UK Budget 2025
Does it Make Your Daily Life Better?
What is the UK Budget and How Does it Affect You?
UK Chancellor of the Exchequer Rt Hon Rachel Reeves MP presented UK Budget in her annual statement before the Parliament on 26 November 2025.
Quick Links:
What is Budget?
The UK Budget is an annual statement by the Chancellor of the Exchequer to Parliament. It outlines the government's plans for taxation and spending for the financial year ahead and includes economic forecasts from the Office for Budget Responsibility (OBR).
Since 2017, the budget has typically been delivered in the autumn, to allow major tax changes to take place before the start of the new financial year. The government has committed to holding one main budget in the autumn, with a separate Spring Fiscal Statement to focus on economic updates rather than major tax changes.
What are the Major Changes in the 2025 Budget: Do they Make Your Life Better?
Fiscal changes are not major, but minor and designed to raise tax revenue.
In the Quick Overview you can go straight into the policy changes.
The quick overview is based on the discussions of Old Square Tax Chambers barristers.
It's a looking down the back of a sofa for coins budget, isn't it?
Quick Budget Overview
VAT
Customs and Import Duty
Air Passenger Duty on Private Jets
Digital Services Tax
Digital Gaming and Betting
Abolition of Bingo Tax
Key Policy Focus
2025 UK Budget outlines the key areas of policy focus as reproduced verbatim from the executive summary below.
This is reproduced verbatim from Budget's Executive Summary
This Budget takes the fair and necessary choices to deliver on the government’s promise of change:
- Cutting the cost of living by tackling inflation and taking around £150 off energy bills on average from April next year, and implementing a one-year freeze on regulated train fares and prescriptions charges.
- Cutting the NHS waiting list in England, supported by 5.2 million more appointments delivered since the start of the Parliament and by creating 250 new Neighbourhood Health Centres.
- Cutting debt and borrowing, to reduce the amount spent on debt interest rather than public services and to support the Bank of England to get inflation and interest rates down.
These choices strengthen Britain’s economic foundations and set the course for a secure future for the country.
Since the start of this Parliament, Britain has:
- Outperformed growth forecasts, with growth in 2025 upgraded to 1.5% from 1% in March, and is on course to be the second-fastest growing economy among G7 countries.
- Seen real wages increase more than in the decade from 2010.
- Struck three trade deals, with the US, India and the EU. The India free trade agreement alone could increase GDP by over 0.1% in the long term.
- Seen the Bank of England cut interest rates five times.
The choices taken at Autumn Budget 2024 and over the Parliament have begun to deliver on the government’s mandate for change:
- Increased funding to fix the NHS has seen waiting lists fall, with 5.2 million more appointments delivered.
- Provided over £120 billion in additional capital investment for roads, rail and energy, including £15.6 billion for major city-region transport. The Office of Budget Responsibility (OBR) estimates that the uplift in public investment will raise potential output by around 0.4% over 10 years.
- Implemented ambitious regulatory reforms with a target to reduce the annual admin burden on business by £5.6 billion by the end of the Parliament.
- Reformed the National Planning Policy Framework, delivering 170,000 additional homes and boosting GDP by 0.2% by 2029-30.
The government’s plans are underpinned by its non-negotiable fiscal rules which provide credibility by ensuring day-to-day spending is met with revenues, while allowing the step change needed in investment to grow the economy.
But, despite this progress, for many working people and businesses, the economy is not working well enough, and people are still struggling with the cost of living.
Reflecting historical economic underperformance, the OBR has revised down its productivity forecast. In isolation this reduces the amount of revenue the OBR expects the government to collect by around £16 billion in 2029-30.
The government is determined to outperform this forecast by continuing its plans to grow the economy, protecting public services and cutting borrowing.
But it is right to plan based on the independent forecaster’s judgements, meaning, despite Britain’s progress, the government needs to strengthen the public finances.
