Rachel Reeves delivered her second Autumn Budget last November. Outlined below are the key proposals which could affect you:
• The freeze on the tax-free personal allowance, Income Tax and National Insurance (NI) thresholds has been extended to April 2031.
• Savings and property income tax rates will increase by 2% from April 2027.
• The basic and higher dividend tax rates increased by 2% from April 2026. The divided dividend allowance remaining at £500.
• Cash ISA allowance will reduce to £12,000 for most people from 2027.
• A new ‘mansion’ tax on residential properties valued over £2 million, will introduce council tax surcharges ranging from £2,500 to £7,500 from April 2028.
• The £2.5 million 100% agricultural property and business property relief inheritance tax limit starting from April 2026 will be transferable between spouses.
• Tax free-pension contributions made via salary sacrifice arrangements will be limited to £2,000 from April 2029.
• National minimum wage rates have increased in April 2026 to: – £12.71 for those 21 and over, £10.85 for 18–20-year-olds, £8.00 for 16 and 17-year-olds.
• The main rate of capital allowances has decreased to 14% from 18% effective from April 2026.
• The annual investment allowance (AIA) of £1 million available on qualifying plant and machinery purchases remains. A new 40% first year allowance being available where the AIA cannot be claimed.
• A new road tax will be charged on the use of electric and hybrid vehicles from April 2028, being 3p per mile for electric vehicles and 1.5p for hybrids.
• The two-child universal credit cap has been removed from April 2026, allowing qualifying parents to claim universal credit for all their children.
• No changes have been announced to VAT or corporation tax rates.
As always, the devil is in the detail and until the legislation is passed, we will not have absolute certainty over the impact. The introduction of the transferable £2.5 million 100% IHT threshold between spouses is welcome and does give flexibility when looking at estate planning.
If you would like to discuss any of the government’s proposed changes or have concerns over how these changes may impact you or your business, please do not hesitate to contact us.
