The Chancellor has kept the main pension allowances unchanged but has confirmed a new cap on salary sacrifice arrangements that will apply from April 2029.

There had been heated speculation that the Chancellor would change the pension rules to help the government raise taxes, but no changes were announced to the annual allowance (which remains at £60,000) or to the carry-forward rules which can use up previous year’s annual allowances. The lump sum allowance has also remained unchanged at £268,275.

However, the Chancellor announced changes to the salary sacrifice arrangements for pension contributions. Salary sacrifice allows employees to reduce part of their salary or bonus in exchange for pension contributions, which is tax-efficient and helps save for retirement. However, this arrangement has disproportionately benefited higher earners with salary sacrifice costs expected to rise from £2.8 billion in 2016-17 to £8 billion by 2030-31.

From April 2029, the government plans to introduce a cap on salary sacrifice contributions which will limit the amount that can be sacrificed without incurring National Insurance Contributions (NICs) to £2,000 per employee. Salary sacrifice contributions above this amount will be subject to employer and employee NICs. Pension contributions that are not part of a salary sacrifice will remain unchanged.

The Chancellor reaffirmed the government's commitment to maintaining the Triple Lock on the State Pension throughout this parliament. This means that in April 2026, the State Pension will increase by 4.8%. The Triple Lock ensures that the State Pension rises by the highest of three measures: inflation, wage growth, or 2.5%, helping to protect pensioners' income against rising costs of living.

Also, starting from 6 April 2027, the government will close a loophole that allows individuals to use pensions for inheritance tax (IHT) planning. Under the new rules, any unspent pension pots will be brought within the scope of IHT.

The Chancellor has confirmed a series of duty increases on tobacco, vaping liquid, and alcohol that will take effect over the next year, with new rates intended to balance public health concerns with support for producers and the wider hospitality sector.

As part of the Autumn Budget measures the Chancellor announced that the duty rates on tobacco products were increased by 2% above the rate of inflation (based on RPI) effective from 6pm on 26 November 2025. The one-off increase of £2.20 per 100 cigarettes or 50g of other tobacco products and annual uprating of tobacco duty by RPI + 2% next year will take effect from 1 October 2026

It was also announced as part of last year’s Budget measures that the government will introduce a new duty at a flat rate excise duty of £2.20 per 10ml on all vaping liquid which will come into effect from 1 October 2026.

The Chancellor also confirmed that effective from 1 February 2026, the government will increase the Alcohol Duty rates in line with Retail Price Index inflation. The Small Producer Relief discounts will also be uprated, so eligible small producers receive relative duty reductions as now. These changes will also take effect from 1 February 2026.

The government considered various views, from cutting or freezing alcohol duties to increasing them above inflation. The decision they announced seeks to balance supporting alcohol producers and the hospitality sector with the need to reduce alcohol related harm.

In the Autumn Budget, the Chancellor had been expected to increase fuel duty rates. However, she has extended the fuel duty cut for a further 6 months to help support households and businesses. 

The Chancellor said ‘I know that the cost of travelling to and from work is still too expensive, so I am extending the 5p cut until September 2026. And because I know that changes in wholesale prices are not always passed onto motorists, I am bringing in new rules to mandate petrol forecourts to share real-time prices through a new Fuel Finder.’ 

This means that the temporary cut in the rates of fuel duty introduced at Spring Statement in March 2022, and extended multiple times is to be extended for a further 6 months until 31 August 2026.

The planned inflation-based increase for 2026-27 will be cancelled. Together with the launch of Fuel Finder, these measures are expected to save families £89 next year compared to previous plans.

Starting in 2028-29, the government will introduce a High Value Council Tax Surcharge (HVCTS) for residential properties in England valued at £2 million or more. This surcharge will be collected by local authorities, but the revenue will go to central government.

High Value Council Tax Surcharge Charging Structure

Property Value	Surcharge
£2 million – £2.5 million	£2,500
£2.5 million – £3.5 million	£3,500
£3.5 million – £5 million	£5,000
Over £5 million	£7,500

The surcharge amounts will be based on the value of the residential property in 2026. The surcharge will increase as the property value rises, up to a maximum charge of £7,500 for properties valued over £5 million.

According to HM Treasury figures, the surcharge will apply to fewer than 1% of properties in England. Homeowners, not tenants, will be liable for the surcharge, which will be in addition to their existing Council Tax. Social housing will be excluded.

