The UK Autumn Budget 2025:
What Rachel Reeves Announced

27th November 2025

The Autumn Budget 2025 tax changes were delivered against a challenging UK economic backdrop. Growth is weak, inflation is still above target, and public finances are under strain. The Budget had to balance three competing objectives: restoring fiscal credibility, tackling the cost of living, and supporting long-term growth.

While GDP growth has been moderate, the Office for Budget Responsibility (OBR) revised its medium term productivity forecast downwards. This weaker outlook means lower projected tax receipts in future years, which increased pressure on the Chancellor to raise taxes, cut spending, or both.

Inflation remains above the Bank of England’s 2% target, running at around 3.6% in October 2025. Combined with high interest rates and a continued freeze on income tax thresholds, this has squeezed household disposable incomes and kept the cost of living under pressure.

Government borrowing is currently higher than the OBR’s previous forecast. At the same time, the Chancellor has committed to self imposed fiscal rules that require debt and borrowing to be placed on a sustainable path. In practice, this left a significant black hole in government funding and made Autumn Budget 2025 tax changes unavoidable.

In summary, Rachel Reeves prioritised:

• Raising revenue through targeted tax measures
• Addressing the cost of living crisis
• Trying to support economic growth within tight fiscal constraints

A Chaotic Lead Up To The Autumn Budget 2025

The run up to the Autumn Budget 2025 was widely described as chaotic. Just minutes before the Chancellor was due to speak, the OBR accidentally published its full Economic and Fiscal Outlook online. This report contained all of the key measures to be announced in the Budget, including tax rises and welfare changes.

As a result, MPs, markets and commentators were already analysing the details before Rachel Reeves began her statement in the House of Commons. Reeves described the leak as “deeply disappointing” and “a serious error”. The OBR blamed a “technical error” and launched an investigation.

There was also confusion over Labour’s income tax policy. For several weeks there were strong signals that the Chancellor might break Labour’s manifesto pledge and raise income tax rates to fill the fiscal gap. Reeves even gave a speech earlier in November preparing the public for a possible increase in income tax, which would have broken Labour’s promise not to raise taxes for working people.

However, after updated OBR forecasts showed a smaller black hole in funding of around £20 billion and stronger than expected tax receipts, Reeves changed course. Instead of raising income tax rates, she extended the freeze on income tax thresholds until 2030/31.

This reversal was leaked to the press before it was formally confirmed, which added to the perception of disorder. Treasury insiders admitted that the government had “marched everyone up the hill only to march them back down again”, prompting accusations of a “complete shambles”.

Politically, this Autumn Budget 2025 was designed to show that the economy is safe in Labour’s hands. In practice, the income tax U turn and the OBR leak left Labour open to criticism. The Conservative leader described it as “the most chaotic lead up to a Budget in living memory” and some Labour MPs acknowledged that the handling was embarrassing.

Stealth Tax Strategy In The Autumn Budget 2025

Although the government avoided headline rate increases for Income Tax, National Insurance and VAT, the Autumn Budget 2025 tax changes rely heavily on so-called “stealth taxes”. These include prolonged freezes to thresholds and targeted increases on unearned income and wealth.

Taken together, the package is expected to raise an additional £26 billion in tax each year by the end of the Parliament.

This summary sets out the main Autumn Budget 2025 tax changes in:

• Personal taxation
• Business and corporate taxation
• Transport, energy and indirect taxes
• Tax administration and compliance

Personal Taxation Changes In Autumn Budget 2025

The core of the revenue raising plan focuses on increasing the tax burden on a large share of the working population and on individuals with investment income. The Budget also introduced reforms aimed at wealth, savings and pensions.

Despite widespread speculation, Rachel Reeves did not introduce an “exit tax” or “settling up” charge for taxpayers leaving the UK. She also ignored calls for a wealth tax, despite the public debate around this idea.

Income Tax And National Insurance Threshold Freezes

The single largest measure in the Autumn Budget 2025 personal tax package is the extension of the freeze on Income Tax and National Insurance thresholds.

• The freeze on the Income Tax Personal Allowance at £12,570 and the Higher Rate Threshold at £50,270 has been extended for a further three years, until April 2031.
• The National Insurance Primary and Secondary Thresholds are also frozen for the same period.

This is widely described as a “stealth tax” because the headline rates of tax remain unchanged. However, as wages increase with inflation, more people are brought into the tax system and more basic rate taxpayers are dragged into the 40% higher rate. This effect is known as fiscal drag.

