The 2025 Budget was eventually delivered by The Chancellor Rachel Reeves on 26th November 2025. It follows weeks of speculation, kite flying, and the complete abandonment of Budget purdah. Remarkably, the whole thing was effectively leaked for the best part of an hour before the Chancellor actually stood up. There was certainly a lot of announcements but not a tremendous amount of good news.
The following is a summary of the main points, concentrating on the announcements which affect small business owners as usual.
In an extension of this stealth measure, many major tax thresholds will be frozen for a further three years, to 6 April 2031. This includes personal income tax and equivalent national insurance thresholds. If enacted, the personal allowance will have been held at £12,570 for 10 years.
The National Minimum Wage rates will increase from 1 April 2026 and will be subject to a separate blog article.
Not much changed in respect of capital allowances (most small businesses will still be able to get 100% tax relief on assets purchased under the Annual Investment Allowance). However, the headline rate of writing down allowance applicable to capital expenditure in the main rate pool will drop from 18% to 14% on 1 April 2026 (1 April 2026 for companies, 6 April 2026 for sole traders and partnerships).
Electronic invoicing will be made mandatory for all VAT invoices for business-to-business and business-to-government transactions from 2029. This will be subject to consultation early next year and more details will be expected in the 2026 Budget.
There weren’t really any new announcements in respect of MTD: this is still happening from April 2026. However, it was confirmed that there won’t be any penalties for late submission in 2026/27.
A new penalty regime will apply from April 2027 in respect of Self Assessment late submission and late payment. Penalties for late filing will be more lenient but penalties for late payment will increase.
For filing dates on or after 1 April 2026, late filing penalties will double from £100 to £200. This doubles again if a return is more than 3 months late.
The current rate of dividend tax is 8.75% for basic rate taxpayers and 33.75% for higher rate taxpayers. These rates will increase by 2% with effect from 6 April 2026, increasing to 10.75% and 35.75% respectively.
The government is creating separate tax rates for property income. These separate rates mean property income will have its own individual tax rates (as already occurs for the taxation of savings and dividend income). From April 2027, the property basic rate will be 22%, the property higher rate will be 42% and the property additional rate will be 47%. Finance cost relief will be provided at the separate property basic rate (22%).
Tax on savings income will increase by 2% from April 2027. For basic rate taxpayers, this will increase from 20% to 22% and for higher rate taxpayers, the increase is from 40% to 42%. The Savings Allowance is unchanged (£1,000 for basic rate taxpayers, £500 for higher rate taxpayers).
From April 2028, a new mileage-based charge will apply to electric and plug-in hybrid cars. In 2028-29, the charge will be 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrid cars.
Pension contributions by salary sacrifice means that employees save on employees NI and employers also save with employers NI. From April 2029, there will be an annual cap of £2,000 made under salary sacrifice. Contributions above £2,000 will be subject to employee and employers NI.
For more on the 2025 Budget, please visit here.
27.11.25
