Autumn Budget 2025

On Wednesday 26th November 2025, Chancellor Rachel Reeves announced the governments budget for the financial years ahead.

Here is a summary of the announcements relevant to limited company directors, sole traders and landlords*;

• The tax free personal allowance (£12,570), higher rate threshold (£50,270) and additional rate threshold (£125,140) remain frozen until the 2031/2032 tax year.

• 2% increase in the basic and higher rates of Dividend Tax to 10.75% and 35.75% respectively from April 2026. No changes to Dividend Tax at the additional rate.

• 2% increase in Income Tax paid on rental income. The tax rates will be 22% at the basic rate, 42% at the higher rate and 47% at the additional rate. This increase takes place from April 2027.

• 2% increase in tax paid on interest income (excluding ISAs) above the relevant thresholds from April 2027.

• Pensions contributions via salary sacrifice schemes will be liable for National Insurance on contributions above £2,000 a year from April 2029.

• Cash ISA allowance capped at £12,000 a year for under 65s.

• Increase in the minimum wage to £12.71 from April 2026.

• No changes to Corporation Tax rates. “Full Expensing” (100% capital allowances in year one against Corporation Tax) to be retained.

• No changes to the main rate of Income Tax for Sole Traders and PAYE Employees (excluding property and interest income, see above).

• No change to Employers or Employee National Insurance rates.

• Fuel duty frozen for five months after April 2026, followed by a staged increase from September 2026.

• New mileage based tax for EV and plug-in hybrid cars from April 2028.

• Making Tax Digital for Income Tax will go ahead from April 2026 as expected (https://matrixaccountancyservices.org.uk/news/making-tax-digital-for-self-assessment-mtd-for-itsa-latest-update-for-limited-company-directors-sole-traders-partnerships-and-landlords ).

*Please note, all information is accurate as of 26th November 2025 and may be subject to change.

Summary

I will publish guidance in the coming months on the changes to salary sacrifice pension contributions prior to the changes taking effect in April 2029.

Unincorporated landlords should note the change to Income Tax rates from April 2027.

Due to the increase in Dividend Tax rates from April 2026, the effective tax rate on income from a limited (close) company taking into account Corporation Tax and Dividend Tax is approximately 28% on earnings above the £12,570 personal allowance. This is approximately higher than the tax rate paid by Sole Traders at the basic rate (26%).

However, there are circumstances where business incorporation may be a tax efficient option.

For detailed advice and guidance on how the changes in the budget may impact you or your business you can contact me by email at will@matrixaccountancyservices.com or by calling 01788 486065