Autumn Budget 2025

While many changes were widely trailed in the press, what’s now important is how these measures affect growth, employment, and planning.

Income tax threshold freeze extended to 2031

The extension to the freeze to 2031 on income tax thresholds means pay rises intended to offset employees’ cost-of-living pressures are being eroded. Where inflationary increases are given, employees will see real-term reductions in spending power despite the salary increase. This trend will place pressure on the employer and will continue to dampen economic growth.

Employment pressures

The further rise in minimum and living wages adds further strain, particularly for the retail and hospitality sectors which are still absorbing the previous National Insurance and minimum wage increases. In a climate of high youth unemployment and growing automation, these changes risk suppressing job creation even further. The increase may ultimately aid economic growth through the increased spend of the recipients.

Business rates changes

Business rates relief offers some respite for retail and hospitality, but this is likely to be quickly offset by property revaluations. These sectors remain under pressure and, as critical to our communities, need much more targeted government support.

Salary sacrifice restriction to pension contributions – from April 2029

Limiting pension salary sacrifice benefits to £2,000 was expected, but the delay until 2029 was a surprise. While this gives employers time to adapt, the eventual impact will raise employment costs. Businesses may respond by increasing prices (inflationary), reducing pension contributions, or restraining pay growth, all of which affect talent retention.

Profit extraction and dividend strategy

From April 2026, dividend rates rise by 2% across both ordinary and upper bands, increasing extraction costs for owner-managers for amounts up to £125,140. A mix of salary and dividends will likely remain the most efficient route, but planning is essential.

Business exits – the capital gains tax relief cut for Employee Ownership Trusts

There has been an immediate capital gains tax (CGT) relief reduction for sales to Employee Ownership Trusts (‘EOT’s). 50% of the taxable gain will be subject to CGT which gives an effective rate of 12%. This could impact the decisions made regarding succession planning, for those who are considering this as a viable route.

Landlords and the owners of homes valued at £2m+

Private landlords, already challenged by mortgage interest restrictions and legislative burdens, face a further 2% property tax increase from April 2027. We would expect more landlords to either restructure into companies or exit the market, potentially helping first time buyers, but creating challenges for renters as landlords pass on the cost.

The proposed High Value Council Tax Surcharge (HVCTS) or better described as the Mansion Tax will start from April 2028 on properties worth at least £2m. Annual charges start at £2,500 and will be based on 2026 valuations. This is likely to lead to many valuation challenges and disrupt property growth.

Overall impact

Overall, the Budget relied heavily on stealth measures such as frozen thresholds and delayed implementation. There were no game-changing steps to accelerate growth, and the economic environment will remain challenging in the short term. However, with rate cuts on the horizon and changes to EIS and EMI provide the potential for renewed confidence and opportunities exist for those who adapt and consider their strategic, plans early.

Would you like to know more?

If you have any questions about the Government’s Autumn Budget and how it may impact you, please get in touch with your usual Blick Rothenberg contact, or use the form below.

You can also visit our Budget Hub, where you can find our commentary and a range of insights to help you better understand how the Budget may affect you.