The Government went into the Autumn Budget with a tough job. The country is dealing with rising debt, ongoing cost-of-living pressures and political uncertainty, so difficult decisions were expected.
From the start, Chancellor Rachel Reeves said the Budget would be built around fairness meaning everyone will need to contribute to reducing national debt while supporting those who need help most.
As a result, taxes are rising in several areas. One of the biggest changes is the decision to freeze personal tax thresholds for another three years.
With inflation still above the Bank of England’s 2% target and interest costs rising, Reeves made it clear that higher earners and wealthier households will shoulder more of the tax burden.
The headline move is the new mansion tax, alongside higher tax rates on income from dividends, property and savings, plus new limits on pension tax relief through salary sacrifice schemes.
Personal tax changes dominated this Budget, but businesses were still affected. Capital allowances are being reduced, and Capital Gains Tax relief for Employee Ownership Trusts is being cut.
For many employers, the most costly change will be the rise in National Living Wage and National Minimum Wage, which increases employment costs across the board.
Reeves finished her speech by promising support for people who are struggling, aiming to grow the economy, reduce inflation and ease living costs.
- Economy and deficit
- Personal tax freeze
- Business tax
- Tax on wealth
- Electric cars and transport
- Spending and investment
- Savings and pensions
- Final thoughts
Economy and deficit
One of Labour’s main promises was to stabilise the economy and bring down national debt over this parliament.
Despite a difficult start and a bigger-than-expected gap in public finances, Rachel Reeves says her plans are working. She acknowledged that tax rises for both individuals and businesses are part of the “necessary choices” needed to fix the economy.
The latest figures from the OBR show that the UK economy is expected to grow by 1.5% in 2025, which is 0.5% higher than previous forecasts.
But the longer-term picture isn’t as strong.
2026 growth is expected at 1.4%, down from the earlier 1.9% forecast.
2027 growth is projected at 1.6%, slightly below expectations.
Growth continues at a slower pace through to 2029.
Even with slower growth, the Government is still expected to reduce the deficit over the next two years, moving into a budget surplus by 2027/28. By 2030/31, that surplus could reach £24.6 billion.
Reeves highlighted that tax increases have now doubled the financial room she has to meet her fiscal rules — from £9.9bn to roughly £22bn.
However, reaching surplus won’t be comfortable. More tax rises and difficult decisions are expected in the years ahead.
Personal tax freeze
One of the most significant decisions in the Autumn Budget is the plan to keep personal tax thresholds frozen until April 2031 meaning the current freeze is being extended by another three years.
Technically, Labour hasn’t raised income tax rates, so it can still say it kept its manifesto promise. But in practical terms, this is still effectively a tax rise.
The freeze covers income tax thresholds and National Insurance thresholds for both employees and the self-employed. Looking further into the details, it also extends the freeze on Inheritance Tax thresholds from April 2030 to April 2031.
The Government expects this move to raise around £8 billion. However, it also means almost one million more people will end up paying income tax, and many existing taxpayers will be pushed into higher bands through fiscal drag.
There was one positive update for those concerned about the upcoming changes to Agricultural and Business Property Relief from April 2026. The Chancellor confirmed that any unused £1 million APR/BPR allowance at the 100% rate can be transferred between spouses or civil partners — even if the first partner passed away before 6 April 2026.
To help ease financial pressure elsewhere, Reeves announced plans to scrap the ECO scheme, which should reduce household energy bills by around £150 a year.
Business tax
Compared to the previous Budget, which introduced big changes for businesses, this one was fairly light on business tax reforms.
The main shift is that from April 2026, the writing down allowance will drop from 18% to 14%. To soften the impact, the Government will introduce a 40% first-year allowance for main-rate assets, encouraging businesses to keep investing.
However, those planning to sell their business through an Employee Ownership Trust may feel the hit. Capital Gains Tax relief for EOTs will fall from 100% to 50%, making this route less tax-efficient.
The biggest impact for many employers won’t be tax, but wages. Both the National Living Wage and National Minimum Wage are rising from 1 April 2026:
National Living Wage: £12.71 per hour (up 4.1%)
National Minimum Wage for 18-20 year olds: £10.85 per hour (up 8.5%)
National Minimum Wage for 16-17 year olds and apprentices: £8.00 per hour (up 6%)
Tax on wealth
Many people expected this Budget to go hard on wealth taxes. Although there were some measures aimed at higher-value income and assets — and plenty of strong messaging from Reeves — the final outcome was lighter than many predicted.
One major change is an increase to tax on dividends, property income and savings.
From April 2026, both the ordinary and upper dividend tax rates will rise by 2 percentage points. The additional rate stays the same.
Then from April 2027, property income will be taxed under a new set of bands:
Property basic rate: 22%
Property higher rate: 42%
Property additional rate: 47%
In the same year, tax on savings will also rise by 2 percentage points across all bands.
Another big announcement is the introduction of the High Value Council Tax Surcharge, widely referred to as a mansion tax. It applies to properties worth over £2 million.
Charges will be:
£2,500 per year for homes valued above £2 million
Rising to £7,500 per year for homes worth more than £5 million
Electric cars and transport
Electric car ownership has grown at an incredible pace over the past few years, helped along by grants, tax breaks and government support. This Autumn Budget, however, marks a turning point. The Chancellor laid out a new roadmap for electric vehicle taxation that introduces running costs for motorists, while still putting money into infrastructure to encourage continued growth.
