Autumn Budget 2025 summary for small companies and sole traders

The Autumn Budget announced on 26 November 2025 by Chancellor Rachel Reeves introduces major tax and financial reforms that will significantly impact individuals and businesses. With extended freezes on income tax and National Insurance thresholds, increased rates on savings and dividend income, and new restrictions on deductions, this budget marks a substantial shift for taxpayers amidst rising costs and changing economic priorities.

Whether you’re an employee, landlord, business owner, investor, or saver, the measures introduced will likely affect your finances over the coming years. Below, we break down the key announcements and what they mean in practice.

Income Tax

Extended threshold freeze and tightened working from home claims.

The government has confirmed that current income tax rates and thresholds will remain frozen until 2031, extending a policy that was originally due to end in 2028.

For many, this will mean fiscal drag: as wages rise with inflation, more people may move into higher tax bands.

A major change affecting employees is the removal of the income tax deduction for non-reimbursed working-from-home expenses from 6 April 2026.
This will impact those who currently claim directly with HMRC when their employer does not reimburse costs. It remains unclear whether this restriction will extend to employer-claimed expenses.

National Insurance

A further three-year threshold freeze

National Insurance thresholds and rates will also remain frozen from 6 April 2028 to 2031.
This aligns national insurance with the income tax freeze, meaning workers may see higher bills over time as earnings rise.

Savings Tax

Rates increasing

For savers, tax on interest income will rise by 2% across all tax bands from April 2027. This means the savings basic rate will increase to 22%. The higher savings rate will increase to 42% and the savings additional rate will increase to 47%.

The starting rate for savings remains at £5,000 until 5 April 2031, providing some relief for lower-income savers.

Dividend Taxes

Significant Increases on the Horizon

Dividend tax rates will rise from April 2026:

• Basic rate: from 8.75% to 10.75%
• Higher rate: from 33.75% to 35.75%
• The additional rate will remain unchanged at 39.35%.

These increases are driven by the government’s view that dividend income should contribute more fairly, given that it is not subject to NI.

Additionally, the dividend tax credit for non-UK residents will be abolished. From 6 April 2026, dividends received after a temporary period of non-residence will be taxable in the UK.

Property Taxes

Landlords to pay more

Landlords will face a 2% tax rise across basic, higher, and additional rate brackets from April 2027, reflecting the fact that rental profits are not subject to NI.

The income tax rates for property income will be 22% for basic rate, 42% for higher rate and 47% for additional rate.

ISA Changes

New cash limits for most savers

From 6 April 2027, the ISA cash allowance will be capped at £12,000 within the £20,000 annual limit.
However, individuals aged 65+ can continue to use the full £20,000 cash ISA allowance.

All other ISA allowances remain unchanged.

Student Loans

Threshold freeze ahead

For Plan 2 student loans, the repayment threshold will remain fixed at 2026/27 levels for three years, covering the 2027/28 to 2029/30 tax years.

This means repayments may increase for graduates as earnings rise, even without a threshold adjustment.

Capital Gains Tax

No new changes

The Budget introduced no further CGT updates, maintaining the status quo for investors and landlords in this area.

Corporation Tax

Penalties strengthened

From 1 April 2026, penalties for filing Corporation Tax returns late will double, emphasising the government’s push for timely compliance.

Capital Allowances

Updated reliefs for businesses

Several changes are coming to capital allowances:

• The 100% first-year allowance for zero-emission vehicles is extended to:
  • 31 March 2027 for Corporation Tax
  • 5 April 2027 for Income Tax
• A new 40% first-year allowance will apply to main-rate assets from 1 January 2026.
• Writing-down allowances will fall from 18% to 14% from April 2026.

These updates aim to encourage investment while aligning allowances with long-term fiscal plans.

Pensions

Tighter rules for UK entitlement

Significant changes are planned for pension entitlement and contributions:

• Access to voluntary Class 2 national insurance contributions for individuals living abroad will be removed.
• Eligibility for a UK State Pension will require 10 years of living and working in the UK, with higher required contributions.
• From 2029, national insurance relief on salary-sacrifice pension contributions will be capped at £2,000 per person. Any contributions above this will attract national insurance.

These measures are intended to streamline entitlement and ensure contributions better reflect usage.

Final Thoughts

The Autumn Budget 2025 introduces a broad range of tax changes that will affect many individual workers, landlords, investors, and savers as well as businesses of all sizes. While some measures aim to simplify the system, others may increase the tax burden in real terms, especially given the extended freezes on thresholds.