2025 Budget changes explained
What does the 2025 Budget mean for my business?
The 2025 Budget brings in a mix of tweaks and longer term changes that will affect most people in one way or another. Some start next year, others roll out gradually, and a few won’t land until 2029. To keep things simple, we’ve broken down the main points so you can see what’s changing for your income, savings, property, and business activity without needing to sift through the full announcement. Let this be your quick guide to what’s coming up and when.
Changes from April 2026
Individuals
- Dividends tax rates for individuals will increase by 2%
- Basic rate will increase from 8.75% to 10.75%
- Higher rate will increase from 33.75% to 35.75%
- The additional rate will not increase and will stay at 39.35%
| Dividend Tax Band | New Rate from April 2026 |
|---|---|
| Basic Rate | 10.75% |
| Higher Rate | 35.75% |
| Additional Rate | 39.35% |
Tax relief for non-reimbursed homeworking expenses will be removed
National Minimum wage will increase to:
- £12.71 an hour for workers aged 21 and over
- £10.85 an hour for workers aged 18 – 20
- £8 an hour for workers aged 16-17 and apprenticeships
| Age | Minimum Hourly Wage |
|---|---|
| 21 and over | £12.71 |
| 18 - 20 | £10.85 |
| 16 - 17 and Apprenticeships | £8.00 |
Businesses
A new 40% first year allowance for capital allowances will be introduced from 01/01/26
The main rate of capital allowances writing down allowance will reduce from 18% to 14% for both individuals and Limited Companies
*Capital allowances are the tax relief you receive on capital expenditure (assets)
The 100% first-year allowances for zero-emission cars and electric vehicle charge-points are being extended until 31 March 2027 for corporation tax and 5 April 2027 for income tax purposes.
The penalty for submitting a corporation tax return late will double
Changes from April 2027
Property Income
Income tax rates for property income will increase from 20% to 22% for basic rate, 40% to 42% for higher rate and 45% to 47% for additional rate
Savings Income
Savings basic rate of tax will increase from 20% to 22% for basic rate, 40% to 42% for higher rate and 45% to 47% for additional rate
Benefits in Kind
BIK will need to be reported through the payroll in real time
Cash ISA Allowance
Cash ISAs allowance for those under 65 will reduce from £20,000 to £12,000
Changes from April 2029
Salary Sacrifice
From April 2029, the amount of salary that an employee can sacrifice in return for pension contributions before attracting a National Insurance contributions (NICs) charge will be capped at £2,000 a year. Any salary sacrifice above the cap will be subject to employer and employee NI
Other
HMRCs outbound communications will be digital rather than by post (rolling out when each departments IT systems are ready). Customers can opt out of digital communications
E-invoicing
It is proposed that from April 2029 all VAT invoices will be required to be issued in a specified electronic format.
Self-Assessment taxpayers with Pay as You Earn (PAYE) income
Income Tax Self-Assessment (ITSA) taxpayers with Pay as You Earn (PAYE) income will be required to pay their ITSA tax liabilities in-year through deductions from their PAYE income.
Employers and pension providers will receive a tax code to enable the ITSA liability to be collected from the individual’s pay, provided there are sufficient funds to accommodate the deduction.
