All has been revealed, and a little earlier than planned!
On 26 November 2025, after months of speculation, Chancellor Rachel Reeves delivered her second Budget. Although her speech was rather overshadowed by the astonishing news that the Office for Budget Responsibility (OBR) had published the details early in a “technical error”. It seems likely that the technical error was of the “PEBKAC” variety, i.e. Problem Exists Between Keyboard And Chair!
It is fair to say that both the Chancellor and the Deputy Speaker were furious over the “unprecedented” leaks and there will be many red faces and questions to answer.
So, did the Budget live up to all the speculation? We think that it could have been worse, although as expected it was mostly bad news.
Did Rachel Reeves keep Labour’s election pledge not to raise taxes on working people? Technically, yes – the headline rates haven’t changed. But as you’ll see below, most people will still end up paying more tax.
Read on for our summary of today’s measures, which have been described as a “smorgasbord of misery”!
Income tax
Income tax and corresponding National Insurance thresholds for employees and the self-employed will remain frozen for an additional three years, from April 2028 to April 2031. Inheritance tax thresholds will also stay unchanged until April 2031. These extended freezes will increase fiscal drag, meaning more individuals will be drawn into higher tax bands and pay greater amounts of tax over time.
In addition, income tax rates are being increased on property, dividend and savings income, as follows:
The above will keep the tax software companies busy, particularly on top of dealing with Making Tax Digital for Income Tax, which is probably why they’ve been given until 2027 to make some of the changes.
The government states that these changes are to create fairness, by addressing the fact that property, dividend and savings income are not subject to National Insurance.
The government announced that they will ease the administrative burden for pensioners whose sole income is the state pension, so that they don’t have to pay small amounts of tax from 2027/28 if the state pension exceeds the personal allowance from that point. However, they don’t seem to have worked out the details of how this will be done.
Further clampdown on salary sacrifice
From April 2029, pension contributions above £2,000 per year made via salary sacrifice will lose their National Insurance exemption. This is expected to raise billions and also make the system “fairer” (so called fairness was a recurring theme today) but it’s a blow for higher earners who’ve used this route to boost savings.
Salary sacrifice has been in the government’s sights before. Back in 2017, the tax perks for certain cars, technology, and other benefits were stripped away, leaving pensions as one of the last big advantages. This restriction signals the end of that era and was widely predicted.
Inheritance tax – something positive!
From 6 April 2026, the government will reform agricultural property relief and business property relief, with a restriction for the 100% rate of these reliefs to £1m (which has also been fixed for a further year until April 2031).
That reform is still happening (sorry Mr Clarkson) but it has now been confirmed that the £1m allowance for the 100% rate will be transferable between spouses and civil partners. The nil rate band and residential nil rate band are already transferable and it seems likely that not making the £1m allowance transferable was an oversight, which has now, very sensibly, been corrected.
It is also worth noting that many of the feared inheritance tax measures, for example restrictions to lifetime gifting, have not been introduced. So more good news!
Employee Ownership Trusts
Now back to the bad news. The government will reduce the capital gains tax relief available on qualifying disposals to Employee Ownership Trusts from 100% of the gain to 50%, with effect from 26 November 2025.
This restriction has been introduced because the scheme has cost 20 times more than the government expected. Although, we would have thought it quite obvious that people would be attracted to selling their businesses tax free!
Sneaky wealth tax
In another “fairness” measure, the government is asking those owning the highest-value properties to contribute more. The government is introducing a High Value Council Tax Surcharge (HVCTS) in England for residential properties worth £2m or more, from April 2028. New charges start at £2,500 per year, rising to £7,500 per year for properties valued above £5m, and will be levied on property owners rather than occupiers.
This is widely seen as a form of “mansion tax”. While it’s not technically the much-discussed wealth tax, it certainly acts like one – targeting high-value property owners. Wealth taxes are usually considered hard, complex, and expensive to administer, but this approach seems a relatively simple way to raise extra revenue.
Enterprise Management Incentives (EMI) schemes
The company eligibility limits for EMI schemes will be significantly increased, to allow scale-ups to join start-ups in offering tax-advantaged shares to reward talent. From April 2026:
Individual Savings Accounts (ISAs)
We have had a generous £20,000 annual ISA limit for a while, which can be used for cash ISAs, stocks & shares ISAs, or be split.
The £20,000 limit is staying but, from April 2027, the annual cash ISA limit will be £12,000, within the overall annual limit of £20,000. Savers over the age of 65 will continue to be able to save up to £20,000 in a cash ISA each year.