So at Budget 2025, the government is doubling down on its plans and the economic and fiscal strategy it set last autumn by:
- Relentlessly pursuing growth to create a secure future through an ambitious growth strategy, including supply-side reforms. The OBR’s downgrade shows the imperative of this programme.
- Taking the responsible choice to get borrowing down and increase the government’s fiscal buffers.
- Fixing the failings of the welfare system to stop people being written off due to sickness and to lift 450,000 children out of poverty.
- Protecting and strengthening the NHS and other public services while ensuring public money is well spent.
- Making the tax system fairer and fit for 21st-century Britain.
- Taking decisive action to cut the cost of living and bring down inflation.
Relentlessly pursuing growth
The OBR’s revised productivity outlook demonstrates the need for the government’s supply-side reforms. At this Budget, the government is going further:
- Investing for the future:This Budget protects increased public investment over the Parliament and delivers the infrastructure needed to drive growth. The government is also investing almost £900 million to complete the publicly funded works for the Lower Thames Crossing; boosting capital investment in the NHS by £300 million; and establishing the Leeds City Fund as a 25-year Business Rates Retention Zone, underlining its commitment to the Northern Growth Corridor.
- The government is also making further planning reforms to accelerate delivery of housing and infrastructure; empowering local and regional leaders to boost growth in their areas; and strengthening the UK’s nuclear capacities to increase energy security.
- Backing business and unlocking innovation:The government is making it easier for entrepreneurs to start, scale and stay in the UK, with tax changes to incentivise greater investment into scaling companies, a new UK Listing Relief from Stamp Duty Reserve Tax, and reforms to the UK research and development (R&D) system. This will support the UK’s modern Industrial Strategy. The high street will benefit from permanently lower business rates for retail, hospitality and leisure, funded by higher rates for the most expensive properties such as warehouses used by large online retailers. The government will also stick to the commitments set out in the corporate tax roadmap, to provide businesses certainty, and make targeted changes to the capital allowances treatment of main rate assets in a way that preserves the value of relief for future investment.
- Unleashing talent and opportunity:The government is making over £1.5 billion available across the spending review period into the Youth Guarantee and the Growth and Skills Levy. This will tackle the elevated number of people not in education, employment or training (NEET) rates, with the Youth Guarantee ensuring all young people aged 16-24 years old have access to the support they need to earn or learn. Reforms to the visa system will make sure UK businesses have access to the brightest and best global talent.
Taking the responsible choice to get borrowing down and increase the government’s fiscal buffers
Budget 2025 continues to deliver the government’s fiscal strategy: putting the public finances on a sustainable footing to give businesses and households the certainty they need, while increasing investment to grow the economy:
- The government is cutting debt and borrowing – keeping to its tough fiscal rules. The OBR confirms the government is meeting the stability rule in 2029‑30 by £21.7 billion and the investment rule by £24.4 billion, and meeting the stability rule a year early.
- The government is more than doubling the buffer against the stability rule. A higher buffer means more stability for working people and businesses, by reducing the need to change tax and spending plans when there are changes in the economy.
- Policy at this Budget means borrowing falls in every year of the forecast with the UK forecast to reduce borrowing by more than any other G7 country.
Fiscal Rate Band Freezes and What Do They Mean to You?
The budget that looks primarily to freeze fiscal rates, which results in the fiscal creep.
There are several fiscal rate band freezes:
- Income tax
- NIC
- IHT nil rate band
Rate band freezes are predicted to result in nearly a quarter of taxpayers paying the higher rate by 2030. Key tax raising measure here is fiscal creep.
It's one of the largest medium-term tax rises of recent years with a 30 billion rise by 2030 - 2031.
Fiscal creep has been the largest single tax raising measure since 1979. The fiscal creep is expected to raise £32 billion in 2026 - 2027 and £39 billion in 2029 - 2030.
Making it likely the largest overall tax increase for a single policy in the post-war period.
Rate ban freezes are very important fiscal policy measures.
Income Tax Changes
Self Assessment
There is a proposal that self assessment taxes are going to be paid automatically throughout the year. No clear proposals how it is going to be implemented or managed.
