Date: November 2025
Prepared For: ACCA Members and Clients
Subject: Overview of Key Tax and Policy Changes
Executive Summary
The Chancellor’s Autumn Budget 2025 aims to stabilize public finances and bolster fiscal credibility through significant tax increases and frozen thresholds. The measures introduce considerable complexity to the tax system, with further consultations expected. While the headline Corporation Tax rate remains capped at 25%, businesses face new administrative burdens and rate changes for capital allowances. For individuals, the freeze on income tax thresholds is extended to 2031, alongside increases in dividend and savings tax rates.
This briefing outlines the critical changes affecting businesses, individuals, and capital taxes.
1. Business Taxation
Corporation Tax (CT)
The government has confirmed the corporate tax roadmap for this Parliament:
- Headline Rate: Capped at 25%.
- Small Profits Rate: Maintained at current levels (19%).
- Allowances:
- Full Expensing: Permanent 100% first-year allowance for main rate plant and machinery.
- AIA: Annual Investment Allowance remains at £1 million.
- R&D: Rates for the merged R&D Expenditure Credit and Enhanced Support for R&D Intensive SMEs are maintained.
- Patent Box: Maintained.
New Measures:
- Writing Down Allowances (WDA): The main rate WDA reduces from 18% to 14% from 1 April 2026 (Corporation Tax) and 6 April 2026 (Income Tax).
- New First-Year Allowance: A 40% FYA for main-rate assets is introduced from 1 January 2026. This extends relief to the leasing sector, which is currently excluded from full expensing. Cars and second-hand assets remain ineligible.
- Zero-Emission Vehicles: The 100% FYA for zero-emission cars and EV charge points is extended to 31 March 2027 (Corporation Tax) and 5 April 2027 (Income Tax).
- Administration:
- Late Filing Penalties: Doubled from 1 April 2026.
Digitalisation: Consultation in early 2026 on mandating digital submission and tagging of CT computations.
Making Tax Digital (MTD)
The rollout of MTD for Income Tax Self Assessment (ITSA) continues:
- Threshold Extension: MTD will apply to sole traders and landlords with income over £20,000 by the end of this Parliament.
- Current Roadmap:
- April 2026: Income over £50,000.
- April 2027: Income over £30,000.
- Deferrals & Exemptions:
- Deferred (1 year): Trusts/estates, averaging adjustments, qualifying care relief, and non-resident foreign entertainers/sportspeople.
- Exempt: Those with a Court of Protection deputyship.
Employment Costs
From 1 April 2026, minimum wage rates will increase significantly:
- National Living Wage (21+): Increases by 4.1% to £12.71/hour.
- 18-20 Year Olds: Increases by 8.5% to £10.85/hour.
- 16-17 Year Olds & Apprentices: Increases by 6.0% to £8.00/hour.
- Youth Guarantee: A new guaranteed 6-month paid placement for 18-21-year-olds on Universal Credit for 18 months.
Business Rates
- Retail, Hospitality, and Leisure (RHL): Permanently lower multipliers intended from 2026/27.
- High-Value Properties: From 1 April 2026, a higher multiplier (50.8p) applies to properties with a rateable value of £500,000+.
- Small Business Relief: Grace period extended to two years for businesses expanding into a second property.
2. Capital Taxes
Capital Gains Tax (CGT)
Rates are increasing, and reliefs are being restricted:
- Business Asset Disposal Relief (BADR) & Investors’ Relief: Rate increases from 14% to 18% from 6 April 2026.
- Investors’ Relief Limit: Lifetime limit reduced from £10m to £1m for disposals on/after 30 October 2024.
- Employee Ownership Trusts (EOTs): Relief restricted. From 26 November 2025, only 50% of gains on disposals to EOTs are exempt (previously 100%).
Inheritance Tax (IHT)
- Thresholds: The Nil Rate Band (£325k) and Residence Nil Rate Band (£175k) are frozen until April 2031.
- Pensions: Unused pension funds and death benefits will be included in the estate for IHT purposes from April 2027.
