The leak of the Budget ahead of the announcement on Wednesday stole much of the Chancellor’s thunder as it provided the financial backdrop to the public before she had the opportunity to speak herself.
After months of signalling difficult decisions ahead, it has now been outlined how the Government plans to steady the economy and manage tight public finances.
As always, the speech itself centred around the spending proposals so we are left with diving into the detail contained within the Treasury report.
Key takeaways from the Budget
- 2% tax increase on property and savings income from April 2027.
- 2% tax increase on basic and higher dividend rates from April 2026.
- Salary sacrifice for pension contributions above £2,000 will no longer be exempt from National Insurance from April 2029.
What’s coming in April?
It is also important to recap the changes coming into effect from April 2026 which have been announced previously, most notably:
- The introduction of the quarterly reporting which will apply to self-employed businesses and landlords with turnover in excess of £50,000 a year (£30,000 from April 2027) – MTD for ITSA.
- Business Asset Disposal Relief rate increasing to 18%, aligning it with the lowest rate of Capital Gains Tax.
Property
In her speech, Reeves specifically stated that “a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary, because no national insurance is charged on property, dividend or savings income”. The difference arises because of NIC which landlords are not currently subject to.
Separate tax rates for income from property are therefore being introduced from April 2027 at 22%, 42% and 47%.
This will see higher and additional rate tax paying landlords subject to the same marginal rate of tax as those in employment.
Basic rate tax paying landlords will continue to have a lower marginal rate, by 6%.
Savings
Tax rate on savings income will also increase by 2% across all bands from April 2027. The savings allowance will remain in place so it continues that only interest above the available allowances will be subject to the increased rates.
From April 2027 the annual ISA cash limit will be set at £12,000, within the overall annual ISA limit of £20,000. Savers over the age of 65 will continue to be able to save up to £20,000 in a cash ISA each year.
Protection from tax on interest and dividends received within an ISA remain.
Dividends
Dividend rates are set to increase from April 2026 to 10.75% and 35.75% for the basic and higher rate bands. The additional rate will remain the same.
Pension Contributions
Salary sacrifice pension contributions above a £2,000 cap from April 2029 will no longer be exempt from National Insurance. Contributions via the scheme in excess of this cap will be subject to both employee and employers national insurance.
State Pension
The Government have committed to increasing the State Pension by 4.8% so pensioners will receive an additional £575 per year.
Capital Gains Tax
Relief on sales to Employee Ownership Trusts is being cut from 100% to 50% from now.
Rates for Capital Gains Tax remain the same following the increase in last Autumn’s statement.
High Value Council Tax Surcharge (HVTCS)
From April 2028 owners of residential properties worth more than £2 million will be subject to a ‘Mansion’ tax, on top of Council Tax, starting at £2,500.
Thresholds
The freeze on the personal tax-free allowance has been extended to April 2031 allowing more tax to be collected as wages increase with inflation.
The Plan 2 Student Loan repayment threshold has also been frozen until April 2030.
Cars
An Electric Vehicle Exercise Duty (eVED) will be introduced from April 2028 at 3p per mile for electric cars. Based on average mileage of 8,500 miles per year, this will cost the electric car driver an additional £255 per year.
A separate charge of 1.5 per mile will be introduced for plug-in hybrid vehicles.
Fuel duty remains frozen, but a staggered increase is on the horizon in September 2026. For those of us who have not converted to electric yet, this means it is likely we will pay more at the pump for our fuel this time next year.
Corporation Tax
The main rate for Corporation Tax is remaining at 25%.
Writing Down Allowances (WDA) for plant and machinery purchases are decreasing from 18% to 14% from April 2026. From January 2026, main rate assets will attract a new 40% first year allowance.
This is unlikely to affect most small to medium sized businesses where the £1 million Annual Investment Allowance (AIA) remains.
Penalties for late filing of Corporation Tax Returns are doubling from April 2026.
Inheritance tax
Inheritance Tax thresholds have been frozen for a further year to April 2031.
The £1 million allowance for the 100% rate of Business Property Relief will be transferable between spouses and civil partners from April 2026.
It was previously announced that, from 6 April 2027, the Government is removing the opportunity for individuals to use pensions as a vehicle for IHT planning by bringing unspent pots into the scope of IHT.
VAT
From April 2029, businesses will be required to issue all VAT invoices as e-invoices, with a roadmap on implementation to be published next year.
Avoidance
Plans have been proposed to launch a strengthened reward scheme for informants who provide valuable information which allows HM Revenue and Customs (HMRC) to tackle high-value avoidance or evasion, modelled on the US scheme.
In Summary
As expected, this Budget gave us more to chew on than the Spring statement earlier this year. While nothing here completely rewrites the tax rulebook, a fair few dials have been turned, or at least parked for a future date and, as always, the real impact will depend on your individual circumstances.
We’ll keep you updated if any further detail emerges in the coming weeks that may impact you and we’d be more than happy to have a chat through any of the announcements that are of a concern to you.
