The Autumn Budget was delivered by the new Chancellor of the Exchequer, Rachel Reeves, on 30th October. The headline announcement was an increase in the main rate of employer National Insurance contributions from 13.8% to 15% and a reduction in the earnings threshold for employers from £9,100 to £5,000 (both from 7th April 2025).
Other changes included capital gains tax rates for gains on investments and other assets being increased in line with gains on residential property, and the exemption of pension funds from IHT (Inheritance Tax) ending from April 2027.
The OBR (Office for Budget Responsibility) forecasts the UK economy will grow by 1.1% this year, 2% in 2025, and 1.8% in 2026. The rate of inflation is forecast to average 2.5% this year, 2.6% in 2025, and 2.3% in 2026.
Key figures for the new 2025/26 tax year are now as follows:
Pensions
• Standard annual allowance to remain at £60,000.
• MPAA (Money Purchase Annual Allowance, for individuals who have accessed flexible pension income) to remain at £10,000.
• The Lifetime Allowance was not reinstated, but restrictions remain on total tax-free lump sum (£268,275) and lump sum death benefits (£1,073,100).
• Flat rate state pension to increase from £221.20 to £230.25 per week.
• Pension funds to be included in the value of an individual’s estate for IHT purposes from April 2027.
Income Tax
• Personal allowance to remain at £12,570.
• Higher rate tax threshold to remain at £50,270.
• Additional rate tax threshold to remain at £125,140.
• Rates of income tax unchanged (basic rate 20%, higher rate 40% and additional rate 45%).
• Note that an effective income tax rate of 60% applies between £100,000 and £125,140, due to the loss of £1 of personal allowance for every £2 of income.
Capital Gains Tax
• Capital gains tax for gains on investments and other assets has increased from 10% to 18% (basic rate) and from 20% to 24% (higher rate) with immediate effect.
• Capital gains tax for gains on residential property remains at 18% (basic rate) and 24% (higher rate).
• Capital gains tax allowance remains at £3,000.
Other Individual Tax
• Dividend allowance to remain at £500.
• Personal savings allowance to remain at £1,000 (basic rate taxpayers), £500 (higher rate taxpayers) or £0 (additional rate taxpayers).
• Income level at which child benefit starts to be reduced to remain at £60,000.
Corporation Tax
• Corporation Tax to remain at 25% for larger companies (profits above £250,000).
• Corporation Tax for smaller companies (profits below £50,000) to remain at 19%, with tapered rates for profits £50,000 – £250,000.
ISAs
• ISA allowance remains at £20,000.
• JISA allowance remains at £9,000.
• LISA allowance remains at £4,000.
• The “UK ISA”, proposed by the previous Government, is not going ahead.
Please note that different tax rates and allowances apply in Scotland.
This article is for information only and should not be construed as advice or a recommendation. You should always seek independent financial advice prior to taking any action.
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