Budget 2025: What Accountants, Investors and Property Owners Need to Know

The 2025 Budget marks a clear shift in how the government plans to raise revenue and where it intends to provide support. Wealth, property and unearned income are being taxed more heavily. In contrast, families and lower-paid workers will see extra support.

If you own property, receive rental income, invest, run a business, or advise clients who do, these changes matter. Some take effect as early as next year, while others are part of a longer-term plan.

Budget highlights (at a glance):

• Income tax personal allowance and thresholds frozen until 6 April 2031

• National insurance thresholds also frozen until 2031

• Dividend tax rates rise by 2 percentage points from 2026/27

• Savings income and property income tax rates rise by 2 percentage points from 2027/28

• Salary sacrifice for pensions capped at £2,000 per year from 2029/30

• A High Value Council Tax Surcharge applies to properties over £2 million from April 2028

• A pay-per-mile charge introduced for EVs and hybrids from April 2028

• Unused IHT business and agricultural reliefs become transferable between spouses

• The IHT nil-rate band and residence nil-rate band frozen until April 2031

• Maximum Cash ISA reduced to £12,000 (under age 65) from 2027/28, total ISA limit stays at £20,000

• The two-child benefit cap is abolished from April 2026

• Enterprise Management Incentive (EMI) eligibility widened to include scale-ups

Let’s break it down:

Higher tax on rental income and savings (from April 2027)

From 6 April 2027, rental income and savings income will no longer fall under the usual income tax bands. Instead, they’ll be taxed using new, higher standalone rates.

The new rates will be:

• Basic rate: 22%
• Higher rate: 42%
• Additional rate: 47%

These rates will apply to:
• Rental income from residential and commercial property
• Savings income such as bank interest (outside ISAs)

What this really means is simple: landlords and savers will pay more tax on the same level of income.

For example, a higher-rate taxpayer earning £20,000 in net rental profit will now face tax at 42% instead of 40%. That’s an extra £400 in tax per year on that income alone. Over time, that adds up quickly.

These changes will materially reduce net yields for landlords and reduce the attractiveness of holding large cash balances outside tax-efficient wrappers.

It also places greater importance on:
• Cost control
• Tax-efficient structuring
• Long-term exit planning
• Better use of ISAs, pensions and allowances

For property investors in particular, cashflow forecasts and return models will need to be rebuilt from scratch.

National Insurance changes

• NIC thresholds frozen until April 2031
• Class 1 secondary threshold remains £5,000
• Voluntary Class 2 NICs for those abroad removed from April 2026
• Ten-year UK connection required for voluntary NICs
• Review of voluntary NICs to take place in 2026
• Employment Allowance: £10,500
  Not available where the only employee is a director.

Dividend tax increases (from April 2026)

Dividend income will also become more expensive to extract.

From 6 April 2026:
• Basic rate dividend tax rises from 8.75% to 10.75%
• Higher rate dividend tax rises from 33.75% to 35.75%
• The additional rate remains unchanged

For company owners who pay themselves via dividends, this chips away at after-tax income. Over time, this could make a higher salary / lower dividend mix, or greater pension contributions, more attractive.

It may also change how some small business owners structure profit extraction entirely.

A new annual surcharge on high-value homes (from April 2028)

Homes valued at over £2 million will be subject to a new High-Value Council Tax Surcharge from April 2028.

Based on current proposals:
• Properties just over £2 million: around £2,500 per year
• Properties over £5 million: around £7,500 per year

This isn’t a one-off tax. It’s an annual holding cost.

For high-net-worth individuals, this changes the long-term cost of ownership and could affect decisions such as:
• Whether to keep, sell or downsize
• Whether to hold property in the UK
• Whether to keep property in personal ownership or via a company

In London and other high-value areas, this will have a noticeable impact on planning.

Salary-sacrifice for pensions: major restriction (from April 2029)

Salary-sacrifice has been one of the most efficient ways to save into a pension, as it reduces both income tax and National Insurance.

From April 2029, that benefit will be capped.

Only the first £2,000 per year of pension contributions made through salary-sacrifice will be free from National Insurance. Anything above that will be treated like normal pay and will be subject to NI.

This significantly reduces the advantage for higher earners who contribute large amounts to their pension via salary sacrifice. While income tax relief will still exist, a large part of the “extra” benefit disappears.

Anyone currently using salary-sacrifice as a core part of their planning should start thinking ahead now, not in 2029.

The minimum wage is rising again

From April 2026, the National Living Wage and National Minimum Wage will increase to the following levels:

• Age 21 and over: £12.71 per hour
• Age 18–20: £10.85 per hour
• Age 16–17 and apprentices: £8.00 per hour

For employees, this is a positive change and will lift household income at the lower end of the pay scale.

For employers, however, this is a real cost increase, particularly in industries with large, lower-paid workforces such as hospitality, retail, logistics and care.

Many businesses will need to reassess:
• Staffing levels
• Pricing strategies
• Profit margins
• Automation plans

This is especially important for small business owners.

State pension

Increases by 4.8%, worth up to £575 extra per year.

Pension credit and housing benefit admin will merge.

Income tax thresholds remain frozen (fiscal drag continues)

The personal allowance and income tax bands will remain frozen for a further three years.

On the surface, your tax rate hasn’t changed. In reality, you’ll likely pay more tax each year as your salary grows but the thresholds don’t move with inflation.

