The UK Autumn Budget 2025: What It Means for You and Your Business

The UK Autumn Budget 2025: What It Means for You and Your Business

A practical summary from IN Accountancy 

The Autumn Budget 2025 has now been announced. While it didn’t bring the sweeping tax reforms some had feared, it does introduce several important changes that will affect business owners, entrepreneurs and investors alike. 

In our post-Budget discussion, IN Accountancy’s Tax Director Paul Brown and Managing Director Sarah Harkness broke down what the announcements mean in real terms. Below, we summarise the key takeaways — and the practical steps you may want to consider. 

 

What didn’t change: the biggest reliefs 

For many of our clients, the most significant news was what the Chancellor left untouched: 

• No major reform to Capital Gains Tax (CGT) but some detail changes 

• No major changes to Inheritance Tax (IHT) but again some detail changes 

• The 25% tax-free pension lump sum remains intact 

• Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) survives as is 

All areas that had been flagged for potential change — but, for now at least, remain stable. However, that doesn’t mean the overall tax landscape isn’t becoming more demanding. 

 

Fiscal drag: the impact of frozen thresholds

The Budget confirmed the continued freeze on key tax thresholds: 

• Income tax thresholds remain frozen until 2030/31 

• IHT nil-rate bands unchanged 

• Student loan repayment thresholds also frozen 

On paper, tax rates haven’t increased. In practice, rising incomes and investment returns mean more people are being pulled into higher tax bands — a process known as either a stealth tax because tax bills rise without headline rate hikes or fiscal drag – income moves, thresholds don’t 

This means more individuals are moving into the 40% or 45% income tax brackets, even if their real terms income hasn’t changed significantly. 

 

Tax rises on dividends, rental income and savings 

Although personal income tax rates remain untouched, the government is targeting “passive” income instead — namely: 

• Dividends 

• Rental income 

• Savings income 

What’s changing: 

• From April 2026: 

• Dividends will face an additional 2% tax across the basic and higher rate bands, but there is no change to the top, additional rate. 

• From April 2027: 

• The same 2% surcharge will apply to rental and savings income but this time across all income levels. 

There had been speculation that the Government would apply National Insurance to investment income – they have not done this but these changes have much the same effect, albeit at a lower rate for basic rate taxpayers then the equivalent NIC rate on earned and self employed income. 

If you typically draw income via dividends or rely on investment returns, this may significantly affect your optimal remuneration and investment strategy. 

 

Reconsidering salary vs dividend strategy

With: 

• Frozen thresholds 

• Dividend tax hikes from 2026 

• Ongoing National Insurance changes 

…it’s no longer safe to assume that a low-salary/high-dividend model is always the most tax-efficient. 

Now is the time to: 

• Reassess the ideal salary/dividend mix 

• Project forward, not just react to current rules 

• Factor in pensions, cashflow and personal goals 

Tax strategy was never a “set and forget” exercise, but now more than ever. it needs regular review. 

 

Salary sacrifice pension changes (from 2029)

One of the longer-term changes announced relates to salary sacrifice pension arrangements. 

Currently: 

• Employees can give up salary in exchange for employer pension contributions 

• Both employee and employer save on National Insurance Contributions 

• Employers often boost pensions further using their employer NIC savings 

From 2029: 

• A £2,000 cap will apply on salary sacrificed that qualifies for full tax/NIC relief 

• Contributions above this limit will: 

• Not receive the same advantages 

• Be subject to employer’s NIC 

In practice: 

• Reduced appeal for high earners 

• Less incentive for employers to top up 

• More complexity in remuneration and pension planning, especially for directors 

 

Employee Ownership Trusts (EOTs): CGT relief halved

A significant and unexpected change affects business owners considering a sale to an EOT. 

Currently: 

• Full CGT relief applies when selling to an EOT — 100% tax-free (subject to a wide range of conditions) 

From April 2026: 

• CGT relief will be limited to 50% of the gain 

This dramatically alters the tax implications of using an EOT: 

• CGT at normal rates will be payable on the taxable element of the gain 

• Business Asset Disposal Relief will not apply to the taxable element of the gain 

• Owners part-way through a sale may face a higher tax bill than expected 

While employee ownership continues to be an attractive option for business owners looking tp preserve the legacy they have created and reward their loyal employees,  the tax advantages that previously existed have been significantly eroded which may well cause those who were unsure about selling to an EOT to consider  alternative exit strategies which may realise a higher post tax value than a sale to an EOT. 