Properties above the £2 million threshold will be reassessed every five years by the Valuation Office. The surcharge rates will increase annually in line with CPI inflation starting in 2029-30.

This new charge is expected to raise around £430 million annually for local government services. Local authorities will be compensated for the additional costs of administering the surcharge. A public consultation on further details, including reliefs and exemptions, will take place next year.

The degree of speculation about this year’s Budget announcements was further compounded when the Office of Budgetary Responsibility uploaded their report on Budget changes prior to Rachel Reeves announcements to Parliament.

However, there are to be no changes to the main rates of Income Tax, NIC and VAT that affect wage earners across the UK, but the Budget Report highlights numerous changes to plug the gap in government finances. We have set out below the most impactful of these changes as they affect business owners and UK taxpayers.

Individuals — what changes and what to watch

Personal tax thresholds remain frozen

• The thresholds for income tax and employer National Insurance contributions will be frozen until at least April 2031 (with earlier freezes extended further by the new Budget).
• This “fiscal creep” means that as wages (or inflation) rise, more people will effectively pay higher rates of tax or move into higher tax bands even though nominal rates remain unchanged. 

Higher tax on investment, property and savings income

• Tax rates on dividends, property income and savings income are being increased by two percentage points. The dividend changes are due to take effect from April 2026 and the property and savings income a year later from April 2027. The dividend changes only apply to the basic and higher rate bands.
• Existing allowances (for example on dividends and savings) will continue to provide protection for people with low to moderate amounts of such income.

ISA reforms will see some limits reduced

• From 6 April 2027, the annual cash limit for ISA savings will be reduced to £12,000. The subscription limits for ISAs overall will remain at £20,000. Savers aged 65 and over will continue to be allowed to save up to £20,000 in a cash ISA each year. 

Two-child limit for Universal Credit (UC) to be scrapped

• The two-child limit introduced back in 2017 is to be scrapped from April of next year. The government has said that removing the two-child limit will lift 450,000 children out of poverty. There had been a concerted campaign over many years to have this cap removed.

Pension contributions via salary sacrifice will be limited

• For individuals using salary sacrifice schemes to contribute to pensions tax-efficiently, the relief will be capped so that only the first £2,000 of pension contributions per person per year remain exempt from National Insurance. Contributions above that threshold will be subject to NICs from 2029.
• This change is likely to hit higher earners and those with larger pensions contributions more heavily.

A new council-tax surcharge for high-value properties

• From April 2028, homes valued at over £2 million will attract a “High Value Council Tax Surcharge”.
• The surcharge will be banded: a property worth £2 million to £2.5 million will incur a surcharge of £2,500; properties worth more will pay higher surcharges (up to £7,500 for properties valued over £5 million).
• The surcharge will be collected locally (with council tax) but the revenue will go to central government.

New taxes on electric vehicles, online gambling and imports

• A new per-mile Electric Vehicle Excise Duty (eVED) will be introduced for battery electric cars and plug-in hybrids from April 2028. This is intended to replace some of the lost revenue from fuel duty. The rate will be 3p per-mile for fully electric vehicles and 1.5p for plug-in hybrids.
• The government is removing the customs-duty relief for low-value imports (£135 or less), a move aimed at levelling the playing field for UK retailers competing with foreign-based online sellers. This change will take effect from March 2029 at the latest.
• There will be tighter rules for VAT on ride-sharing taxi apps (preventing misuse of a scheme intended for tour operators).
• Changes to the taxation of online gambling are also on the way. This includes an increase in Remote Gaming Duty from 21 per cent to 40 per cent from 1 April 2026 and the abolishment of Bingo Duty from the same date.

Other changes with possible future effects

• Some changes to Capital Gains Tax for non-resident individuals, share exchange/reorganisation rules, and inheritance-related trust charges for former non-domicile residents were also announced.

Businesses — what changes and what to watch

Business rates relief and targeted support for certain sectors

• The government plans to make permanent lower business rates for over 750,000 retail, hospitality and leisure properties amounting to nearly £900 million per year from April 2026.
• A support package worth £4.3 billion will help businesses with rate bill increases following revaluations from April 2026.
• For film studios, 40 per cent business rates relief will be maintained for ten years, until 2034. 