This “fiscal drag” silently pushes more people into higher bands over time and reduces real take-home pay.

It’s one of the government’s biggest revenue raisers, but it happens quietly.

From a planning perspective, this means more people will be paying higher-rate tax without ever experiencing a big pay rise.

Cash ISAs: lower allowance for many (from April 2027)

For most people, the annual Cash ISA allowance will fall from £20,000 to £12,000 from April 2027. (Over-65s will not be affected.)

At the same time, savings interest is being taxed more heavily.

The combined effect is clear: keeping large sums in cash outside pensions and ISAs will become far less efficient. Savers will need to think more carefully about where their money sits.

Company cars and vehicle changes

From April 2028:

• Fully electric vehicles: 3p per mile
• Plug-in hybrids: 1.5p per mile
• Payable in addition to existing VED

From April 2026:

• Expensive car supplement threshold for EVs increases to £50,000

Benefit-in-kind changes to car schemes are delayed until 2030
Temporary easements for some PHEV vehicles apply until 2031

Two-child benefit cap abolished (from April 2026)

One of the biggest social changes in the Budget is the removal of the two-child benefit cap.

From April 2026, families will be able to receive support for all children, not just the first two. This applies to child-related elements of Universal Credit and other benefits.

This is expected to benefit around 560,000 families, with an average increase in support of roughly £5,000 per year. It is also expected to significantly reduce child poverty levels.

Business taxation

Corporation tax: no change to headline rates
The main rate of corporation tax will remain at 25%, and the small profits rate will stay at 19%. This provides some certainty for businesses when planning profits, cashflow and dividends, as there are no new headline increases being introduced in this Budget.

Writing Down Allowance reduced
From April 2026, the main rate of capital allowances (the Writing Down Allowance) will fall to 14%. This means businesses will be able to claim less tax relief each year on qualifying plant and machinery compared to current levels, increasing the time it takes to fully relieve the cost of an asset against taxable profits.

New 40% First Year Allowance
To offset the reduced Writing Down Allowance, a new 40% First Year Allowance (FYA) will be introduced for qualifying main rate assets. This will allow companies to deduct 40% of an asset’s cost in the year of purchase, significantly accelerating tax relief and improving year-one cashflow. It’s worth noting that this does not apply to cars, second-hand assets or assets leased abroad.

Annual Investment Allowance remains at 100%
The Annual Investment Allowance (AIA) is staying at 100%, meaning businesses can continue to deduct the full cost of qualifying expenditure (up to the AIA limit) in the year of purchase. This keeps immediate tax relief available on many capital purchases and remains one of the most powerful planning tools for businesses investing in equipment or infrastructure.

Share Incentive Schemes

Venture Capital Trusts (VCTs): Lower investor relief

From the 2026/27 tax year, the income tax relief on VCT investments will drop to 20%. This means investors will receive less upfront tax relief than before. That said, VCTs will still offer valuable benefits, including tax-free dividends and no capital gains tax on qualifying disposals, which keeps them attractive for investors willing to take on higher risk in return for long-term potential.

Enterprise Investment Scheme (EIS): Bigger funding limits for businesses
The amount that companies can raise through VCT and EIS funding is increasing. From April 2026:

• The annual investment limit will rise to £10 million
• For knowledge-intensive companies (KICs), this increases to £20 million

This change is designed to help high-growth and innovation-led businesses access larger pools of capital as they scale.

Higher lifetime caps for growing companies
The total amount a company can raise over its lifetime will also increase:

• Up to £24 million under the standard rules
• Up to £40 million for KICs

This allows successful companies to raise additional rounds of funding over time without breaching scheme limits.

Increased gross assets thresholds
To widen eligibility for these schemes, the gross assets limits are being raised to:

• £30 million before a share issue
• £35 million immediately after the share issue

This change means more established and scaling businesses can still qualify for VCT and EIS funding, even as their balance sheets grow.

Gambling tax changes

Higher taxes on remote gambling
Remote gaming duty will increase sharply from 21% to 40% from April 2026. This applies to online casino-style activities such as slots, roulette and virtual games. The government’s aim is to bring gambling duties in line with broader policy and social responsibility considerations around online gambling.

Bingo duty abolished
From April 2026, bingo duty will be completely removed, reducing the tax burden on bingo operators and venues. This is likely intended as a targeted support measure for the sector, which is often community-based and has faced declining footfall in recent years.

Remote betting duty introduced
A new remote betting rate of 25% will be introduced within general betting duty from April 2027. This will apply to online and app-based betting services. However, remote horse racing bets will remain taxed at 15%, so they are not subject to the new higher rate.

What this means in real terms

If you’re a property owner
Your tax bill is likely to rise. Rental profits will be taxed more heavily, and high-value properties will now carry an extra annual charge.

If you’re an investor or business owner
Dividend income will be taxed more. Pension planning through salary-sacrifice becomes less attractive. Tax-efficient structuring becomes essential.

If you’re an employer
Rising minimum wages and frozen thresholds will squeeze margins. Workforce planning and pricing strategy need reviewing.

If you’re a family with children on Universal Credit
Support is increasing, especially for larger families. For some, this provides genuine relief.

If you’re a saver
Sitting on large amounts of cash is becoming more expensive, from a tax perspective. The way you hold and invest money matters more than ever.