Taxing Different income at different rates
The rates have been changed for:
- property income
- dividend income
- savings income
This begs for simplification measures in reduction in the personal allowance from £100,000 onwards as there is an extra tax for earnings above £100,000. For instance, sole traders are keeping their profits just below £100,000.
Salary Sacrifice and Pensions
Salary sacrifice for making pensions contributions going to be restricted and capped at £2,000 a year for employee contributions instead of the general limit of £6,000 a year on personal contributions into a pension plan.
It is estimated that in 2029 – 2030 it will be £4,845 million and in 2030 -2031 £2,585 million making it by far the biggest predicted revenue raiser in the entire budget.
ISAs
From April 2027, the ISA allowance of £20,000 stays the same and £8,000 of which will be allocated exclusively for investment. Over 65s will retain their full cash allowance.
Changes to the EIS, SEIS and EMI
Enterprise investment rules that have been announced are substantially just a rate change in a different form. The government is not going to change the rules.
The law will continue to be as it was but by raising the levels they are going to bring in a lot more companies and opportunity to use these reliefs into the market.
The main question is how these reliefs apply and whether the criteria for trading are met. This has resulted in a lot of litigation in the past 7-8 years.
The government is starting a consultation which is asking everybody how we can make this even more effective and promote the entrepreneurship by changing the rules further. Hopefully, the consultation will result in clarity in this area.
R&D Relief and Entertainment Industry Reliefs
The government is bringing in procedural changes to simplify and clarify some of the rules in relation to R&D relief and entertainment industry reliefs.
For example, what happens when you trade credits within groups, which created quite a bit of uncertainty. It looks like the government is continuing to tidy up. This is the same direction of travel with EIS and EMI.
There is a lot of the litigation which arose out of HMRC policy changes. HMRC policy is to interpret the legislation more narrowly than they had previously.
There are cases where companies have been issuing shares on the same basis and then HMRC have said “no” as at a certain point because their policy on interpretation has changed. And, yet the budget changes are broadly in favour of widening accessibility.
The HMRC have been capable of being persuaded to take a slightly broader view on conditions for a follow-on funding after the initial investment period.
This budget is in response to more employee based rather entrepreneur based advantage share schemes.
The responses were published on 26 November 2026 in summary form.
All the government is saying so far is that HMRC are going to go away and think about whether any of the suggested changes will be made and will generally work to improve the administration. There is not currently a substantive action plan.
Capital Gains Tax Relief on Transfers into Employee Ownership Trusts
Changes that are going to be made to capital gains tax relief (CGT) on transfers into employee ownership trusts.
The relief is going to be quite significantly reduced.
The employee ownership trusts came into being in 2014. The purpose of this trust was to allow a business owner who was going to pass ownership to employees via a trust mechanism could get full capital gains tax relief on the transfer.
Even if the seller owner was going to be paid over a period of years effectively out of future dividends that relief is going to be reduced to 50% the total amount. The mechanism by which this is going to be done is not entirely clear.
The similar approach is taken towards employee ownership trust over the past few years. The conditions have been slightly tightened up to avoid frequently used loopholes involving for example offshore trustees. This was tightened up last year.
The employee ownership trust changes are aimed at perceived abuse. It is debatable whether the measure is aimed at tackling perceived abuse or is aligned with agricultural relief and business property relief at 50% limits.
An appropriate anti- avoidance measure would call for the tightening of the rules and not allowing the people you don't want to benefit, rather than limiting it for everybody. The current approach does not limit abuse but does affect the companies that the legislation was originally intended for.
Advanced Tax for Major Projects Consultation
Advanced tax certainty for major projects consultation is introduced.
One of the problems was the fact that HMRC have sometimes taken rather a long time to respond to requests for advanced clearance.
There is a policy whereby HMRC accepting complex cases are supposed to
provide a final answer within 28 days. If it is a complex case at least supposed to acknowledge the request in 28 days and agree a timeline for providing a final answer. The HMRC didn’t always follow through this policy.