Corporation tax, capital allowances and investment incentives adjusted

• Corporation Tax remains capped at 25 per cent for the duration of this Parliament.
• Writing-down allowances (the tax relief businesses claim when they buy capital items not qualifying for “full expensing”) will be reduced from 18 per cent to 14 per cent from April 2026, making it marginally less attractive to invest in some capital items unless they fall under the full expensing rules.
• From 1 January 2026, the government will introduce a new 40 per cent First Year Allowance for main rate expenditure. This will apply to most spending on assets for leasing and expenditure by unincorporated businesses.

Withdrawal of certain reliefs and tightening of anti-avoidance rules

• Relief for gains on disposals to Employee Ownership Trusts is being cut, from 100 per cent to 50 per cent. That reduces the appeal of these trusts as a tax-efficient exit strategy or ownership structure for both entrepreneurs and businesses.
• The Budget introduces new anti-avoidance rules addressing certain non-derecognition liabilities, among other technical reforms.

Changes to imports, compliance and VAT arrangements

• The removal of the low-value consignment relief (which previously exempted many foreign online retailers from customs duties on small-value imports) may benefit UK bricks-and-mortar retailers by levelling the playing field.
• More robust HMRC compliance and administrative reforms are planned, which the government expects will reduce the tax gap (the difference between what is owed and what is collected).

Minimum wage changes

• The National Living Wage (NLW) will rise from £12.21 to £12.71 per hour on 1 April 2026, a 4.1 per cent increase. The National Minimum Wage (NMW) for 18-20 year olds will also increase from £10.00 to £10.85, an 8.5 per cent increase, increasing pay by up to £1,500 a year. This change is part of efforts to narrow the wage gap between younger workers and those on the NLW. Additionally, the NMW for 16-17 year olds and the Apprentice Rate will both rise from £7.55 to £8.00 (a 6 per cent increase).

What this means in practice for different types of taxpayers

For a middle-income employee

If you are a typical employee with mainly salaried income and modest savings or investment income, the freeze on thresholds may slowly push more of your earnings into higher rate bands, reducing your disposable income over time. If you rely on dividends or rental income, your after-tax return may suffer due to the higher rates. Pension contributions made via salary sacrifice may lose some of their attractiveness if they exceed £2,000 per year, but modest savers should be relatively unaffected.

For higher earners, property owners, and investors

If you own a high-value home, rental property, or significant investments, these changes may hit you harder. The council-tax surcharge on expensive properties and the higher rates on investment income make clear that future tax burdens will increasingly fall on wealth, capital, and savings rather than earned income. Pension-savings advantages for high earners are reduced. For business owners, particularly those using or considering Employee Ownership Trusts, the reduction in reliefs may diminish some previously attractive exit or succession planning strategies.

For small businesses, investors and growth companies

The maintenance of Corporation Tax at 25 per cent provides some certainty, but reduced capital allowances and fewer reliefs may raise the effective tax cost of certain investments. On the plus side, support for high-streets (lower business rates for retail, hospitality, leisure) and targeted reliefs (e.g., for film studios) offer relief for businesses in those sectors. The removal of import-duty relief for low-value imports could benefit UK retailers by levelling the competitive field.

Broader context and likely economic impact

• The government expects these measures to raise around £26 billion per year by 2029–30, making this among the largest medium-term tax increases in recent decades.
• As a result, the overall tax take is projected to reach a record 38 per cent of GDP by 2030–31.
• Some planned reliefs and public spending measures are intended to offset cost-of-living pressures: for example, cuts to energy bills, freezing rail fares, and support for households on lower incomes.

What to keep an eye on

• Implementation: Many changes (pension-salary sacrifice cap, high-value property surcharge, vehicle mileage levy) come in over a number of years. The detail of how they will be applied may affect their actual impact.
• Behavioural responses: As thresholds remain frozen and investment incomes are taxed more heavily, individuals may shift the balance of their income (more salary, less dividends, changes to pension contributions) which could reshape personal tax planning strategies.
• Business planning and investment: Reduced writing-down allowances and withdrawal of some reliefs may influence decisions about capital expenditure, timing of investments, and business structure (especially for those considering Employee Ownership Trusts).
• Compliance and administration: The government’s push to tighten compliance and close loopholes may mean higher scrutiny for individuals and businesses, particularly around imports, VAT, and offshore arrangements.