arrangements will continue to receive the normal tax and National Insurance treatment. However, any sacrifice above that level will be treated as if it were normal taxable pay.
This effectively reduces the tax advantage of sacrificing salary into pensions, although employer contributions paid directly into schemes remain unaffected.
Current sacrifice arrangements can continue without change until the start of the 2026 to 2027 tax year. Employers with flexible benefit systems should review scheme documentation, communicate changes to employees and consider whether alternative contribution structures are appropriate.
Employment and payroll measures
National Living Wage and Minimum Wage increases from April 2026
The Budget confirms the planned minimum wage rates from 1 April 2026. These are higher than the current 2025 to 2026 figures and reflect the most recent Low Pay Commission recommendations.
From 1 April 2026 the proposed rates are:
• National Living Wage for workers aged 21 and over: £12.71 per hour
• 18 to 20 year old rate: £10.85 per hour
• 16 to 17 year old rate: £8.00 per hour
• Apprentice rate: £8.00 per hour
These increases will particularly affect sectors with large numbers of hourly paid staff such as hospitality, retail, warehousing, logistics and care services. Employers should calculate the combined cost of higher wages, higher employer pension contributions and any secondary impact on pay structures.
Enforcement of minimum wage compliance continues under the Promote, Prevent and Respond strategy. Employers must ensure accurate time records, correct treatment of deductions and careful monitoring of when workers become eligible for higher age related rates.
Business taxation and support
Corporation tax
The main rate of corporation tax remains 25 percent and the small profits rate remains 19 percent. The associated company rules continue to determine how thresholds apply to businesses under common control.
With thresholds unchanged, many companies with modest profit growth may move into the main rate band over time without any change in commercial structure. Accurate forecasting remains important.
Capital allowances and full expensing
Full expensing continues for companies investing in qualifying plant and machinery. Companies can claim a 100 percent first year allowance on main pool assets and a 50 percent allowance for special rate assets.
For unincorporated traders a new 40 percent first year allowance takes effect from 6 April 2026. This applies to expenditure on qualifying main pool plant and machinery. The remaining 60 percent enters the main pool and is relieved through writing down allowances in future accounting periods.
The Annual Investment Allowance remains available in full up to £1 million each year and continues to provide 100 percent relief for qualifying expenditure.
Sole traders and partnerships planning investment should consider whether expenditure is best timed before or after April 2026, particularly where spending may exceed available Annual Investment Allowance thresholds.
Business rates
A consultation has been launched on business rate multipliers for the retail, hospitality and leisure sectors. The Government is reviewing how to support high street vibrancy while maintaining a sustainable revenue base for local authorities. Any changes are expected to take effect after 2027. Businesses in these sectors should consider participating in the consultation process.
Customs and import reforms
The Budget includes a call for evidence on changes to the customs treatment of low value imports. This review may lead to adjustments to VAT and duty thresholds for imported goods and could affect supply chains relying on overseas manufacturers. Businesses that regularly import items valued below current limits should monitor this closely.
VAT updates
Several VAT consultations accompany the Budget. These include reviews of:
• VAT treatment of goods donated to charity for resale
• VAT rules for private hire vehicles
• Simplification options for small businesses
The consultations indicate a general direction towards simplification combined with tightening of areas where competitive distortions currently exist. Final proposals are expected in a future Finance Bill.
The VAT registration threshold remains £90,000. With turnover rising in many small businesses, owners should ensure they forecast sales well in advance to avoid late registration penalties.
Environmental and transport measures
Electric vehicle duties
The Government continues its transition away from fuel duty reliance. A further consultation is underway to develop a standardised duty structure for electric vehicles. Although the final regime is not yet fixed, owners should expect duties to begin rising gradually towards the end of the decade.
Rail and energy
The Budget confirms a continuation of policies designed to ease living costs, including a further freeze on regulated rail fares. The Government also reiterates its intention to support vulnerable households through the current energy transition, although precise figures vary by region.
Corporate transparency and enforcement
Companies House reforms
The Budget signals further progress on corporate transparency reforms. New identity verification requirements, enhanced penalties for inaccurate filings and stronger action against false directorships reflect the Government’s ongoing implementation of the Economic Crime and Corporate Transparency Act.
Directors should ensure their Companies House records remain accurate and that identity documents are up to date. Corporate service providers used for registered office addresses or company formation must comply with strengthened verification rules.
HMRC compliance
HMRC is expected to increase its focus on the areas that generate reliable revenue returns. These include property income reporting, VAT registration compliance, loss relief claims within corporation tax and payroll reporting issues. Businesses should expect more digital prompts and increased data matching.
High value council tax surcharge (the mansion tax)
The Budget introduces a new annual council tax surcharge for properties valued at £2 million or more following the 2026 revaluation. This charge will apply from the 2028 to 2029 financial year.
The surcharge bands are:
• £2 million to £2.5 million: £2,500
• £2.5 million to £3.5 million: £3,500
• £3.5 million to £5 million: £5,000
• Over £5 million: £7,500
The charge applies in addition to normal council tax. The Valuation Office Agency will undertake the revaluation exercise and determine which properties fall within scope. Homes in social housing are excluded.
For homeowners, this surcharge represents a recurring annual levy based purely on property value. Individuals holding high value homes should model the long-term cost, the potential impact on property investment decisions and whether ownership structures remain appropriate.
Planning points
Individuals
- Review income projections for 2026 to 2027, especially where savings or dividends form a large share of total income.
• Make use of ISA allowances to shield future investment returns from higher tax rates.
• Landlords should ensure digital record keeping systems are in place well before April 2026.
• Review pension contributions, particularly where salary sacrifice is used, due to the new £2,000 limit.
Employers
- Update payroll systems to incorporate the April 2026 minimum wage increases.
• Ensure working time records are accurate and deductions are reviewed for minimum wage compliance.
• Consider the effect of threshold freezes on employee take-home pay and budget forecasts.
Businesses
- Review corporation tax forecasts to ensure associated company rules are applied correctly.
• Evaluate timing of capital expenditure ahead of the introduction of the 40 percent allowance for unincorporated traders.
• Monitor import processes if low value goods feature in supply chains.
• Forecast turnover carefully to manage VAT registration exposure.
Closing summary
This Budget continues the general direction of the past two years. Thresholds remain frozen, compliance requirements become more rigorous, and a series of targeted tax increases will take effect over the next two years. For many the impact will build gradually rather than overnight. However, the cumulative effect of increased tax rates on dividends, savings and property income, combined with new limits on salary sacrifice and significantly higher minimum wage rates, means that planning is more important than ever.
If you need more information on any of the topics raised in this summary, or on any other news items you have picked up regarding the recent Budget announcements, please feel free to book in a meeting, drop us an email or give un a call on 01933 229944.