Autumn Budget 2025: the key takeaways

The Chancellor recently set out the government’s financial plans in this year’s Budget. Our tax consultant solicitor Michael Fluss provides an overview of the key takeaways and how it will impact your finances.

Property

• High Value Council Tax Surcharge (HVCTS) (Mansion Tax): With effect from April 2028, owners of residential properties worth £2m or more will be liable to annual HVCTS as follows:
  • £2.5k for properties worth £2m-£2.5m;
  • £3.5k for properties worth £2.5m-£3.5m;
  • £5k for properties worth £3.5m-£5m; and
  • £7.5k for properties worth over £5m.

• Charges will increase in line with CPI inflation annually from 2029-30.
• Consultation to be held on details in early 2026.

• Annual Tax on Enveloped Dwellings (ATED) (where owned by companies and other non-natural persons, e.g. collective investment schemes): removal of time limit for claiming “commercial purposes” relief, whether in ATED return or otherwise (so that legitimate businesses are not penalised by missing technical deadline). Time limits for filing ATED return are unchanged.
• Non-resident capital gains: Property-rich non-UK resident companies (i.e. companies deriving at least 75% of their value from UK land) have been within the charge to corporation tax on capital gains realised on disposals of UK land for a number of years.  In the case of protected cell companies (which exist in a number of jurisdictions, including Jersey, Guernsey and Cayman), with effect from 26 November 2025, property richness for these purposes is to be determined by the individual PCC cell, rather than the PCC itself.
• Property income/rent (in England, Wales and Northern Ireland) – 2% increase in income tax rates (payable by individuals) with effect from 27/28 (Scotland and potentially, Wales, may differ under devolved powers):
  • Property basic rate – 22% (which will also be rate of withholding from (i) payments to all non-resident landlords not granted clearance under non-resident landlords scheme, and (ii) property income distributions from REITs and property AIFs);
  • Property higher rate – 42%;
  • Property additional rate – 47%.
• Capital allowances – Writing down allowances (WDAs) and first year allowances (FYAs) (used to shelter trading and rental profits):
  • WDAs (for ”main rate” plant and machinery) to be reduced from 18% p.a. to 14% p.a. from April 26 (timing of relief for capital allowances on spend on fixtures (including in relation to acquisitions of property and landlord’s contributions on grant of lease to tenant’s fixtures) to be spread over longer period of time).
  • Introduction of 40% FYAs (i.e. upfront 40% tax relief) for new “main rate” plant and machinery (including fixtures) with effect from 1 January 2026 (where full expensing (100% FYAs not available, e.g. for non-incorporated businesses))

• Construction industry scheme – new penalties where business knowingly receives or makes CIS payments connected with fraudulent evasion of tax (or should have known):
  • Cancellation of gross payment status.
  • Business could be liable for lost tax.
  • Business and individuals connected with it (including directors) could be liable to penalty equal to 30% of lost tax.

Personal

• Rate of income tax on savings (including interest) with effect from 27/28 (UK-wide):
  • Savings basic rate – 22%;
  • Savings higher rate – 42%;
  • Savings additional rate – 47%.

• Starting rate for savings (0% up to £5k for taxpayers with up to £17,570 income not from property, savings or dividends) and personal savings allowance (0% for savings income up to £1k for basic rate taxpayers and £500 for higher rate taxpayers) are unchanged

• Rate of income tax on dividend income with effect from 26/27 (UK-wide):
  • Dividend ordinary rate – 10.75%;
  • Dividend upper rate – 35.75%;
  • Dividend additional rate – 39.35% (unchanged).

• Dividend allowance – £500 (unchanged)

• ISAs (from April 2027):
  • Cash ISAs – reduced to £12k for savers under 65 within overall ISA limit (including stocks and shares ISA) of £20k.
  • Savers older than 65 will still have £20k cash ISA.
• Salary sacrifice (from April 2029):
  • amount exempt from National Insurance Contributions to be capped at £2k p.a. for employee contributions made via salary sacrifice.

