BUDGET STATEMENT

On 26th November, 2025 The Rt. Hon. Rachel Reeves MP delivered the 2025 Budget Statement. From the following links you may viewKey Announcements in the 2025 Autumn Budget Statement

or, more formally,

UK Autumn Budget 2025: tax hikes, fiscal drag and the 'Mansion Tax'

26 November 2025, UK Chancellor Rachel Reeves delivered her second Budget, which sought to raise £26 billion in tax through a combination of threshold freezes, targeted base-broadening and a renewed focus on compliance.

In respect of Personal Income Tax, the existing freeze on income tax and equivalent National Insurance thresholds, which was introduced in 2021, was extended from 2028 to 2031.

Dividend tax rates will increase from 8.75% and 33.75% to 10.75% and 35.75% respectively for basic and higher rate taxpayers with effect from April 2026. Additional rate dividend tax will remain unchanged at 39.35%. Savings and Property income tax will increase from 20%, 40% and 45% to 22%, 42% and 47% for basic, higher and additional rate taxpayers with effect from April 2027.

A new High Value Council Tax Surcharge (HVCTS) will be introduced from April 2028. Owners of properties identified as being valued at over £2 million by the Valuation Office at 2026 prices will pay a recurring annual charge on top of their current council tax under four price bands:

· Property valued at £2 million to £2.5 million – £2,500 per year.

· Property valued at £2.5 million to £3.5 million – £3,500 per year.

· Property valued at £3.5 million to £5 million – £5,000 per year.

· Property valued at £5 million or more – £7,500 per year.

The HVCTS will be administered alongside existing Council Tax by local authorities. The charges will all be uprated by Consumer Prices Index (CPI) inflation each year from 2029-30 onwards. The government will consult on a full set of reliefs and exemptions, as well as proposed rules for more complex ownership structures including companies, funds, trusts and partnerships.

The government is to introduce a £5 million cap on the 10-yearly 6% inheritance tax (IHT) charges that can apply to relevant property trusts that were established by non-UK domiciled individuals prior to 30 October 2024, even where that settlor has now acquired long-term-resident (LTR) status in the UK. This change will be relevant for non-UK domiciled individuals with pre-existing trust structures that hold assets more than £83 million.

From 6 April 2026, all dividends received from close companies by a non-resident shareholder will be charged to tax on return to the UK during a period of temporary non-UK tax residence. Previously, under the TNR rules there was no charge to UK tax if a distribution or dividend was made from 'post departure trade profits' – profits that accrued to a company after the individual had left the UK.

The notional tax credit provided of 8.75% for non-UK residents who receive UK dividends will be abolished with effect for dividends received on and after 6 April 2026.

From 6 April 2026, access to Class 2 Voluntary National Insurance Contributions (VNICs) will be abolished for individuals living and working overseas. Non-UK residents will only be able to utilise the Class 3 VNICs rate and, to qualify, will have to have been resident in the UK for ten years prior. The rate of Class 3 VNICs will also increase from £17.75 to £18.40 per week, or £956.80 per annum.

The inheritance tax (IHT) nil-rate band and residence nil-rate band will remain frozen until April 2031. The government also announced it will legislate to prevent IHT avoidance through certain loopholes, including:

· From 6 April 2026, UK agricultural property held via non-UK entities will be 'looked through' and treated as UK-situated. Aimed at preventing the conversion of UK agricultural property, which is subject to IHT, into shares in a non-UK company, which is not subject to IHT when owned by individuals who are not long-term residents or by trusts, this brings agricultural property into line with residential property.

· From 26 November 2025, new provisions are introduced to prevent trustees from avoiding the 6% IHT exit charge when non-UK property goes out of scope of IHT by bringing assets to the UK prior to a settlor ceasing to be a long-term resident and then taking the assets offshore again.

· From 26 November 2025, restricting the IHT charity exemptions on gifts made by charitable trusts directly to UK charities unless they meet the wider definition of a charity under existing legislation.

The £1 million allowance for the 100% rate of agricultural property relief (APR) and business property relief (BPR), which will come into effect on 6 April 2026 for IHT purposes, will be transferable between spouses and civil partners. Previously assets had to be passed to children on first death. The combined allowance for the 100% rate of APR and BPR will be fixed at £1 million until April 2031.

In respect of Corporate Income Tax, the Budget maintained the core structure of the UK's corporate tax system, with a main rate of 25% and a small profits rate of 19%.

From 26 November 2025, the government will reduce capital gains tax (CGT) relief on disposals to employee ownership trusts (EOTs) from 100% to 50%. The Chancellor stated that this change would address the system which has been "creating a route for gains to go completely untaxed when businesses are sold".

The government clarified that the sale of a UK property rich company (derives more than 75% of its value from UK land), will now specifically cover the cells of overseas protected cell companies. From 26 November 2025, each cell within a cell company is to be treated like a standalone company for NRCGT purposes so that the cell itself is tested for UK property richness when disposed. These rules apply equally to overseas individuals and companies making disposals of cell companies.

From April 2026, the investment limits for enterprise investment scheme (EIS) and venture capital trust (VCT) companies will be increased to £10 million and for knowledge intensive companies will be increased to £20 million The company lifetime limit for receipt of such investments will increase to £24 million and £40 million respectively.

From April 2026, the gross assets threshold will rise to £30 million prior to an investment and £35 million after investment under any of these schemes. However, the rate of VCT income tax relief will fall from 30% to 20%.

The government will abolish the Diverted Profits Tax (DPT) and replace it with a simplified approach integrated into the corporation tax regime. The new rules will focus on unassessed transfer pricing profits, removing the separate DPT charge and aligning profit attribution with OECD standards. This change aims to streamline compliance, reduce complexity and ensure that UK tax rules remain competitive while effectively countering profit diversion. Transitional guidance will be published to help businesses adapt to the new framework and will apply from 1 January 2026.

The government said it was taking further steps to close the tax gap and said its proposed changes would raise £2.4 billion in additional tax revenue in 2029-2030 by collecting more unpaid taxes and modernising the tax system. It aims to improve how HMRC uses information from third parties and build new technology to increase the use of data-driven prompts to help taxpayers avoid errors when submitting tax returns.

It is to amend the anti-avoidance rules to counter the no disposal treatment applying to share exchanges and company reorganisations. These amendments will ensure that where a shareholder enters into a share exchange or company reorganisation and one of the main purposes of this is to secure the shareholder a tax advantage, it will now be caught by the anti-avoidance rules.

The government is to strengthen the reward scheme for informants who provide information that allows HMRC to tackle high-value avoidance or evasion. For cases where tax over £1.5 million is recovered, HMRC will pay rewards up to 30% of the additional tax collected that would otherwise have gone unpaid.

Following consultation, the government will legislate in finance bill 2025-26 to further target promoters of tax avoidance to allow HMRC to shut schemes down more quickly. Subject to the Finance Bill, the government will introduce enhanced powers and sanctions to tackle tax advisers who facilitate non-compliance from 1 April 2026.

The Disclosure of Tax Avoidance Schemes (DOTAS) and Disclosure of Tax Avoidance Schemes for VAT and Other Indirect Taxes (DASVOIT) civil penalty regimes will be updated so HMRC can issue penalties directly, without tribunal approval, speeding up enforcement. However, the government said it will not regulate tax advisers and will instead work in partnership with the sector to raise standards in the tax advice market.

The government is investing £25 million over the next five years to recruit additional Insolvency Service staff to disqualify more rogue directors. It will also amend the Company Directors Disqualification Act 1986 to extend the circumstances in which directors who break the law can be disqualified.

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