By Dean Shepherd.
Chancellor Rachel Reeves delivered her second Budget on Wednesday 26 November 2025, introducing £26.1 billion in annual tax rises by 2029/30. While Labour's manifesto pledge not to increase income tax, National Insurance or VAT for "working people" remained technically intact, a raft of measures will significantly impact your clients' tax planning strategies. Here's the comprehensive update for accountants and their practices.
The most significant revenue-raiser continues to be fiscal drag. The personal allowance (£12,570) and higher rate threshold (£50,270) will now remain frozen until 2030/31 – three additional years beyond the previous 2028 deadline. This measure alone will raise £7.6 billion annually by 2029/30.
Employer national insurance now sits at 15% on most earnings above £5,000 per employee, following changes that took effect from 6 April 2025. Employee rates remain at 8% on £12,570-£50,270 and 2% above. These changes have already raised payroll costs significantly, with no relief announced.
From 6 April 2026, dividend tax rates will increase by 2 percentage points across the board:
With the dividend allowance already slashed to just £500 annually, this creates a double burden for owner-managed businesses taking profits via dividends.
From 6 April 2026, the notional dividend tax credit previously available to non-UK residents on UK dividend income will be abolished. Non-residents will now be treated identically to UK residents for dividend tax purposes, subject to the same 10.75%/35.75%/39.35% rates.
From 6 April 2027, separate income tax rates for property will be introduced (England, Wales, and Northern Ireland):
The ordering of reliefs is also changing: from 6 April 2027, income tax reliefs and allowances will be applied first to non-property income, then property, followed by savings and dividends.
From 6 April 2027, savings income tax rates will increase by 2 percentage points across all bands. The personal savings allowance (£1,000 for basic rate and £500 for higher rate taxpayers) will be maintained but no longer offset property or dividend income.
Effective from 6 April 2026:
The £1m combined allowance will be indexed to CPI from 6 April 2031, and all APR/BPR thresholds remain frozen until 30 April 2031.
From 6 April 2027, unused pension funds and death benefits will be brought into an individual's estate for IHT purposes.
The nil-rate band remains fixed at £325,000 and the residence nil-rate band at £175,000 until 2030/31, with the taper threshold fixed at £2 million. From 6 April 2031, these will increase in line with CPI.
From April 2026, the main rate for Writing Down Allowances (WDA) on plant and machinery will be reduced from 18% to 14% on a reducing balance basis. The Special Rate Pool WDA (long-life assets and integral features) remains at 6%.
From January 2026, a new 40% first-year allowance is introduced for companies investing in qualifying plant and machinery in the main pool. Companies can deduct 40% of eligible costs in year one, with the remaining balance entering the main pool for WDAs at the new 14% rate.
Annual Investment Allowance (AIA) and full expensing
The £1 million AIA is retained, providing immediate 100% relief for qualifying expenditure up to this threshold each year. Full expensing also remains available:
A new annual charge applies to residential properties valued over £2 million from April 2028:
Properties in council tax bands F, G, and H (approximately 2.4 million) will be revalued to determine liability. The charge can be deferred until sale or death.
From April 2029, salary sacrifice pension contributions above £2,000 annually will be subject to both employer and employee National Insurance.
How it works:
From 6 April 2026, employers can reimburse employees for eye tests, flu vaccines, and home working equipment with the same tax and National Insurance relief as if providing these items directly. Currently, exemptions only apply to direct provision, creating inconsistency.
From 1 January 2025 to 5 April 2028 (retroactively), a temporary easement applies to mitigate PHEV benefit-in-kind tax liabilities due to new emission standards (EU Euro 6e and UN equivalents):
Responsibility for PAYE compliance shifts from umbrella companies to either:
Joint and several liability applies. If the umbrella company fails to pay PAYE/NICs, HMRC can pursue the agency or end client for the full amount.
The government has introduced legislation in Finance Bill 2025-26 in relation to Making Tax Digital (MTD) for Income Tax and the new penalty reform regime which means that taxpayers joining MTD in April 2026 will not receive penalty points for late submission of their first four quarterly updates.
