Autumn Budget 2025: What It Means for You

Dividend Tax

From tax year 2026/27:

• The dividend ordinary rate increases from 8.75% to 10.75%.
• The dividend upper rate rises from 33.75% to 35.75%.
• The additional dividend rate remains at 39.35%.

Why this matters:

For business owners who remunerate themselves through dividends, the net effect is a reduction in take-home income. This reduces disposable income and adds pressure to personal financial planning. Shareholder-directors considering extraction strategies, business sales, or succession planning should review their remuneration structure now, as these changes heighten the importance of proactive tax planning.

Savings Income Tax

From 2027/28:

• Savings Income Tax
• Basic rate increases from 20% to 22%.
• Higher rate rises from 40% to 42%.
• Additional rate increases from 45% to 47%.

Why this matters:

Higher-rate and additional-rate taxpayers will experience notable increases in their tax liability on savings income. This reduces the net return on conventional investment products and may unintentionally encourage higher-risk investment behaviours in the search for yield. Business owners should actively consider tax-efficient shelters such as ISAs, premium bonds, pensions, and structured investment planning. The complexity of these decisions reinforces the value of coordinated advice between your accountant and financial adviser.

Property Income

From 2027/28, property income will be taxed at 22% (basic rate), 42% (higher rate), and 47% (additional rate). These rates apply in England and Northern Ireland, with Scotland and Wales retaining devolved powers.

Why this matters:

Landlords will face higher operating costs through increased taxation, reducing net rental yield. A strategic review of property portfolios, debt structures, and ownership models is strongly recommended.

The personal allowance and income tax thresholds will remain frozen until 5 April 2031, extending the previously announced freeze by an additional three years.

Why this matters (fiscal drag):

As wages rise, more taxpayers are pushed into higher tax bands despite no increase in thresholds. This stealth tax increases effective tax rates across the population, capturing many individuals who historically sat below higher-rate thresholds. For businesses, the impact is twofold: employee wage expectations rise, while owners face increasing personal tax burdens.

Reduction in Writing-Down Allowance

From 2026, the main rate WDA will fall from 18% to 14%.

Why this matters:

A lower WDA reduces the annual tax relief available on capital expenditure. The result is higher taxable profits and reduced cash flow in the short term. Sectors with significant plant and machinery expenditure—manufacturing, agriculture, construction, logistics—will feel this most acutely. Lower allowances create disincentives for capital investment and may hinder productivity improvements.

Introduction of a 40% First-Year Allowance

A new 40% FYA for main-rate assets (excluding cars, second-hand assets, and overseas leasing) will apply from 1 January 2026.

Why this matters:

This is a significant countermeasure to the WDA reduction and provides a valuable opportunity for businesses to bring forward planned investment. The allowance improves short-term cash flow and enhances investment feasibility. Accurate timing and correct administration of claims will be essential to avoiding costly errors.

Extension of 100% FYAs for Zero-Emission Cars and EV Charge Points

Extended to 31 March 2027 (corporation tax) and 5 April 2027 (income tax).

Why this matters:

This extension supports businesses investing in green assets. Immediate full tax relief improves cash flow at the point of purchase and strengthens the business case for electrification of fleets and premises infrastructure.

Minor revisions to the foreign income and gains (FIG) regime take effect from April 2025 and 2026 to ensure consistent operation across income tax, CGT, and IHT.

From 6 April 2026, non-UK residents will no longer be treated as having paid income tax on UK dividends.

Why this matters:

This aligns the UK with international tax standards and removes a relief previously available under ITTOIA 2005, s 399. International clients receiving UK dividend income will need to reassess tax exposure under their domestic tax regimes.

Class 1 (employees and employers)

Frozen until 5 April 2031.

Why this matters:

A frozen threshold increases NIC liabilities as wages rise. This puts upward pressure on employment costs and may constrain hiring and salary growth.

Class 4 (self-employed)

Also frozen until 5 April 2031.

Why this matters:

Self-employed individuals will experience compounded NIC increases over the coming years, tightening margins and increasing lifetime tax exposure.

The overriding message from this Budget is the importance of active financial management. The measures introduced will cumulatively increase the tax burden on business owners, landlords, and higher-earning individuals. To mitigate these pressures, we recommend:

1. Engage in early financial planning to identify potential cash flow pressure points and tax liabilities.
2. Coordinate advice between your accountant and financial adviser to ensure dividend planning, savings strategies, and investment decisions are aligned.
3. Review capital expenditure plans to take advantage of the new 40% FYA and the extended green allowances.
4. Strengthen financial resilience through structured savings vehicles such as ISAs and bonds.
5. Reassess remuneration strategies and ownership structures in anticipation of higher income and dividend tax rates.

 

If you would like support in assessing how the Autumn Budget affects your business or personal tax position, please contact us. We are here to help you navigate these changes with confidence and clarity.

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