UK Autumn Budget 2025

On 26 November, the UK Chancellor of the Exchequer delivered the much-anticipated UK Autumn Budget. 

Against the backdrop of an economic forecast which was slightly better than anticipated, the Budget measures announced included confirmation that the corporation tax rate will remain at 25% and that there will be no general increases in national insurance (social security) contributions, VAT or income tax on employment income (though income tax is set to rise on some types of income). 

Key announcements included:

• The capital allowance writing down main rate will be reduced from 18% to 14% from April 2026. However, a new 40% first-year allowance (benefitting lessors and unincorporated businesses) will be introduced from January 2026. There will be no changes to the full-expensing regime.
  
  
• As part of an effort to boost the attractiveness of the UK as a destination for IPOs and capital-raising, a new ‘listing relief’ will be introduced giving a three-year exemption from SDRT (a UK transfer tax paid by the buyer) on shares listed in the UK.
  
  
• With the intention of supporting inward investment, from July 2026, the UK tax authority will provide a special advance clearance service for projects costing over GBP1 billion. The new service is intended to provide certainty on corporation tax, stamp (transfer) taxes, VAT, payroll taxes and the construction industry scheme. While the new service is limited to the largest projects, there is a welcome commitment to review this threshold after one year.
  
  
• As foreshadowed in its consultations on transfer pricing, the government will, for accounting periods beginning on or after 1 January 2027, require in-scope multinationals to submit an International Controlled Transaction Schedule to report information annually on cross-border related party transactions. The government will also move forward with reforming UK law in relation to transfer pricing (including the proposed repeal of UK-to-UK transfer pricing, and permanent establishments and the replacement of the Diverted Profits Tax) with an unassessed transfer pricing profits charge within corporation tax.
  
  
• On indirect tax, while the UK continues to seek alignment with the EU in several areas, despite Brexit – such as e-invoicing, customs treatment of low-value imports, and the introduction of a Carbon Border Adjustment Mechanism (CBAM) – there is a notable divergence regarding the implementation of a major CJEU case around VAT grouping rules.
  
  
• For individuals, income tax thresholds for higher and additional rate payers will now be frozen until 2031 rather than until 2028. Income tax rates on passive income (as opposed to employment income) are set to rise. From April 2026 income tax rates for dividend income will be increased by 2% for basic and higher tax rates, increasing them to 10.75 and 35.75%. The additional rate remains at 39.35%. From April 2027 income tax rates for savings income (interest) and property income will be increase by 2% for basic, higher and additional tax rates, increasing them to 22%, 42% and 47%.
  
  
• HMRC announcements indicate that, as a consequence of the change in the savings rate, the withholding tax rate applicable to interest payments from a UK 'source' will also increase from 20% to 22%. Accordingly, the management of withholding tax on UK interest, has increased in importance.
  
  
• National Insurance contributions (NICs) relief (employee and employer social security contributions) for employee pension contributions made under salary sacrifice arrangements will be limited to GBP2,000 of contributions per employee with effect from April 2029. Pension contributions via salary sacrifice over this amount will be subject to employee and employer NICs in the same was as ordinary employee pension contributions.
  
  
• Substantial expansion to the scope of the companies eligible to grant their employees tax-advantaged share options under the Enterprise Management Incentives rules. The per-employee limit is also set to increase.
  
  
• In relation to real estate, the new property income tax basic rate will increase the withholding tax on property income distributions from REITs and PAIFs from 20% to 22% – and also apply to withholding under the non-resident landlord scheme. Tougher anti-fraud rules will be brought in with the Construction Industry Scheme and there will be a new ‘high value council tax surcharge’ on residential properties valued at over GBP2 million.

Please see below further detail on each of these measures and our more extensive coverage in the articles below.

[Please note that at the time of writing this alert, the government had not published all of the supporting documents to the Budget 2025.]