On 26 November 2025, Chancellor Rachel Reeves presented her second Budget to Parliament. After the tax-raising budget of 2024, it had been hoped by the government that widely applicable tax increases would not be required again in 2025. However, with economic pressures continuing to apply, tax increases have been announced and these will affect the vast majority of households.
If you are a business owner…
If you have employees, increases to both the national minimum wage and national living wage will have a cost impact. The minimum hourly rates that employers must pay their employees go up from 1 April 2026. Employers must pay their employees at least these minimum rates to avoid penalties, back payments and other regulatory action.
Both employer and employee NIC will be payable on salary sacrifice pension contributions above £2,000 per year from April 2029. These measures could have further implications on staffing and recruitment decisions for your business.
If you are a company shareholder…
For companies, corporation tax rates and thresholds remain unchanged. The basic and higher rates of dividend tax will rise by 2% to 10.75% and 35.75% respectively. Following these changes, ensuring you are still on the most tax-efficient route to extract profit from the company will be important.
If you are a worker….
While income tax rates on earnings from a job or self-employment were not increased, income tax thresholds will now remain unchanged until 2031. Future pay increases will see a greater proportion of income brought into tax, achieving the same result as a tax rate rise.
Workers on either the national minimum wage or national living wage will see increases in their pay from April 2026. The rates of National Insurance Contributions (NIC) paid by employees and employers remain unchanged.
If you are a property owner…
If you own a rental property personally, profits earned will be subject to higher property income tax rates, with a 2% rise across the basic, higher and additional rate bands from April 2027. If you sell a rental property, the rates of capital gains tax remain unchanged.
The widely anticipated introduction of a ‘mansion tax’ was announced with owners of properties worth more than £2 million subject to a minimum additional annual council tax surcharge of £2,500 from April 2028.
If you wish to have access to our full Budget for more details, then please contact us.