Corporate/finance/Investors/Employee Shares

• Withholding tax rate: Rate of withholding tax on interest to be increased from 20% to 22% with effect from April 2027.  Cross border financing into the UK will need to take this into account.
• Claiming incorporation relief: Incorporation relief on incorporation of business (rollover/deferral of Capital Gains Tax (CGT)) – not automatic – will need to be claimed in tax return (compliance).
• Expansion of Enterprise Investment Scheme (EIS)/ Venture Capital Trust (VCT) tax relief regimes, with restriction of rate of VCT income tax relief (taking effect on 6 April 2026):
  • Increase in maximum value of gross assets of company both immediately before and immediately after issue of shares from, respectively, £15m to £30m and £16m to £35m.
  • Annual investment limit increased from £5m to £10m and, in the case of knowledge-intensive (R&D) companies, from £10m to £20m.
  • The company’s lifetime investment limit is increased from £12m to £24m and, in the case of knowledge-intensive companies, from £20m to £40m.
  • Income tax relief for individual investing in VCT is reduced from 30% to 20%.
• Sale of shares (say, by Founder) to Employee ownership trusts – restriction on extent of relief from CGT:
  • 50% of gain on sale is immediately chargeable (without business asset disposal relief) and 50% is rolled over, so that acquisition cost to trust is original acquisition cost plus 50% of gain (applies to disposals made on or after 26 November 2025).
  • Previously full amount of gain was rolled over.
• Expansion of Enterprise Management Incentives (EMI) scheme (with effect from 6 April 2026):
  • Increase in:
    • company options from £3m to £6m (so that company can grant options to employees over shares having a total market value on grant of up to that amount);
    • maximum gross assets of EMI option issuing company from £30m to £120m; and
    • maximum number of employees of the company from 250 to 500.
  • Above increases to apply retrospectively to existing EMI contracts which have not already expired or been exercised.
  • Limit on exercise period to be extended from 10 years to 15 years.

NB: EMI and CSOP option agreements may be amended to include a sale on a Private Intermittent Securities and Capital Exchange System (PISCES) as an exercisable event treated as included on grant so as to preserve the scheme’s tax advantages (takes effect from 15 May 2025 when initially announced).

• Stamp taxes on shares – ‘modernisation’ – going digital:
  • New digital service to be tested for payment of stamp duty/stamp duty reserve tax on off-market transfer of securities.
  • Regulations to be introduced to facilitate that testing.
  • Longer term outcome not entirely clear but with the government looking to replace Stamp Duty and SDRT with a modernised single tax on transfers of securities – the Securities Transfer Charge (STC) – and confirming it will be issuing its response to a stamp taxes consultation held earlier this year (following an earlier consultation in 2023), some quite fundamental changes in relation to the stamp taxes legislation, particularly, as regards the management and operation of stamp duty/SDRT (and its prospective replacement by STC) can be expected.
• Stamp duty reserve tax (SDRT) – relief on transfers of newly listed securities
  • With effect from 27 November 2025, agreements for transfer of shares or other securities of a company whose shares have been listed within the previous three years on a UK regulated market are exempt from the 0.5% SDRT charge (so long as transfer does not form part of a merger or takeover where there is a change of control). As shares would generally be traded electronically (so no physical instrument), stamp duty should not generally be chargeable, hence the SDRT focus of the exemption. [NB 1.5% charge may apply where transfer is to a depositary receipt system or an unelected clearance system, though issues of the shares should not generally be chargeable.]
  • Stated aim is to secure higher initial valuations and liquidity by encouraging the trading of newly listed shares in the secondary market.
  • Helpfully supplements the existing SDRT exemption introduced last year for transfers effected as part of the listing arrangements themselves.
• Anti-avoidance rule relating to certain non-derecognition liabilities (securitisations)
  • Relevant to securitisations – applies where there has been a non-derecognition of assets transferred to a securitisation vehicle and a liability is recognised in connection with the transfer.
  • Potentially applicable in the case of retained securitisations where originator is treated for accounting purposes as retaining assets and effectively guaranteeing cash flows despite receiving cash for transfer.
  • Originator is denied a corporation tax deduction if a main purpose of the arrangement is to obtain a tax advantage.
  • Takes effect on 26 November 2026.