- Agricultural & Business Property Relief: The 100% relief will be capped at a combined £1 million allowance from April 2026. Legislation will index this £1m allowance to CPI from April 2031.
3. Personal Taxation
Income Tax Thresholds
The freeze on the Personal Allowance (£12,570) and Higher Rate Threshold (£50,270) is extended to 2030-31.
Tax Rates: Dividends, Savings & Property
To raise revenue from assets, rates on “passive” income are increasing:
- Dividend Income (from April 2026):
- Ordinary Rate: 10.75% (up from 8.75%)
- Upper Rate: 35.75% (up from 33.75%)
- Additional Rate: Remains 39.35%
- Savings & Property Income (from April 2027):
- Basic Rate: 22% (up from 20%)
- Higher Rate: 42% (up from 40%)
- Additional Rate: 47% (up from 45%)
Pensions
- Salary Sacrifice: From April 2029, employer NIC relief on salary sacrifice pension contributions is capped at £2,000 per year. Contributions above this are subject to employer NICs.
- State Pension: Increases by 4.8% in April 2026.
ISAs
- Cash ISA Limit: Reduced from £20,000 to £12,000 from 6 April 2027.
- Total ISA Limit: Remains at £20,000.
4. Motoring & Employment
Company Cars (Benefit in Kind)
Rates for 2028/29 and 2029/30 have been set to provide long-term certainty:
- EVs (Zero Emission): Increases by 2% per year, reaching 9% in 2029/30.
- Hybrids (1-50g CO2): Rises to 18% (2028/29) and 19% (2029/30).
- Other Vehicles: Max rate rises to 38% (2028/29) and 39% (2029/30).
Electric Vehicle Excise Duty (eVED)
From April 2028, a pay-per-mile charge applies:
- Battery Electric: 3p per mile.
- Plug-in Hybrid: 1.5p per mile.
5. Tax Administration & Compliance
- Timely Payment (ITSA): From April 2029, taxpayers with both Self-Assessment and PAYE income will have ITSA liabilities collected via their tax code throughout the year, rather than a lump sum.
- HMRC Resources: £89m investment for debt collection staff and £25m to tackle insolvency abuse (“phoenixism”).
- Simple Assessment: From 2027/28, pensioners with income just above the personal allowance will be removed from Self-Assessment via Simple Assessment adjustments.
Appendix: Income Tax Rates Tables
England, Wales & Northern Ireland (Non-Dividend Income)
| Band | Income Range | 2025/26 Rate | 2026/27 Rate |
| Starting Rate (Savings) | Up to £5,000 | 0% | 0% |
| Personal Allowance | £0 – £12,570 | 0% | 0% |
| Basic Rate | £12,571 – £50,270 | 20% | 20% |
| Higher Rate | £50,271 – £125,140 | 40% | 40% |
| Additional Rate | Above £125,140 | 45% | 45% |
Scotland (Non-Dividend Income)
| Band | Income Range | 2025/26 Rate | 2026/27 Rate |
| Personal Allowance | £0 – £12,570 | 0% | 0% |
| Starting Rate | £12,571 – £15,397 | 19% | 19% |
| Basic Rate | £15,398 – £27,491 | 20% | 20% |
| Intermediate Rate | £27,492 – £43,662 | 21% | 21% |
| Higher Rate | £43,663 – £75,000 | 42% | 42% |
| Advanced Rate | £75,001 – £125,140 | 45% | 45% |
| Top Rate | Above £125,140 | 48% | 48% |
Dividend Income (UK Wide)
| Band | 2025/26 Rate | 2026/27 Rate |
| Allowance | £500 | £500 |
| Ordinary Rate | 8.75% | 10.75% |
| Upper Rate | 33.75% | 35.75% |
| Additional Rate | 39.35% | 39.35% |
ACCA LEGAL NOTICE
This is a basic guide prepared by ACCA UK’s Technical Advisory Service for members and their clients. It should not be used as a definitive guide since individual circumstances may vary. Specific advice should be obtained, where necessary.