Following the 2024 Budget, there was considerable speculation about what would be in the UK Government’s 2025 Budget. The Chancellor presented her Budget on 26 November 2025 (slightly after the OBR released its report!), and whilst there are significant tax measures and announcements, from a Private Client perspective, this Budget was arguably less turbulent than in 2024.
A summary of some of the key measures is set out below.
Income Tax and National Insurance
Income tax and the National Insurance contributions secondary thresholds will remain frozen, extending the freeze from 2028 to 2031. This means the Income Tax personal allowance (£12,570) and higher-rate thresholds will remain frozen until April 2031.
Property, Dividend and Savings Income
New Income Tax rates will be introduced for property, dividend and savings income.
From April 2027, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47% (an additional 2% across the board).
From April 2026, the ordinary and upper rates of tax on dividend income will also increase by 2%. The ordinary rate will rise from 8.75% to 10.75%, and the upper rate from 33.75% to 35.75%. The additional rate will continue at 39.35%.
Finally, tax on savings income will also increase by 2% across all bands. The basic rate will rise from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47% from April 2027. The Starting Rate for Savings will be kept at £5,000 for 2026-27, but ISA limits have been reformed (though that is outside the scope of this blog).
These increases may, depending on the goals of the taxpayer concerned, encourage more people to consider alternative investment vehicles, such as Family Investment Companies to hold property and other investments.
Capital Gains Tax (CGT)
The main CGT rates were increased from 10% and 20% to 18% and 24% for disposals made after 30 October 2024 in the 2024 Budget. The annual exempt amount will remain at £3,000 for the tax year 2026/27, and the planned increase in the CGT rate for Business Asset Disposal Relief (BADR) to 18% (from 14%) for disposals after 6 April 2026 will also continue. This may mean that taxpayers look to make use of the lower rate for BADR before April next year.
The relief for disposals to Employee Ownership Trusts will be cut from 100% to 50% from 26 November 2025.
Incorporation Relief is an important relief for individuals and partners who transfer a business to a company. Currently, this relief applies automatically. It was announced that legislation would be introduced so that a claim for relief must be made in the tax year of the transfer.
The Budget also announced proposed revisions to the anti-avoidance provisions in respect of the relief that applies for share-for-share exchanges, altering the focus of those provisions. This relief is an important tool in company reorganisations, which helps to avoid a “dry tax charge” on transactions which are typically entered into for sound commercial reasons.
Inheritance Tax (IHT)
Sadly, we did not see any great movement in the changes announced in the 2024 Budget in respect of the reform of APR and BPR.
However, the Chancellor did announce provisions to allow the transfer of any unused £1 million Allowance for the 100% rate of APR and BPR between spouses and civil partners, including where the first death was before 6 April 2026.
This will be welcomed by many, particularly those who cannot effectively make use of one partner’s Allowance. However, there are other key issues in the draft legislation and in respect of how these changes will be managed, that need to be addressed before their introduction in April 2026.
The freeze on the nil rate band and residence nil rate band will continue until 2031, and the £1m Allowance will also be fixed until April 2031.
Pensions will still fall into the IHT “net” from April 2027 as set out in Budget 2024. However, the 2025 Budget introduces new provisions allowing Personal Representatives to instruct pension scheme administrators to withhold up to 50% of taxable benefits for a period of up to 15 months to cover IHT liabilities in certain cases. Additionally, Personal Representatives will be released from liability for any IHT on pensions that come to light after they have received formal clearance from HMRC.
The Budget also announced a cap of £5million on relevant property trust charges for pre-30 October 2024 excluded property trusts.
Pensions
Very briefly - It was announced that there will be a change from 6 April 2029 so that there is a charge to employer and employee National Insurance contributions on pension contributions above £2,000 per annum made via salary sacrifice.
Stamp Duty Land Tax (SDLT), Annual Tax on Enveloped Dwellings (ATED) and High-Value Property
There wasn’t much in the way of SDLT changes, but the Budget maintains the ATED regime and introduces changes to changes to the time limits on making claims for relief.
The so called “Mansion Tax”: The government will introduce a High Value Council Tax Surcharge from 2028–29. This is a staggered charge and will apply to residential properties in England valued at £2 million or more, with local authorities responsible for collecting the surcharge on behalf of the Government.
The Budget 2025 brings changes across income, property, investments, and inheritance planning. Understanding these updates is essential, and if you’d like to explore how these measures could impact you or your business, now is the time to review your plans. Roythornes’ Private Client and Corporate teams are on hand to ensure your plans are aligned with the latest changes.