There are huge pressures on HMRC. The staff and budget cuts within the HMRC over the last couple of years were shortsighted by the government as HMRC is one government department, which raised money for the government.
There is some sort of attention to help taxpayers get more certainty about how major projects are going to be treated.
Consultation result was published on 26 November 2025. Taxpayers are being promised a new advanced tax certainty service from July 2026.
There's going to be a pilot from March for certain types of transaction.
Proposal of a Reward for Information of High Value Tax Fraud
The proposal of a reward for information of high value tax fraud. It is where you provide information that leads to the recovery of 1.5 million pounds of tax or more, you can get a reward of up to 30%.
A New Consultation on Reducing Promoters
A new consultation on reducing promoters. HMRC sanctions and powers against advisers who facilitate non-compliance.
This budget is the compliance package as it is expected to significantly reduce the tax gap.
The administrative parts of this package are a more significant aspect of it. There is the threat of a penalty regime update which is expected to be a full penalty regime update.
Currently, the penalty regime is scattered throughout the legislation and is not consistent and unclear as to which taxes it applies. Therefore, the rationalisation of the current penalty regime would be a positive change.
Domestic Reporting in Relation to Crypto Assets
Domestic reporting in relation to UK resident crypto asset users is introduced under the crypto asset reporting framework.
The essential framework hasn't changed.
Review of the Loan Charge
Review of the loan charge signals a new settlement opportunity.
Ray McCann's review conclusion has come back highly critical of the way the loan charge has been handled and exasperated at the fact that it's still not done.
There are huge numbers of people facing loan charge liabilities in unresolved situations.
There is an opportunity to settled this in a way that is roughly fair.
What that looks like is essentially going back and looking at the loans that were received and figuring out how much tax would have been paid in those years in addition to what was paid and settling based on just the additional payment of that.
No interest, no penalties. The government has accepted this essentially in full and has even gone suggesting suspending the rest of the tax you would be due under the loan charges.
The government said “no” that's too much bother too much uncertainty for people having hang over them let's just write it off.
This is very good news for anyone with loan charge liabilities. The interesting question is what happens to all the existing disputes.
HMRC is now compelled to settle the ongoing litigation.
One of the recommendations is that companies who claimed deductions for contributions into these loan schemes and HMRC insisting that they shouldn't get them because they weren't holding exclusively for the trade.
The review recommends the HMRC settle on the basis that those deductions are allowable, for example.
This is a huge reversal of policy. It is not clear whether people who settled under last scheme be allowed to resettle. Presumably, they will not be able to.
Indirect Tax
VAT
There will be changes in VAT treatment of private hire vehicles. There has been lots of litigation with companies like Uber and Bolt.
The model we operate is worked out so that VAT arises only on the commission that Uber and Bolt both charge.
Bolt persuaded the first-tier tribunal that it should be within the two operators margin scheme. This is going to be abolished as answer to HMRC seeking VAT on the full amount of the fare.
We will have to see what legislation says in due course.
Customs and Import Duty
There are no more customs or import duty relief. There is no customs duty anymore in the UK since Brexit.
No more import duty relief applies for low value imports of under £135.
Air Passenger Duty on Private Jets
Air passenger duty on private jets of 20 tonnes and above with fewer than 19 seats is going to be at the higher level.
There were 1,730 responses, to a consultation, which is an awful lot of responses for any tax consultation.
Digital Services Tax
Digital services taxes are doing a very good job. It generated 800 million pounds last year.
There are no signs of any avoidance or fraud.
Digital Gaming and Betting
The biggest tax raises are on digital gaming and digital betting. This will have
a huge impact on offshore operators as almost all digital gambling services are run offshore.
Abolition of Bingo Tax
The abolition of bingo tax from April 1, 2026.
Offshore Aspects
The offshore aspects:
- the opportunity to make voluntary class 3 national insurance contributions when you are non-UK resident are to be abolished. Historically, paying voluntary class 3 national insurance contributions was beneficial to you if you left the UK and you wanted to retain access to certain benefits should you come back.
