Budget

Income Tax & National Insurance

• Income tax and NI thresholds frozen for three years beyond 2028.

• Thresholds will be uprated by CPI in the interim.

• Slight reduction in employee NICs.

• From 2029, salary-sacrifice pension contributions exempt from NI will be capped at £2,000 per year.

Dividend, Savings & Rental Income

• Dividend tax rates increase by 2% for basic and upper bands from April 2026.

• Savings income tax rates rise from April 2027.

• Rental income tax increases by 2 percentage points from April 2027.

• Capital Gains Tax allowance remains at £3,000; Employee Ownership Trusts CGT relief reduced from 100% to 50%.

ISAs

• Cash ISA limit for under-65s raised to £12,000; remaining allowance up to £20,000 must go to investments.

Welfare Reform

• Two-child limit in Universal Credit and Child Tax Credit removed from April.

• Help to Save scheme extended and expanded beyond 2027.

State Pension

• State pension (basic and new) increases by 4.8% from April under the triple lock.

National Minimum Wage

• Over-21s: +4.1% to £12.71/hour in April.

• Ages 18–20: +8.5% to £10.85/hour, part of move toward a single adult rate.

Council Tax

• Homes in England worth over £2m face a new surcharge of £2,500–£7,500, alongside revaluation of bands F–H.

Property Taxation & Landlords

• Furnished Holiday Lettings regime abolished from April 2026.

Fuel Duty

• 5p cut extended to September 2026, then phased up over six months.

Electric Vehicles

• Mileage-based tax for EVs and plug-in hybrids introduced from 2028.

Public Transport

• Regulated rail fares frozen in 2026 (first time since 1996).

Motability

• Premium cars removed from eligibility.

Corporation Tax & Capital Allowances

• Corporation Tax held at 25%, lowest in the G7.

• Full expensing extended to leased plant and machinery from April 2026.

• Writing-Down Allowance reduced from 18% to 14% from April 2026.

• New 40% First-Year Allowance from January 2026.

• Annual Investment Allowance remains at £1m.

R&D & Incentives

• R&D intensity threshold lowered to 25% for SME relief.

• New SME Growth Allowance adds 20% deduction on certain costs.

• VCT/EIS limits increased:

  • Standard companies to £10m,

  • Knowledge-Intensive Companies to £20m,

  • Lifetime limits to £24m and £40m.

• EMI scheme eligibility expanded.

VAT

• Registration threshold raised to £92,000.

• Mandatory digital real-time invoice reporting for high-risk sectors from 2027.

• Mandatory quarterly MTD for ITSA from April 2026, extending in 2027.

• No penalty points for late submission of the first four quarterly updates for customers joining Making Tax Digital (MTD) from April 2026.

• Customers must still keep digital records and submit quarterly updates before filing their tax return.

• Easement does not apply to the 2026/27 end-of-year tax return (due 31 January 2028); late submission will still incur a penalty point.

• In their first year under the new penalty system, customers will have 30 days (15 extra) to pay outstanding tax before a late payment penalty arises.

• A one-year deferral (to April 2027) applies to:

  • Recipients of trust & estates income

  • Individuals using averaging adjustments

  • Those eligible for qualifying care relief

  • Non-UK resident foreign entertainers or sportspeople

• These groups must continue to meet current ITSA obligations and be ready for MTD by April 2027.

• Individuals under a Court of Protection deputyship will be permanently exempt from MTD (building on earlier PoA announcements).

• Government will introduce legislation on MTD for Income Tax and the penalty reform regime in Finance Bill 2025–26.

• End of late-penalty holidays:

  • Corporation Tax penalties double from April 2026.

  • ITSA & VAT late submission/payment penalties rise from April 2027.

• Increased HMRC activity on transfer pricing, off-payroll working, and cryptoasset reporting.

Gambling, Alcohol, Tobacco

• Online betting duty rises from 21% to 40% in April; 10% bingo tax removed.

• Tobacco duty increases by 2% above RPI.

• Alcohol taxes, including draught, rise in February based on higher RPI.

Sugary Drinks

• From 2028, levy extended to pre-packaged milkshakes and lattes.

Small Package Exemption

• Tax exemption on overseas parcels under £135 removed from 2029.

• Green first-year allowances extended to 2030.

• Mandatory audited climate transition plans from FY2027.

• Growth: Forecast 1.5% for 2025 (up from 1%), but 1.5% average from 2026–29 (down from 1.8%).

• Inflation: Averaging 3.5% this year, falling to 2.5% next year, reaching 2% target by 2027.