London, November 30, 2025
The UK Chancellor has unveiled the Autumn Budget 2025 with measures including frozen income tax thresholds, new property and wealth taxes, increased welfare spending, and changes to dividend and pension taxation, aiming to address economic stagnation and rising unemployment without raising income tax rates.
Key Tax Measures
The Chancellor dropped plans to raise income tax rates for the first time since 1975. Instead, the government opted to freeze income tax thresholds, effectively increasing the tax burden as earnings rise with inflation. Significant revenue is also expected from enhanced property-related taxes, notably a new mansion tax targeting high-value homes, effective April 2028. This levy imposes annual surcharges starting at £7,500 for properties over £5 million.
Dividend tax rates will rise by 2% in April 2026 for basic and higher-rate taxpayers, moving to 10.75% and 35.75%, respectively, while the additional rate remains unchanged. Changes to pension taxation will begin in April 2029, removing National Insurance exemptions for salary-sacrifice contributions exceeding £2,000 annually.
Welfare and Living Wage Adjustments
Welfare reforms form a key part of the Budget, including the removal of the two-child benefit cap starting April 2026 and aligning welfare benefits with inflation rates. These measures reflect the government’s response to economic pressures and social needs.
The national living wage will also increase from £12.21 to £12.71 per hour, following an employer National Insurance rise set for April 2025. This adjustment may influence employment patterns and business costs.
Fuel Duty and Economic Landscape
The Budget maintains a freeze on fuel duty until 2026 but retains a modest cut of 5p per litre to mitigate inflationary risks. These incremental adjustments aim to balance fiscal demands with consumer protection amid economic challenges.
Underlying these fiscal measures is a difficult economic backdrop of stagnant growth, persistent inflation, and rising unemployment. The government’s approach blends structural reforms and incremental taxation to broaden revenue sources without introducing headline income tax rate hikes.
Implications for Stakeholders
Households may face indirect tax increases through frozen thresholds and higher property levies, impacting long-term financial planning. Businesses and investors will encounter changes via dividend tax adjustments and pension contribution rules, requiring strategic review. Property owners in higher value brackets are particularly affected by the mansion tax surcharge.
The Budget’s mix of partial tax increases without altering primary income tax rates suggests further fiscal measures could emerge in 2026 to address ongoing economic pressures.
This combination of targeted tax rises and reform initiatives marks a cautious shift toward sustainable fiscal consolidation, balancing economic recovery with social support.