The degree of speculation about this year’s Budget announcements was further compounded when the Office of Budgetary Responsibility uploaded their report on Budget changes prior to Rachel Reeves announcements to Parliament.
However, there are to be no changes to the main rates of Income Tax, NIC and VAT that affect wage earners across the UK, but the Budget Report highlights numerous changes to plug the gap in government finances. We have set out below the most impactful of these changes as they affect business owners and UK taxpayers.
Download our PDF or read the full summary below:
Individuals – what changes and what to watch
Personal tax thresholds remain frozen
- The thresholds for income tax and employer National Insurance contributions will be frozen until at least April 2031 (with earlier freezes extended further by the new Budget).
- This “fiscal creep” means that as wages (or inflation) rise, more people will effectively pay higher rates of tax or move into higher tax bands even though nominal rates remain unchanged.
Higher tax on investment, property and savings income
- Tax rates on dividends, property income and savings income are being increased by two percentage points.
- Dividend rate changes take effect from April 2026.
- Property and savings income changes follow from April 2027.
- Existing allowances (for example on dividends and savings) will continue to protect people with low to moderate levels of such income.
ISA reforms will see some limits reduced
- From 6 April 2027, the annual cash limit for ISA savings will be reduced to £12,000.
- The overall ISA subscription limit remains at £20,000.
- Savers aged 65 and over can still save up to £20,000 per year in a cash ISA.
Two-child limit for Universal Credit (UC) to be scrapped
- The two-child limit introduced in 2017 will be removed from April next year.
- The government has stated that removing the cap will lift 450,000 children out of poverty.
Pension contributions via salary sacrifice will be limited
- From 2029, only the first £2,000 of pension contributions via salary sacrifice will be exempt from National Insurance.
- Contributions above that threshold will be subject to NICs.
- This is likely to affect higher earners and those making larger pension contributions.
A new council-tax surcharge for high-value properties
- From April 2028, homes valued at over £2 million will attract a “High Value Council Tax Surcharge”.
- The surcharge will be banded:
- £2 million–£2.5 million: £2,500
- Higher-value properties: up to £7,500 for homes over £5 million
- While collected locally, revenue will go to central government.
New taxes on electric vehicles, online gambling and imports
- A per-mile Electric Vehicle Excise Duty (eVED) will be introduced from April 2028:
- Fully electric vehicles: 3p per mile
- Plug-in hybrids: 1.5p per mile
- Removal of customs-duty relief on low-value imports (formerly for goods ≤ £135) will take effect by March 2029.
- Tightened VAT rules for ride-sharing taxi apps.
- Remote Gaming Duty will increase from 21 per cent to 40 per cent from 1 April 2026.
- Bingo Duty will be abolished from the same date.
Other changes with possible future effects
- Amendments relating to Capital Gains Tax for non-residents.
- Updates to share exchange/reorganisation rules.
- Changes to inheritance-related trust charges for former non-domiciled individuals.
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Businesses – what changes and what to watch
Business rates relief and targeted support
- Lower business rates for over 750,000 retail, hospitality and leisure properties will be made permanent from April 2026, worth nearly £900 million per year.
- A £4.3 billion support package will help businesses with rate increases following revaluations from April 2026.
- Film studios will continue to benefit from 40 per cent business rates relief until 2034.
Corporation tax, capital allowances and investment incentives adjusted
- Corporation Tax remains capped at 25 per cent for the duration of this Parliament.
- Writing-down allowances will reduce from 18 per cent to 14 per cent from April 2026.
- A new 40 per cent First Year Allowance will apply from 1 January 2026 for most main-rate expenditure, including leased assets and items bought by unincorporated businesses.
Withdrawal of certain reliefs and tightening of anti-avoidance rules
- Relief for gains on disposals to Employee Ownership Trusts will decrease from 100 per cent to 50 per cent.
- New anti-avoidance rules will address certain non-derecognition liabilities and other technical issues.
Changes to imports, compliance and VAT arrangements
- Removal of low-value consignment relief is expected to help UK retailers compete with foreign sellers.
- HMRC will implement more robust compliance measures to reduce the tax gap.
Minimum wage changes
- National Living Wage (NLW): rising from £12.21 to £12.71 from 1 April 2026.
- 18–20 year olds: rising from £10.00 to £10.85 (8.5 per cent increase).
- 16–17 year olds and Apprentices: rising from £7.55 to £8.00 (6 per cent increase).
- These increases could raise earnings by up to £1,500 per year for younger workers.
What this means in practice for different taxpayers
For a middle-income employee:
- Frozen thresholds may gradually push more earnings into higher tax bands.
- After-tax returns from dividends and rental income may reduce.
- Pension contributions over £2,000 via salary sacrifice become less efficient.
For higher earners, property owners and investors:
- Higher council tax on high-value homes.
- Increased taxes on investment, property and savings income.
- Reduced pension-saving advantages.
- Reduced appeal of Employee Ownership Trusts as an exit strategy.
For small businesses, investors and growth companies:
- Corporation Tax stability gives certainty.
- Reduced investment allowances raise the effective cost of some capital purchases.
- Business-rate relief helps high-street and hospitality businesses.
- Removal of import-duty relief may help UK retailers.
Broader context and likely economic impact
- Measures are expected to raise £26 billion per year by 2029–30.
- Tax take projected to reach 38 per cent of GDP by 2030–31.
- Some reliefs aimed at easing cost-of-living pressures:
- Energy bill cuts
- Frozen rail fares
- Support for lower-income households
What to keep an eye on
- Implementation timing: many changes are phased over years.
- Behavioural responses: shifts between salary, dividends and pension contributions.
- Business planning impacts: changes to allowances may affect investment timing.
- Compliance focus: expect tighter scrutiny on imports, VAT and offshore structures.
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Useful Official Sources
For readers wanting to verify details or explore official documentation, here are trusted sources:
- HM Treasury – Budget Publications
https://www.gov.uk/government/publications - Office for Budget Responsibility (OBR) – Official Reports
https://obr.uk/publications/ - BBC News – Budget Coverage
https://www.bbc.co.uk/news/topics/cwlw3xz0n1vt/budget
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