The OBR forecasts that this measure alone will raise around £13 billion by 2030-31. By that date, the OBR expects there to be 5.2 million new taxpayers and 4.8 million additional higher rate taxpayers as a result of these extended freezes.

Abolition Of Voluntary Class 2 National Insurance Contributions

The Chancellor also confirmed important changes to National Insurance that directly affect expats.

• The Autumn Budget 2025 confirmed the full abolition of Class 2 National Insurance Contributions from April 2026.
• UK expats working overseas who currently pay voluntary Class 2 NICs, which are cheaper than Class 3 contributions, will no longer be able to use Class 2 to secure qualifying years for the UK State Pension.
• From April 2026, the only way to fill gaps in the National Insurance record while living abroad will be to pay more expensive voluntary Class 3 NICs. The weekly rate for Class 3 is significantly higher than the rate for Class 2, so the cost of securing a qualifying year will rise.
• At present you need 10 years of National Insurance records to qualify for a UK State Pension and 35 years to receive the highest rate of UK State Pension.

Higher Tax On Dividends, Savings And Property Income

Several Autumn Budget 2025 tax changes fall on investment income, including dividends, savings interest and rental income.

• From April 2026, the tax rates on dividend income rise by two percentage points.
  • The basic rate of dividend tax increases from 8.75% to 10.75%.
  • The higher rate of dividend tax rises from 33.75% to 35.75%.
  • The additional rate of dividend tax remains at 39.35%.
• From April 2027, new higher rates will apply to savings income and property rental income, separate from the main earned income tax bands.
  • New basic rate: 22% (currently 20%).
  • New higher rate: 42% (currently 40%).
  • New additional rate: 47% (currently 45%).
  • Finance cost relief for landlords will be given at the new property basic rate of 22%.
• The annual tax free Cash ISA limit will be cut from £20,000 to £12,000 from April 2027. The overall £20,000 ISA limit remains in place, but a larger share must be directed towards investment based ISA products. For savers aged over 65, the Cash ISA limit will stay at £20,000.
• Income Tax relief for Venture Capital Trust (VCT) investments will fall from 30% to 20% from April 2026. Reliefs for the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) remain unchanged.

Pension Changes In The Autumn Budget 2025

A significant, although delayed, revenue raising measure concerns National Insurance relief on salary sacrifice pension contributions.

• From April 2029, a £2,000 annual cap will apply to pension contributions made via salary sacrifice that are exempt from employer and employee NICs.
• Contributions above this £2,000 cap will be subject to NICs at the normal rates, currently 8% for employees and 15% for employers. This measure is forecast to raise £4.7 billion by 2029-30 and is designed to curb a benefit that has mainly favoured higher earners.
• Rachel Reeves did not change the 25% tax free lump sum or the current rates of income tax relief on pension contributions.
• The State Pension will increase in line with the Triple Lock commitment.
• The previously announced measure to bring pension pots into the scope of Inheritance Tax from April 2027 remains on track.

Capital Gains Tax (CGT) Measures

One of the more unexpected Autumn Budget 2025 tax changes is that the main CGT rates were not increased.

However, previously announced restrictions still go ahead and some targeted reliefs are reduced.

• The 100% CGT relief on the sale of a business to an Employee Ownership Trust will fall to 50% for disposals from April 2026.
• As already announced, the CGT rate on gains that qualify for Business Asset Disposal Relief (BADR), formerly Entrepreneurs’ Relief, will rise from 14% to 18% from April 2026.

Inheritance Tax (IHT) Freezes And Tweaks

As expected, the IHT Nil Rate Band of £325,000 and the Residence Nil Rate Band of £175,000 are frozen at their current levels for a further year, until the end of the 2030-2031 tax year. This prolonged freeze increases the number of estates drawn into IHT over time.

Other IHT measures include:

• The previously announced cap on Agricultural Property Relief (APR) and Business Property Relief (BPR) is proceeding. From April 2026, 100% relief will be capped at £1 million. A key concession allows this 100% relief allowance to be transferred between spouses, effectively enabling a farming family to pass up to £2 million tax free.
• All payments under the Infected Blood Scheme will be explicitly exempt from Inheritance Tax.
• The 100% IHT exemption will be restricted to gifts made directly to UK registered charities and Community Amateur Sports Clubs (CASCs). Gifts to certain trusts set up for charitable purposes that are not themselves registered as charities will generally no longer qualify for the exemption.