- the abolition of the non-UK resident dividend tax credit which brings the position into line with the position for UK residents.
- new consultation on offshore anti- avoidance legislation.
IR35 Legislation
- chapter 11 in relation to umbrella companies and agencies
The Budget 2025 introduced new legislation for a new Chapter 11 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), which is designed to combat tax avoidance in the umbrella company market.
This legislation does not change the existing IR35 rules, but it impacts the broader contingent labour market and how recruitment agencies and end-clients manage risk.
The legislation is still being expected.
Per Mile Tax for Electric and Hybrid Cars
Electric cars and hybrid cars are going to be subject to a per mile tax. A new tax.
The theory is that they contribute less to the cost of the road system as people who drive them don't buy petrol or as much petrol and therefore don't contribute by excise duty petrol.
Per mile tax for electric and hybrid cars is going to be collected through the annual road tax.
IHT Changes
IHT changes:
- In addition to existing nil-rate bands and exemptions, a new £1 million allowance will apply to the combined value of property in an estate qualifying for 100% business property relief or 100% agricultural property relief. Relief at the lower rate of 50% will apply to the value of any qualifying relievable property over £1 million. Combined with the nil-rate bands, this means a couple could pass on up to £3 million tax-free between them. A £1 million allowance will also apply to the combined value of relievable agricultural and business property in trusts.
- The rate of business property relief available will be reduced from 100% to 50% in all circumstances for shares admitted to trading onexchanges designated as ‘not listed’. The rate of relief will also reduce from 100% to 50% for qualifying shares listed on foreign exchanges which are not a recognised stock exchange.
- The option to pay Inheritance Tax by equal annual instalments over 10 years interest-free will be extended to all property which is eligible for agricultural property relief or business property relief.
- The method to calculate rates of Inheritance Tax on trust exit charges will be standardised so that all exit charges will be calculated based on unrelieved values, regardless of whether the exit takes place before or after the first 10-year anniversary.
- There is going to be a capping of relevant property trust charges for historic trusts and that cap is going to be 5 million. Good news for non-doms or former non-doms as we don't have them anymore.
Other Changes
- we're going to get a 40% first year writing down allowance for capital assets
- no plans to abolish stamp duty land tax (SDLT)
- mandatory tax advisor registration
- introducing UK listing relief, which is a three-year exemption from Stamp Duty Reserve Tax for companies that choose to list in Britain.
Summary: UK Budget 2025: Does it Make Your Daily Life Better?
The focus of 2025 UK Budget is to raise the revenue for the government and champion entrepreneurship.
The Chancellor specifically addressed in her speech how we can make the conditions for entrepreneurship better and there is an open consultation to this effect also.
The Budget introduces the UK listing relief, which is a three-year exemption from Stamp Duty Reserve Tax (SDRT) for companies that choose to list in Britain.
There are positive changes introduced to enhance UK start-up ecosystem through EIS, SEIS and EMI.
The rules are being simplified for R&D relief and entertainment industry reliefs.
The consultation for advanced tax for major projects is opened.
Settlements with HMRC are to be opened to resolve disputes following the loan charge review.
The freezing of the tax rates is a policy decision to raise more tax revenue for the government. More taxpayers will end up paying mor tax because the tax rates are frozen.
Higher earners will no longer be able to offset their income tax through salary sacrifice regime due to the introduced caps.
Brits’ resident overseas will not be able to pay in their national insurance contributions, and benefit from the UK as easily after leaving the UK.
There is a framework introduced for domestic reporting on crypto.
Agriculture, business property for inheritance tax purposes and employee ownership trusts for capital gains tax purposes see a 50% tax rate.
No more import duty relief applies for low value imports of under £135.
No more bingo tax from 2026. Digital gaming and betting industry is to expect substantial tax raises.
There is a per mile tax for electric and hybrid cars.
Air passenger duty on private jets is also set to increase.
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