This year’s Autumn Budget isn’t serving up one big headline dish – it’s more like a tapas spread. A pinch of fiscal drag here, a sprinkle of duty there… all carefully plated to plug the revenue gap without breaking Labour’s promise of no hikes to income tax, NIC, or VAT. That’s the mission Chancellor Rachel Reeves set out with her second Budget.
The headline? Another £26 billion in tax rises by 2029/30, on top of the £40 billion from last year. And yes, the OBR report leaked early. So much for the element of surprise!
Why the Extra Tax Bite?
The UK’s deficit is ballooning, and bond investors are watching like hawks. Last year’s headroom was just £9.9 billion. The third smallest on record. Reeves needs to double that to £20 billion or risk a repeat of the Liz Truss bond market drama of 2022. So, instead of one big tax hike, she’s gone for a smorgasbord of backloaded smaller measures to soothe the markets.
What’s on Your Plate?
Here’s the tasty bit. The personal finance changes that matter most:
- Income Tax: Fiscal drag continues. Tax bands and allowances are frozen until April 2031.
- Investment Income: The basic and higher rates of tax on dividend income will increase by 2% from April 2026. There is no change to the dividend additional rate. From April 2027, the property income basic rate will increase by 2% to 22%, the higher rate will be 42%, and the additional rate will be 47%. The tax rate on savings income will increase by 2% across all bands from April 2027.
- Capital Gains Tax: Rates stay at 18% (basic) and 24% (higher).
- Inheritance Tax: The new £1m allowance for Business & Agricultural Property Relief from April 2026 will be transferable between spouses. The nil rate and residential bands will be frozen until 2031.
- Property: The much-rumoured mansion tax lands in April 2028 via a £2.5k council surcharge for homes over £2m, rising to £7.5k for £5m+.
- Pensions: Salary sacrifice over £2,000 will attract NI from April 2029. Draft plans to bring pensions into IHT from 2027 are still moving forwards.
- ISAs: Cash ISA limit drops to £12,000 for under-65s from April 2026; Stocks & Shares ISA stays at £20,000, and over 65’s can still save the full amount into a cash ISA.
- EIS & VCTs: EIS income tax relief stays at 30%, but VCT income tax relief drops to 20% from April 2026.
- Motoring: The 5p fuel duty cut ends September 2026. Electric drivers face pay-per-mile charges from April 2028 (expected to be 3p per mile; 1.5p for hybrids).
The Big Question
Will this tax tapas go down well? Reeves faces a tough crowd. Labour backbenchers and an electorate set to feel the pinch of the highest tax take ever. Ipsos now ranks her as the most unpopular Chancellor in 50 years. She’ll be hoping this doesn’t turn into another George Osbourne “pasty tax” fiasco. For now, let’s just say: any good buffet deserves a plate of warm sausage rolls!
Full details of the Autumn Budget 2025 can be found by clicking Autumn Budget 2025 | Key Highlights & Updates
