26/11/2025
Today Rachel Reeves delivered her second autumn budget.
As promised here is my summary of some of the key points relating to income and tax from todays budget:
🍁The national minimum wage for those aged 21 and over will increase by 0.50 pence per hour going from £12.21 per hour to £12.71 per hour - this is effective from April 2026.
🍂The minimum wage for 18-20 year olds will increase by 0.85 pence per hour going from £10.00 per hour to £10.85 per hour - again, this is effective from April 2026. This increase is still part of the long term plan to move towards a single national rate of pay rather than varying rates for different age groups.
🍁 The minimum wage for 16 and 17 year olds will increase by 0.45 pence per hour going from £7.55 per hour to £8.00 per hour - again, this is effective from April 2026.
🍂The current income tax and national insurance thresholds were previously frozen until 2028 - today these thresholds have been frozen for a further three years taking us to 2031. With income rising people could see themselves moving in to a different tax bracket as a result of this - for example more people could be paying tax at the higher rate. This is often referred to as a ‘stealth tax’ with people not always realising how this affects them.
🍁 There has been no change to the current rates of income tax or national insurance for those that are employed or self employed.
🍂The basic rate and higher rates of dividend tax will increase to 10.75% and 35.75% respectively from April 2026 - an increase of 2%. Not great news for those running a company and extracting their income by way of a dividend.
🍁 The tax on savings income will increase by 2% from April 2027 which could prove costly for those who have interest income that is in excess of their personal savings allowance.
🍂From April 2027 property income will have its own separate tax rates with the basic rate being 22%, the higher rate being 42% and the additional rate being 47% - this is an increase of 2% based on the current rates which is disappointing for the landlords out there. There has already been speculation that the landlords will increase rents further to help recoup some of the extra tax paid which is not great news for tenants either.
🍁 With regard to pensions there has been no change to the 25% tax free lump sum or the tax relief on pension contributions made, HOWEVER, there has been a significant change to those making pension contributions by way of a salary sacrifice. A salary sacrifice arrangement allows you save income tax and national insurance. From April 2029, where pension contributions exceed a £2,000 threshold, they will no longer be exempt from national insurance - this applies to both the employee and the employer. They will still get the income tax relief here though.
🍂Owners of property worth two million or more will face a high value council tax surcharge from April
2028 - this surcharge will be banded and starts at £2,500 per annum.
🍁With regard to capital allowances, from April 2026, the main rate of writing down allowances will reduce by 4% to 14%. From 1 January 2026, there will be a new first year allowance of 40% for main rate assets, preserving incentives to invest. Cars, second hand assets and assets for leasing overseas will not be eligible.
🍂There has been no change to the current VAT rate or the VAT registration threshold.
🍁There has been no change to the corporation tax rate of 25%.
🍂 The student loan repayment threshold has been frozen at the 2026/27 level for three years.
I have covered as much as I can for now and I hope this is helpful.
