Autumn Budget 2025: Changes and Implications
Following months of speculation, Rachel Reeves has finally delivered her second autumn budget to parliament.
While manifesto pledges on income tax, National Insurance and VAT rates have been kept, other changes affect everything from savings to property tax. Here are the main points of the budget.
Personal taxation
While income tax rates remain unchanged, the freeze on thresholds has been extended for a further three years, to 2031. As wages rise, this will result in more people paying tax or moving into higher tax bands.
In addition, from April 2026, there will be a 2% increase in both the basic and higher income tax rates on earnings from property, savings and dividends. This is being introduced to compensate for the fact that, unlike employee pay, these sources of income are not liable for National Insurance.
The rise in property tax may lead individuals and landlords to consider the tax benefits of owning and renting their properties through a limited company.
Minimum wage increases
Addressing the cost-of-living crisis, the Chancellor announced a 4.1% rise in the minimum wage for over-21s and an 8.5% rise for 18–20-year-olds, from April 2026. Hourly pay will increase from £12.21 to £12.71 for over 21s and from £10 to £10.85 per hour for the over 18s.
The higher increase for younger employees reflects the government's intention to create a single minimum wage rate for all workers, which businesses will need to plan ahead for.
For employers, the increase in both wage bills and National Insurance contributions will impact profit margins, potentially resulting in pricing increases, reduced investment and pressures on staffing levels.
Apprenticeship funding
Changes announced to apprenticeship funding mean that small and medium-sized businesses no longer need to contribute 5% of the training costs for apprentices under 25. However, from January 2026, the government will no longer fund Level 7 (master's degree level) apprenticeships for those aged 22 and over.
Pensions
The budget has introduced a major change for people who pay into their pension pot under salary sacrifice schemes. From 2029, National Insurance will be payable on all contributions above £2,000 a year.
The good news for those in receipt of basic and new state pensions is that payments will rise 4.8% from April, above the current rate of inflation.
Savings
From April 2027, there is a significant change for people under 65 with cash ISAs. While the ISA limit remains at £20,000 a year, the maximum that can be put into a cash ISA will be £12,000 pa. The remaining £8,000 of the tax-free allowance must be put into an investment ISA. There is no change for those aged over 65.
Property council tax surcharge
From April 2028, the so-called ‘Mansion Tax’ will see properties in England worth more than £2m pay a council tax surcharge of between £2,500 and £7,500 a year. This will follow a revaluation of homes in F, G and H council tax bands and is expected to affect only 1% of the country’s homes.
Property inheritance tax
From April 2026, people will be able to transfer the £1 million allowance for Business Property Relief and Agricultural Property Relief to their spouses and civil partners. This means that a surviving spouse or civil partner can claim the unused allowance, enabling the couple to pass on a maximum of £2m in allowable assets without beneficiaries paying inheritance tax.
Transport
One of the key transport changes will see the end of the 5p per litre cut in fuel duty. From September 2026, the additional 5p duty will be reintroduced in stages.
From 2028, electric vehicles will be subject to a mileage tax. This will be 3p a mile for fully electric cars and 1.5p per mile for hybrids. This is in addition to road tax and is approximately half of what petrol and diesel owners pay in fuel duty.
Benefits
While benefits payments will increase overall from April 2026, the change with the biggest impact is the scrapping of the two-child benefit cap. This will allow households on universal or child tax credit to receive payments for their third and subsequent children. Worth around £3,500 per child per year, it is expected to raise 630,000 children out of poverty.
Workers’ rights
While not part of the budget, the government has also announced a U-turn on its manifesto pledge to allow employees the right to claim unfair dismissal from their first day in a job.
To avoid the legislation being delayed in the House of Lords, the qualifying period for new workers will now be reduced from two years to six months, instead of day one. This is expected to come into effect in 2027. The reduced flexibility this gives employers is expected to result in the tightening of how businesses recruit staff and manage their performance.
Two other pledges, the day-one rights to sick pay and paternity leave, will go ahead as planned from April 2026. This will also have financial and staffing implications for employers.
If the changes in the 2025 Autumn Budget affect you and you would like to discuss your options, the Wilkinson Woodward team is more than happy to help.