Autumn Budget 2025: what accountants and their clients need to know

The Autumn Budget 2025 began with an unusual twist. Shortly after Rachel Reeves left Downing Street holding the traditional Red Box, the Office for Budget Responsibility (OBR) accidentally published its fiscal outlook online. Key details were out before the Chancellor even began her speech – including the headline that this Budget raises around £26 billion in extra tax by 2029–30.

But for accountants and payroll professionals, what does this mean for your clients over the next few years? Below, we unpack the key measures and their practical implications.

1. Personal tax and investment income

Income tax and NI thresholds frozen to 2030–31

Personal tax and National Insurance thresholds are frozen for a further three years beyond 2028. That means the personal allowance and higher-rate thresholds will stay put through to 2030–31, by which point they’ll have been frozen for almost a decade.

Thresholds in England, Wales and Northern Ireland (Scotland sets its own rates), will remain at:

Implications:

• The OBR estimates that 780,000 more people will be brought into paying income tax in 2029-30

• “Fiscal drag” will mean more basic-rate taxpayers will drift into higher-rate bands as nominal wages rise

• Directors paying themselves a mix of salary and dividends will find the traditional “optimal” salary levels need revisiting.

2 percentage point rise on property, savings and dividend income

Basic and higher rates on property income, savings income and dividend income will each increase by 2 percentage points.

Implications:

• Directors using dividends as their primary extraction route will see a noticeable fall in net income

• Landlords – particularly higher-rate taxpayers – will experience a squeeze on post-tax rental yields

• Clients living off investment portfolios may need a fresh planning approach.

ISA changes – cash capped for under-65s

The Chancellor announced changes to the ISA system: retaining the £20,000 annual allowance but designating a portion of this exclusively for investment-based ISAs.

Savers over 65 will continue to have access to a full cash ISA allowance, but under-65s will be able to put only £12,000 a year into cash ISAs (the remaining £8,000 must go into investment ISAs).

Implications:

• You may need to help clients who prefer cash ISAs rethink their approach or consider longer-term investment strategies

• Older savers will be unaffected, retaining full flexibility.

2. Wages and pensions

National minimum wage – significant increases

To support the government’s longer-term aim of converging towards a single adult rate, rises in minimum wages have been confirmed from April 2026:

• Over-21s: up 4.1% – from £12.21 to £12.71 per hour

• 18–20-year-olds: up 8.5% – from £10.00 to £10.85 per hour

Implications:

• Labour-intensive sectors will face higher base wage bills

• You may need to help clients model knock-on effects on pay differentials

• Automated payroll systems and rate tables will need updating well ahead of April.

Salary-sacrifice pensions – NI advantage capped

From April 2029, salary-sacrificed pension contributions above £2,000 a year will no longer be exempt from employee NI. The OBR expects this to raise about £4.7 billion in 2029–30.

Implications:

• High-earning employees who currently sacrifice large portions of salary into pensions will lose part of the NI benefit

• Employers using salary-sacrifice schemes as part of senior reward packages may need to rethink

• Clients have a four-year window to adjust, avoiding abrupt changes close to 2029.

3. Property – a targeted “mansion tax”

From April 2028, a new High Value Council Tax Surcharge – dubbed a “mansion tax” – will apply to properties in England valued at more than £2m (in 2026 values). There will be four bands, with an annual surcharge ranging from £2,500 for properties in the £2–2.5m band up to £7,500 for homes worth £5m or more, uprated each year.

Implications:

• High-net-worth individuals and family-owned property businesses will face higher annual holding costs

• Inheritance-tax planning and trust structures may need updating to reflect the surcharge from 2028 onwards.

4. Corporation tax and capital gains

Capital gains tax: EOT disposals move from 100% relief to 50% relief

According to the Budget, capital gains tax relief has grown far beyond its original fiscal estimates: from a projected £100 million cost in 2018–19 to a forecast £2 billion by 2028–29 without intervention. The Chancellor’s response is to reduce the relief to 50%, ensuring business owners “pay their fair share” while keeping Employee Ownership Trusts attractive and viable.

Implications:

• EOTs remain a valuable succession route, but the tax advantage has reduced. Clients will now face CGT on half of the gain

• Funding structures may need rethinking – clients may prefer staged consideration, deferred shares or hybrid models to manage tax and cash flow.

Corporation tax: reduced writing down allowances and a new first-year allowance

Though the main corporation tax rate at 25% and full expensing for qualifying plant and machinery remains unchanged, the main rate of writing down allowances (WDAs) for main-rate assets will fall from 18% to 14%. To balance this, a new 40% first-year allowance (FYA) will be introduced from 1 January 2026 for main-rate assets. Cars, second-hand assets and assets for leasing overseas are excluded.

Implications:

• Lower WDAs increase long-term tax costs for businesses with recurring or high-value capital expenditure

• 40% FYA partially offsets the reduction for qualifying assets, making asset classification and record-keeping crucial.

5. Transport and business costs

New Electric Vehicle (EV) mileage tax from 2028

The Budget confirms the introduction of a mileage-based charge on electric and plug-in hybrid vehicles from April 2028, in a move the Chancellor said was intended to reflect the impact “all cars have on our roads”. The rates will start at 3p per mile for fully electric cars and 1.5p per mile for plug-in hybrids, increasing annually with inflation.

Implications:

• Clients with, or planning, EV fleets need to re-run total cost of ownership models as, under the measures, an electric car driver covering 8,500 miles a year could pay £255 – about half the cost per mile of petrol and diesel drivers

• EV salary-sacrifice and company-car schemes will remain attractive on some fronts, but the long-term tax advantage narrows

• Accurate mileage tracking will become essential for tax compliance.

Fuel and rail

• Fuel duty is frozen for five months after April, then scheduled to rise in stages from September 2026

• Regulated rail fares in England will be frozen next year – useful for employers with large commuting workforces.

6. The big picture

The OBR estimates that the combined effect of threshold freezes, rate increases and new levies will raise around £26 billion of additional tax by 2029–30, taking the overall tax burden to about 38% of GDP by 2030–31 – the highest on record.

For accountants and payroll professionals, that means helping clients navigate a landscape where:

• More individuals are dragged into higher-rate tax through prolonged threshold freezes

• Dividends, savings and salary-sacrifice pensions are treated less generously

• Wage floors rise significantly, reshaping payroll costs for labour-heavy businesses

• Property-owning clients face new surcharges on high-value homes

• EV fleets and company-car schemes require new cost modelling.

And, as investment planning becomes more complex, clients will lean more heavily on advisers to determine when to invest, which assets qualify for which reliefs and how to structure disposals and capital programmes for the best tax outcome.

Planning ahead with the right tools

The Autumn Budget 2025 introduced a series of changes that won’t all bite at once, but will build steadily over the coming years. For accountants and payroll professionals, staying ahead of these shifts will be key to helping clients understand their obligations, manage costs and make confident decisions.

The good news is that you don’t have to navigate these changes alone. Bright’s technology is designed to help you adapt quickly, stay accurate and give clients the clarity they need. Explore how Bright can support you every step of the way.

This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.