There was a lot of talk in the lead up to the Budget 2025 and equally a huge amount of talk following it (a lot of it political which we won’t get into!). We therefore thought we would do a whistlestop tour of the changes announced.
Corporation tax
- Main rate capped at 25%, with 19% where profits are up to £50,000.
- Annual Investment Allowance (full deduction in year of purchase of qualifying assets) kept at £1m a year.
- Penalties for late submission of corporation tax returns to double from 1 April 2026.
- 100% allowance on the purchase of electric vehicles extended to 31 March 2027.
National Minimum Wage and National Living wage
From 1 April 2026 the rates will be increased to:
| Age Group | Hourly rate |
| 16-17 year olds and apprentices | £8.00 per hour |
| 18-20 year olds | £10.85 per hour |
| 21 and over | £12.71 per hour |
Inheritance tax
- No rate changes or threshold changes.
- As previously announced, from April 2027 unused pension funds and death benefits will be included in the estate.
- The £1m allowance for Agricultural Property Relief and Business Property Relief will increase inline with CPI from 6 April 2031.
Capital Gains Tax
- From 6 April 2026 the rate applicable for Business Asset Disposal Relief will increase form it’s current 14% to 18%.
- Capital gains tax relief on disposals of businesses to Employee Ownership Trusts (EOTs) will be reduced from 26 November 2025 from 100% to 50%.
Income tax
- Thresholds, including personal allowance, will be frozen until 2030/31. This is a personal allowance of £12,570 and higher rate threshold of £50,270.
- From April 2026 dividend tax rates will increase as follows:
| Current rate | New rate from April 2026 | |
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% (no change) |
- From April 2027 the rates applying to property and savings income will increase as follows:
| Current rate | New rate from April 2027 | |
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
National Insurance
From April 2029 the amount someone can salary sacrifice into their pension scheme will be capped at £2,000 a year. Salary sacrifice is the system of giving up this portion of your salary in order for it to be paid into your pension scheme. This saves both Employees and Employers NIC and also means higher rate taxpayers obtain full tax relief immediately rather than claiming back the higher rate element.
Electric cars
- As previously announced the Benefit In Kind rates will increase by 2% per year in 2028/29 and 2029/30.
- From April 2028 electric car drivers will be subject to a pay-per-mile charge of 3p per mile for electric vehicles and 1.5p per mile for hybrid vehicles.
ISA Limits
From 6 April 2027 the annual cash ISA limit will be set at £12,000 with a further £8,000 available for deposits into a stocks and shares ISA. Savers over 65 will continue to be able to save up to £20,000 in a cash ISA each year.
If you would like to discuss any of the Budget 2025 changes and how they affect you and your business, hit the button below and reach out for your free introductory meeting.