The biggest shift is the introduction of a new road-use charge for electric cars. From April 2028, drivers of electric and plug-in hybrid vehicles will pay a per-mile fee, which will sit alongside normal Vehicle Excise Duty. At the moment, the expectation is that fully electric vehicles will cost around 3p per mile, with plug-in hybrids charged at roughly half of that. The Government is still finalising the details, and a consultation will run until March 2026 before the system is finalised.
Alongside this new cost, a significant amount of funding is being directed into EV infrastructure. An extra £200 million has been set aside to improve public and workplace charging, as well as provide more support for home and business installations. To make operation more affordable, eligible chargepoints and electric-only forecourts will benefit from a decade of business rates relief, helping keep costs down for providers and, ideally, drivers.
There are changes for buyers as well. The threshold for the Vehicle Excise Duty Expensive Car Supplement will increase to £50,000 for zero-emission vehicles. This will apply to cars registered from April 2025, with the higher limit taking effect in April 2026. The Electric Car Grant has also received a major boost, extended to 2029–30 and topped up with a further £1.3 billion in funding, giving drivers and fleets more certainty when investing in cleaner transport.
Company car rules are being adjusted too, but with a longer lead-in time. Bringing employee car ownership schemes under Benefit-in-Kind tax won’t happen until 2030, and there will be phased arrangements running into 2031. First-year capital allowances for zero-emission vehicles and charging equipment are now available until 2027, and plug-in hybrids will benefit from a temporary easing of Benefit-in-Kind rates until April 2028 to protect drivers from sudden tax jumps when emissions standards tighten.
Drivers who are sticking with petrol or diesel for the time being are not left out either. The Chancellor confirmed that the current 5p reduction in fuel duty will stay in place until September 2026, giving traditional motorists a little longer to breathe before costs rise again.
Spending and investment
Although taxes are rising, the Budget wasn’t purely about tightening the purse strings. The Chancellor also committed an extra £12 billion in spending, aiming to balance fiscal pressure with support for communities, industry and regional growth.
One of the most notable decisions was the plan to remove the two-child limit in the Universal Credit Child Element from April 2026, a key part of Labour’s pledge to reduce child poverty. But the Budget didn’t focus solely on welfare – money is being directed into a wide mix of economic and infrastructure projects across the country.
The Government’s investment strategy concentrates on boosting regional development, improving transport and unlocking stalled construction. Several new funds form the backbone of this approach. Among them is the £30 million Kernow Industrial Growth Fund, which will support Cornwall’s emerging sectors such as critical minerals and renewable energy, alongside a £500 million Mayoral Revolving Growth Fund designed to help local leaders revive development sites through joint public investment.
Another major pot, the Local Growth Fund, will distribute over £900 million during the next four years to Mayoral Authorities, who will have the freedom to direct spending into business growth, infrastructure, employment and training where it’s most needed. The Growth Mission Fund continues alongside this, having already backed projects like Peterborough’s sports quarter and a new STEM education centre in Darlington.
Investment zones and freeports remain central to the UK’s long-term industrial plan. Approval has now been granted for the Flintshire and Wrexham Investment Zone, Anglesey Freeport and the Forth Green Freeport, with further clarity provided on the Northern Ireland Enhanced Investment Zone.
Transport and infrastructure were also given a substantial lift. Local authorities will see record-breaking levels of road maintenance funding, climbing to more than £2 billion annually by 2029–30 – enough for the Government to exceed its promise to repair an extra million potholes every year.
Energy and industry featured too, with the North Sea Future Plan setting out continued support for domestic oil and gas investment, and up to £14.5 million being directed to industrial development in Grangemouth to help stimulate local employment.
Major projects elsewhere include continued backing for the Docklands Light Railway extension to Thamesmead, progress on the Lower Thames Crossing, and redevelopment of brownfield land in Port Talbot, supporting growth linked to the Celtic Freeport.
Savings and pensions
After years of expectation, the Budget finally delivered major changes to ISA rules. From 6 April 2027, the amount you can put into a cash ISA each year will drop to £12,000, although the overall annual ISA limit will still remain at £20,000. To make full use of the allowance, savers will need to place the remaining £8,000 into a Stocks & Shares ISA, rather than holding it all in cash.
There was also a significant shift in pension and tax planning. From April 2029, National Insurance contributions will be applied to pension contributions over £2,000 a year when made through salary sacrifice arrangements. This brings an end to a method widely used by higher earners to reduce Income Tax while building their pension pots more efficiently.
This change will reshape long-term retirement planning for many professionals, forcing those who make large pension contributions to reconsider how they save in the future.
Final thoughts
The Autumn Budget did bring the tax increases many were expecting, but not in every area people predicted. The main focus was firmly on personal taxation rather than business tax, although the changes will still be felt by staff and business owners across the SME sector.
Labour is clearly aiming to reduce the national deficit while still putting money into areas that should help ease living costs. Whether this balance works long-term remains to be seen, but for most people it will mean higher tax costs in one form or another over the coming years.
Anyone whose financial plans may now be affected by the Budget should get professional advice sooner rather than later, to make sure they’re prepared for what’s ahead.
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To read the full Autumn Budget document, please click here.