 

Incentives: EMI, EIS and VCT expansion on the horizon 

The government signalled plans to expand access to: 

• EMI (Enterprise Management Incentives) 

• EIS (Enterprise Investment Scheme) 

• VCTs (Venture Capital Trusts) 

While detail is still to come, headline intentions include: 

• Extending EMI limits to allow larger businesses to participate 

• Extending EIS and VCT reliefs to larger businesses and increasing the amounts that can be raised, while reducing the rate of tax relief on VCTs 

These have always been powerful tools for attracting investment and retaining and motivating key staff through equity participation but now they are open to a wider range of businesses than before 

 

Inheritance Tax: tweaks, not transformation

There were mixed developments on the IHT front: 

• No relaxation of the changes to Agricultural or Business Property Relief 

• The £1m per-person APR/BPR allowance is now transferable between spouses 

• The option to pay IHT by 10 interest free annual instalments will be extended to all property qualifying for APR and BPR 

This means a couple can potentially shelter £2m of qualifying assets from IHT without additional planning while previously, the £1m allowance was  expected to be “use it or lose it” 

However: 

• The core nil-rate band remains frozen at £325,000 

• Hopes of raising the £1m threshold further did not materialise 

The core message remains unchanged – early planning is key to mitigating IHT exposures, especially with the BPR and APR changes just around the corner. 

 

Property: mansion tax and business rate relief

“Mansion Tax” 

A new annual levy will apply to residential properties valued above £2 million with charges being split into four bands ranging between: 

• An annual charge of £2,500 per year for homes valued at between £2 million and £2.5 million 

• An annual charge of £7,500 per year for properties valued in excess of £5m 

Business rates 

Retail and hospitality businesses will benefit from: 

• Targeted relief on business rates 

• A focus on rebalancing against larger or online businesses 

The government also hinted at equalising taxes between UK high street and overseas online retailers via import charges. 

 

Electric Vehicles (EVs): new per-mile duty

EVs, long seen as tax-efficient company car options, will now face a new road usage duty: 

• Set at 3p per mile for EVs 

• 1.5p per mile for plug-in hybrids 

This  is a measure aimed at equalising the contribution between electric car drivers and those in petrol or diesel cars who pay fuel duty at the pump, but raises questions: 

• How will mileage be measured and enforced? 

• How will leased or non-MOT vehicles be handled? 

We await further detail — but it’s a reminder that today’s tax perks won’t last forever.

ISA changes – The Government announced that from April 2027, while the annual Individual Savings Account annual limit of £20,000 will remain unchanged, those under 65 will only be able to save up to £12,000 in cash each year.  If they wish to save more in a tax advantaged environment he balance will need to be invested in a stocks and shares ISA. 

 

“Sin taxes”: more changes for vapes, gambling and alcohol

Additional increases were announced in areas such as: 

• Vaping products 

• Online gambling and betting 

• Alcohol duties 

Focus areas include: 

• Addressing public health costs 

• Closing tax gaps in high-growth sectors 

Some hints were made about pub support measures, but with little detail for now. 

 

Your next steps: what to do now

With so much changing — and more to come — what actions should you take before the end of the tax year? 

Our recommendations: 

✅ Remuneration review 

• Revisit your salary/dividend/pension strategy 

• Account for the upcoming dividend tax increase 

✅ Budget for staffing changes 

• Plan for National Minimum and Living Wage increases 

• Factor the impact into pricing and profitability forecasts 

✅ Revisit your exit plans 

• With EOT relief changing, it may be time to re-evaluate your succession or sale options 

✅ Review your IHT position 

• Update wills and gifting strategies 

• Make the most of the new transferable allowance 

✅ Start the IHT clock 

• Early planning gives you more options 

 

Final thoughts: survive, adapt, thrive

As Paul and Sarah both emphasised: 

‘The system isn’t getting more generous — but small businesses can still move faster, smarter and more decisively than large ones’

As Sarah put it: 

“It’s not the business, it’s the mindset. The question to ask is: What can I do now, and how can I make it work for me?” 

The Autumn Budget may bring challenges, but it also brings opportunities for those who are prepared to adapt. 

 

Need help navigating these changes? 

The Autumn Budget 2025 will affect how you: 

• Pay yourself 

• Reward and retain staff 

• Invest and structure assets 

• Plan for retirement, exit, or inheritance 

At IN Accountancy, we’ll help you: 

• Understand what the changes mean for you 

• Model the numbers specific to your situation 

• Create a personalised, practical, tax-efficient plan 

👉 If any of these Budget changes could affect you, your business or your family, don’t hesitate to get in touch. 

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There are also hundreds of useful articles on our own website here where you can also download our own UK Budget Summary.