The 2025 Budget didn’t bring sweeping tax cuts, but a long list of freezes, rate rises and restrictions means most people will feel the impact over the next few years, especially the self-employed, landlords and small businesses.
Here’s a summary of what’s changing;
Income Tax & National Insurance
Tax thresholds remain frozen
The personal allowance and higher-rate threshold stay exactly where they are.
With wages rising, this quietly pushes more people into higher tax brackets.
National Insurance thresholds are also frozen.
Tax on Savings, Rental Income and Dividends is Increasing
These changes come in in two stages:
Dividend tax increases (from April 2026)
- Basic rate: 10.75% (was 8.75%)
- Higher rate: 35.75% (was 33.75%)
- Additional-rate unchanged
This will affect almost every small company director who pays themselves via dividends.
Savings & rental income tax increases (from April 2027)
New tax bands apply to both:
- 22% basic rate
- 42% higher rate
- 47% additional rate
For landlords: - Mortgage-interest relief continues, but only at the 22% basic property-income rate.
These rises will reduce net returns for savers, landlords and investors.
Pension Relief & Salary-Sacrifice Changes
The Budget confirmed limits and adjustments to how pension tax relief and salary-sacrifice schemes operate.
Key point:
- Higher earners will see reduced tax advantages, as reliefs become more restricted.
- For basic-rate earners, relief remains broadly similar.
These changes may impact how self-employed people and company directors structure pension contributions.
Minimum Wage Increases (from April 2026)
- £12.71/hour for workers aged 21+
- £10.85/hour for ages 18–20
- £8.00/hour for 16–17-year-olds and apprentices
Businesses with hourly staff, especially in hospitality, care and retail, need to budget for this rise.
ISA Allowance Split (from April 2027)
The annual ISA limit stays at £20,000, but:
- Only £12,000 can go into a Cash ISA
- The remaining £8k+ must go into a Stocks & Shares or investment ISA
- People aged 65+ can still put the full £20,000 in cash
This limits how much savers can keep in low-risk cash products.
Corporation-Tax Filing Penalties Are Doubling
A compliance change:
- Late filing penalties for corporation-tax returns will double for all companies.
This affects:
- Small limited companies
- One-person companies
- Directors who submit records close to deadlines
It will now be significantly more expensive to file late.
Making Tax Digital (MTD)
A one-year soft landing has been confirmed for those joining MTD for Income Tax from April 2026.
- No penalties for late quarterly submissions during 2026/27
- Late-payment penalties still apply
This gives sole traders and landlords time to get used to quarterly updates.
High-Value Property Surcharge (“Mansion Tax”)
A new annual surcharge will apply to properties worth over £2 million, expected from 2028:
- Starting at £2,500 per year
- Rising up to £7,500 per year for homes over £5 million
Charged on top of normal council tax. This mainly affects London and the South East.
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