New Mansion Tax On High Value Homes

As widely expected, the Autumn Budget 2025 introduces a form of Mansion Tax on high value residential properties in England, starting from April 2028.

• Properties valued between £2 million and £5 million will face an annual surcharge of £2,500.
• Properties valued at £5 million and above will face an annual surcharge of £7,500.

Business, Transport And Indirect Tax Changes

On the business side, the Budget keeps the main Corporation Tax rate unchanged while adjusting capital allowances to steer investment. Indirect tax changes fall heavily on motorists and the online gambling sector.

Corporate Tax And Capital Allowances

The main Corporation Tax rate remains at 25%. The focus is on capital allowances that influence when and how businesses invest.

• The 100% Full Expensing regime and the £1 million Annual Investment Allowance (AIA) remain in place, continuing to support investment in plant and machinery.
• The main rate of Writing Down Allowance (WDA) for main rate assets will be reduced from 18% to 14% from April 2026.
• To offset this, a new 40% First Year Allowance (FYA) will be introduced from January 2026 for main rate qualifying assets. This will specifically include assets for leasing, which do not qualify for Full Expensing.
• The merged Research and Development Expenditure Credit (RDEC) regime continues, with administrative technical amendments to clarify the treatment of group company payments.
• The investment and asset limits for the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) will be doubled.

Energy, Transport And Environmental Taxes

Several Autumn Budget 2025 tax changes affect energy, fuel and vehicle use.

• From April 2028, a new per mile levy will be introduced for electric vehicles, expected to raise around £1.4 billion in its first year.
  • Fully electric vehicles will be charged 3 pence per mile.
  • Plug in hybrid electric vehicles will be charged 1.5 pence per mile.
• The current freeze on Fuel Duty is extended until September 2026.
• Rachel Reeves announced an average reduction of £150 in annual energy bills by scrapping the Energy Company Obligation (ECO) scheme and cutting other levies.

Indirect Taxes And Duties

The Budget also raises significant revenue from changes to gambling duties, sugar levies and VAT treatment for ride hailing services.

• Remote Gaming Duty on online casinos will rise from 21% to 40% from April 2026.
• Online General Betting Duty on online sports betting will increase from 15% to 25%, while a carve out is retained for horse racing.
• Bingo Duty is abolished entirely.
• The Soft Drinks Industry Levy, often called the Sugar Tax, will be extended to dairy based drinks such as milkshakes and canned lattes. The sugar threshold will be tightened from 5g per 100ml to 4.5g per 100ml.
• Ride hailing apps such as Uber and Bolt will be required to pay the full 20% rate of VAT on the total fare, rather than just on their commission or profit share. This is predicted to raise £700 million per year.

Tax Administration And Compliance Measures

The Autumn Budget 2025 also includes measures aimed at modernising tax administration and improving compliance.

• Making Tax Digital for Income Tax Self Assessment remains scheduled to begin in April 2026, with UK non-residents exempted until 6 April 2027.
• The government will increase its focus on enforcement, including greater use of upfront payment demands and more frequent use of personal liability for company directors. These measures are expected to raise an extra £1.3 billion by tackling fraud and error.
• The Treasury is consulting on new non statutory routes for corporate entities to seek advance certainty on the tax treatment of major investment projects, to support large capital commitments.

Conclusion: A Tax Raising Autumn Budget 2025

Overall, the Autumn Budget 2025 is clearly a tax raising Budget. The extended freezes on Income Tax and National Insurance thresholds are the most significant Autumn Budget 2025 tax changes for working households. In parallel, higher taxes on dividends, savings, property income and high value pensions place a growing burden on investors and wealthier individuals.

The new Mansion Tax and the per mile charge for electric vehicles were widely anticipated, although unlikely to be popular. The abolition of the two child benefit cap will be welcomed by many families, yet the freezing of allowances and thresholds allows inflation to do much of the work in raising tax receipts.

By 2030/31, the overall UK tax burden is forecast to reach record levels. For individuals, families and business owners, careful planning around these Autumn Budget 2025 tax changes will be essential.

This is wealth. Built with Wisdom.

If you’d like to discuss UK tax, wealth management, or succession planning, our advisers are here to help

Please note this is a general guide and is not advice that can be relied on. It is important that you seek specific advice for your own circumstances. 

This material is intended for both Professional and Retail Clients, as defined by the Dubai Financial Services Authority. Metis Financial Planning Limited is regulated by the Dubai Financial Services Authority.