Chancellor’s Budget Statement 26/11/2025

After what has felt like months of speculation, we finally heard the Chancellor’s budget speech. Very late in the year for autumn budgets and with speculation, leaks and the budget report accidently being released earlier in the day it all felt like a bit of a shambles. I guess we are just about into panto season though!

Those that listened to Rachel Reeves’ speech in full (well done you!) would have heard the normal Parliamentary theatre. At a time when many in our country are disillusioned with politics and politicians, it really does not help to rebuild any form of credibility.

After saying in last year’s speech that the tax rises were a one-off event, the sheer volume of tax changes and announcements were staggering. Some of the measures announced are technical and complicated and will take time (and in some cases Government clarification) to understand the full implications, others are much more straightforward. In this update we bring you the headlines. Be aware that the impact for some of you will be more considerable than others. 

The headline announcements are:

• Minimum Wage – Increases that come into effect in April 2026 were announced prior to the budget speech
  • Those aged 21 and over will rise from £12.21 to £12.71 per hour, a 4.1% increase
  • Rate for 18–20-year-olds to go up from £10.00 to £10.85 per hour, an 8.5% increase
  • The rate for apprentices (and 16-17 Year Olds) increases from £7.55 to £8.000 per hour, an 6% increase
• Personal Taxes
  • No change to main income tax rates, employee national insurance rates or VAT. Government has kept its manifesto pledge
  • Income Tax threshold freeze is extended for a further 3 years to April 2031
  • 2% Tax Increases on Property Income, Dividends and Savings
    • The Income Tax Rate for property income will increase by 2% from April 2027 i.e. current Basic Rate of 20% will become 22%, Higher Rate of 40% will become 42% and Additional Rate of 45% will become 47% 
    • Savings Income – will increase in line with above property income from April 2027
    • Dividend Income – Dividend tax will also increase by 2%, but from April 2026. Ordinary dividend tax rate will increase from 8.75% to 10.75% and the Higher Rate from 33.75% to 35.75%. There is no increase to the Additional Rate for Dividend tax.
  • ISA Allowances – Will be retained at £20,000 per annum but for under 65’s cash isa investments will be limited to £12,000 per annum from April 2027
• Business Rates – As promised, from April 2026 business rates are being reformed. 
  • Multipliers for retail, hospitality and leisure businesses with rateable values under £500K will be reduced from 43p to 38.2p
  • Properties with a rateable value of £500,000 and over will see their multiplier increase to 50.8p
• Pensions
  • State Pensions to increase by 4.8% from April 2026
  • Analysis suggests that those on normal state pension only will find that tax will be payable on this sum from April 2027. We mentioned this last year and in the latest budget statement it says that the Government is exploring ways that they can reduce the administrative burden on pensioners where the state pension is their sole income.
  • In terms of contributions to workplace pensions, Salary Sacrifice Schemes are to be capped at £2,000 per annum. More contributions can be made but will result in Employee and Employer NI contributions being payable
• Benefits
  • Two child benefit cap is to be scrapped from next April
• Transport
  • 5p ‘temporary’ cut in fuel duty on petrol and diesel will be extended again until September 2026
  • Electric and Hybrid cars will be required to pay a new mileage-based tax (3p per mile for Electric and 1.5p per mile for Hybrid cars) from April 2028
  • Regulated Rail fares for journeys in England will be frozen next year
  • Premium cars to be excluded from the Motability Scheme
• Housing and Property
  • Properties in England worth more than £2m will face a council tax surcharge of £2,500, rising to £7,500 if the property is worth more than £5m. This will come into effect from April 2028
• Other measures
  • Tax on profits made by online gaming firms from online bets to rise from 21% to 40% in April of next year
  • 10% Bingo tax to be abolished
  • Tax exemption for small packages from overseas retailers’ worth under £135 to be scrapped from April 2029

  Smarter Opinion

  As with last year, the country had been full of uncertainty about the inevitable tax increases. The news has been dominated with rumours and leaks for so many months. This budget followed on from what was supposed to be a one-off tax increase budget last year. Last year the Government made big promises to turn the country around and the polls have suggested that the voting public are not impressed. We said after last year’s budget that the tax take was the biggest in history and that take has increased yet further. In fact, for many of our clients we know it will feel like take, take, take….

  The tax rises within this budget will have a significant impact on some. Many of us are losers:

  • The further freeze of personal taxation allowances is a massive additional revenue earner for the Government and whilst on the face of it it seems harmless, it does hide a multitude of tax rises. The Government may not have increased the income tax %, but the extra tax being paid by workers is massive:
    • In April 2019 the personal allowance increased from £11,850 to £12,500. Apart from a small £70 rise in April 2021 there have not been any increases since this date
    • Allowances are to be frozen until April 2031. Inflation from April 2019 to April 2031, using actual data to April 2025 and Government estimates through to April 2031, will be 46.64%.
    • The allowances freeze means that
      •  a basic rate taxpayer will be paying an extra £1,166 in tax per year in 2031 (£694 this year)
      • A higher rate taxpayer will be paying £4,664 in tax per year in 2031 (£2,777 this year)
      • During the period of threshold freeze it is estimated that nearly an extra 5 million will be paying higher rate tax than there would have been had tax thresholds increased in line with Consumer Price Index
      • These 5 million will face extra tax per year of between £1,166 and £4,664 by 2031
  • The increased rate of tax for property, savings and dividend income is a real rise to many. The Chancellor said she wouldn’t increase income tax, but let’s be clear she has. 
    • Many landlords run decent properties for tenants and are facing increased costs and regulations because of other Government changes, and now they will be paying more tax on top
    • Dividends are the way many business owners pay themselves and now the dividend tax sums are far higher than similar comparisons for the employed or self employed

  Elsewhere the Government has performed a half-hearted effort to reform an outdated Business Rates system that simply isn’t fair and doesn’t represent business today. Many businesses will not be happy with this outcome.

  Other tax measures like the per mile charge on Electric cars and the additional tax on homes worth over £2 million make sense but require massive work to enable them to be brought in.

  The whole budget, as last year, feels like it further complicates a ridiculously complicated tax system. Simplification would be nice. It also has the same feel that the decisions made are a little ill thought through and a little desperate. The major tax increases (tax thresholds and property/savings/dividend tax increases) don’t consider someone’s ability to pay. They simply tick a manifesto pledge box, that is based on a technicality!

  If the country is in that much of a hole financially then it seems the burden should have been more equally spread. Cynically the tax increases seem a convenient way to fill a £30 billion black hole that didn’t exist this time last year. What credibility do the future budget surplus forecasts have? Perhaps the fairer thing to have done would’ve been to break the manifesto pledge on this occasion, and simply increase Income (& related) Taxes by 1% or 2%, so that everyone contributes according to what they earn. Something it seems the Government wanted to do, but didn’t have the political willpower to push through when it came to the crunch.

  This Government has made promises about growth and the only way out of continuing tax increases is to get Britain back to decent growth levels. Even the Office for Budget Responsibility are forecasting a short-term upward spike, but medium- and longer-term forecasts are, quite frankly, disappointing.

  As per previous budget commentaries the tax system is unfair and many things in the tax world need to be balanced out. However, as has been made clear in the run up to this budget the current political establishment seeks to serve based on what wins votes and not what is necessarily right for the country. I suspect this is not about to change any time soon.

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  Best wishes, take care,