From 1 April 2026, penalties for submitting Corporation Tax returns late will double.
Current penalties for late CT submission are as follows:
Return late - £100 becoming £200
Return more than 3 months late - £200 becoming £400
Three successive failures, return late - £500 becoming £1,000
Three successive failures, return more than 3 months late - £1,000 becoming £2,000
From May 2026, all tax advisers dealing with HMRC for clients must legally register with HMRC and meet minimum professional standards. This change, legislated in the 2025-26 Finance Bill, is designed to raise industry standards and enable HMRC to exclude non-compliant advisers.
Tax advisers will register digitally (with non-digital options for some) and must confirm compliance, including anti-money laundering requirements, each year. Overseas advisers will face slightly higher registration costs due to evidence and translation needs. Advisers who do not comply will be suspended from acting for clients until compliance is restored.
New powers enable HMRC to:
Tax advisers will face closer scrutiny. This creates operational risk for those inadvertently providing inaccurate advice. Targetting deliberate conduct, not one-off errors or genuine legal interpretation differences.
New measures strengthen the Disclosure of Tax Avoidance Schemes (DOTAS) regime through:
The government has accepted recommendations from an independent review of the loan charge (which affects approximately 32,000 individuals who used disguised remuneration tax avoidance schemes). A new settlement opportunity, legislated in Finance Bill 2025-26, will substantially reduce outstanding liabilities. Most individuals could see at least 50% reductions, with an estimated 30% able to settle for nothing.
Key features include recalculating amounts based on tax rates when loans were made, applying promoter fee discounts (up to £10,000 per year), adding a flat £5,000 reduction, waiving late payment interest, writing off inheritance tax, and allowing five-year payment plans. The maximum reduction per person is capped at £70,000.
From 6 April 2026, the EMI scheme limits will expand to allow larger companies and scale-ups to participate. Key changes include increasing the company options limit from £3 million to £6 million, gross assets threshold from £30 million to £120 million, employee count from 250 to 500, and the exercise period from 10 to 15 years.
Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) changes:
VAT relief on donated goods is being extended from April 2026 to cover goods donated for charitable use (not just resale).
In response to a 2024 consultation, the government will not amend VAT legislation to allow PHV operators to act as agents for tax purposes in all cases, nor will it introduce a new margin scheme or reduced rate for the sector.
The government will legislate to exclude suppliers of private hire vehicle and taxi services from the Tour Operators’ Margin Scheme, except where these are supplied in conjunction with certain other travel services.
HMRC has enhanced powers to combat Construction Industry Scheme fraud:
From 6 April 2026, individuals, partners, and trustees transferring a business to a company in exchange for shares must claim incorporation relief through their Self Assessment tax return for the year of transfer. The claim will require details of the transaction, tax computations, and business type.
As previously announced, Business Asset Disposal Relief (BADR, formerly Entrepreneurs' Relief) CGT rate increases from 14% to 18% on the first £1m of qualifying gains from 6 April 2026.
From April 2028, electric vehicles (battery EV and plug-in hybrid EVs) will face a pay-per-mile tax:
Implementation details (collection mechanism, exemptions) still under consultation.
This Budget delivers sustained fiscal pressure across almost all tax types. The cumulative effect of frozen thresholds, dividend rate rises, NI changes, capital allowance reductions, and new compliance burdens means clients will face year-on-year tax increases regardless of income level.
The "fixes" announced (umbrella company reforms, tax adviser standards, anti-avoidance measures) indicate government frustration with compliance levels and tax planning sophistication. While targeting deliberate abuse, these measures increase compliance risk and create barriers for legitimate tax advice.
For accountants, the challenge lies in client communication and proactive planning. The four-year lead times on some measures (salary sacrifice, EV tax) provide planning windows, but only if clients act now. Those who delay will face rushed implementation or missed opportunities.
This analysis is based on Budget announcements made 26 November 2025 and supporting HMRC policy papers. Specific details may change as draft legislation progresses through Parliament. All accountants should verify with primary sources before advising clients on technical matters.