• Umbrella company market – PAYE changes
  • Where umbrella company employs workers on behalf of agencies and end client/business for which they work, end client and agency (in addition to umbrella company) are to be liable to PAYE and NICs.
  • To take effect on 6 April 2026.
• Corporate interest restrictions (existing regime potentially restricting deductions for group’s net interest expense over £2m – extent of restriction broadly determined by reference to percentage of EBITDA)
  • Relaxation of certain admin requirements (relating to reporting of relevant group information)
  • Certain capital expenditure (e.g., waste site restoration, cemeteries, flood protection) is excluded from EBITDA when calculating the corporate interest restriction.  Purpose would appear to be to ensure interest deductions are calculated on operating profits that genuinely reflect the business’s economic activity.
• UK’s international tax rules (relating to transfer pricing, permanent establishments and double tax treaty obligations) to be updated in line with OECD principles and international consensus in a new package of legislation (with diverted profits tax (a UK tax on UK-related profits of multinational enterprises that have been artificially diverted offshore) being absorbed within the UK corporation tax transfer pricing regime)
• Multinational Top-Up Tax and Domestic Top-Up Tax intended to ensure large corporate groups pay a global minimum effective tax rate of 15% on profits in every jurisdiction where they operate – applicable to multinational groups with annual global revenues exceeding 750 million euros that have business activities in the UK and introduced in the last two years in the UK as key components of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) Pillar Two initiative, designed to limit harmful tax competition and profit-shifting strategies by multinational enterprises:
  • UK legislation is to be updated in line with administrative guidance published by the OECD in January 2025.
  • Amendments identified from stakeholder consultation or which are otherwise necessary to ensure the UK’s legislation remains consistent with the commentary and administrative guidance to Pillar Two Initiative are also to be incorporated in UK legislation.
• Increase in fixed penalties for late filing of company corporation tax returns where filing date is on or after 1 April 2026 (first increase in nearly 30 years)
  • £200 up to three months late (up from £100)
  • £400 where more than three months late (up from £200)
  • £1k where three successive late returns followed by further late return (up from £500)
  • £2k where three successive late returns followed by return more than three months late (up from £1k).

Tax Avoidance

• Tackling tax adviser facilitated non-compliance
  • Existing HMRC powers to be enhanced to obtain information from tax advisers who are reasonably suspected to have deliberately facilitated non-compliance in their clients’ tax affairs.
  • A new penalty framework to sanction tax advisers who are found to have deliberately facilitated non-compliance in their clients’ tax affairs is to be introduced.
  • HMRC will be given new powers to publish information about tax advisers where HMRC has used relevant sanctions.
• Tackling promoters of marketed tax avoidance schemes
  • HMRC will have enhanced powers to target promoters of marketed tax avoidance schemes, and other professionals who market or enable the marketing of tax avoidance schemes, including within the tax, accounting and legal professions.
  • Universal stop regulations (prohibiting the marketing of arrangements having no realistic prospect of success) and promoter action notices (barring the provision to promoters of goods and services used in the promotion of tax avoidance (with a carve-out for legal, auditing and IT-type services)) will be introduced.
• Loan charge settlement scheme to be established by HMRC to resolve/settle (under a broad framework of terms) outstanding historic disguised remuneration schemes (typically involving a loan that was not repaid (which have been held by The Supreme Court to be ineffective for the purposes of avoiding tax)) and to bring these to a close.

Consultations

• International student levy to take effect from 1 August 2028 – providers (including universities) liable to fee of £925 for each international student they take – consultation on technical detail announced.
• Visitor levy in England – Consultation announced on giving mayors power to levy tax on visitors’ overnight stays in England.
• Customs treatment of low value imports into UK – consultation announcing removal of the £135 customs duty relief for low-value imports and seeking views on certain elements of a new set of customs arrangements for these goods.

If you have any questions or would like to discuss any aspects of this year’s Budget, please contact Michael Fluss.