Following months of hype and speculation, the Autumn budget has arrived. An interesting start to this budget process as the Office for Budget Responsibility (OBR) managed to leak all of the details before the chancellor announced them…somebody is in trouble!
I think most of what was announced today had already been leaked in some form so to me it didn’t really feel like there were many surprises; equally, there was little positive news for business owners.
While I have not commented on all of today’s announcements, I have tried to focus on the ones most relevant to our clients.
Pensions
The government will cap the amount of money that can be paid into pensions before National Insurance is charged to employers and staff to £2,000 a year from 2029. Contributions above the threshold will be subject to both employer and employee NICs, 15% and 8% respectively for earnings under £50,270.
YFT Comment – This is bad news for employers and employees alike. Employers will have to foot the extra NI bill as well as employees. Given that the government have been keen to incentivise people to save for retirement this move is likely to reduce the amounts people pay into their pensions.
Corporation tax rates
The main rates of Corporation tax rates will stay, so 19% up to £50k in profits and 25% over £250k in profits and tapering in between.
However, they have reduced the capital allowance rate – these allowances are the rates that you can write off assets over the years. By reducing the rate it means the amount that can be written off as a tax deduction also reduces.
YFT Comment – this is strange; surely you want to incentivise companies to buy assets and invest in capital projects – making it harder to get the tax relief runs counter to this objective.
Mansion Tax
Owners of properties worth £2m or more face a high-value council tax surcharge from April 2028. This will be collected alongside council tax. The tax will be banded, with properties valued at £5m+ facing a £7,500 charge. The lowest band – £2m to £2.5m – will be £2,500
YFT Comment – this tax has been talked about for a long time and was widely predicted so no surprises here.
National Living Wage
The National Living Wage for workers aged 21 and over is set to rise from £12.21 to £12.71 per hour from April 2026. This increase is mirrored across the lower age bands, with the minimum wage for 18- to 20-year-olds also seeing a notable jump.
YFT Comment – For many businesses, particularly those in the labour-intensive sectors such as hospitality, retail and care, this represents a major increase in operating costs.
Employee ownership trusts
Capital gains tax relief on business sales made to employee ownership trusts (EOTs) will be reduced from 100% to 50%.
YFT Comment – EOTs have been a useful way for owners to sell their shares to an employee trust. Up until now the proceeds from the sale had 100% CGT relief (so no CGT). This was very generous, but from Nov 2025, the CGT will only have 50% relief so this tax break has been reduced.
Electric Cars
From April 2028, electric car drivers will pay a road charge of 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile, with the rates going up each year with inflation.
YFT Comment: This measure is a way to plug the missing tax generated from fuel duty. As electric cars become more popular and fuel duty falls, the government needs to find ways to cover the shortfall.
Property Income
There is a new separate tax rates for property income, so property income will have its own individual tax rates. From April 2027, the property basic rate will be 22%, higher rate 42% and additional rate 47%. Finance cost relief will be provided at the separate property basic rate (22%).
Dividend Tax Increases from April 2026
| Tax band | Tax rate on dividends over the allowance of £500 |
| Basic rate | 8.75% going to 10.75% |
| Higher rate | 33.75% going to 35.75% |
| Additional rate | 39.35% remains the same |
Worked example
A common way to take funds out of a limited company:
£12,570 salary + £37,700 dividends
First £12,570 income is covered by the personal allowance.
First £500 dividends are covered by the dividend allowance.
The remaining £37,200 dividends will be taxed at the new basic dividend rate of 10.75% so tax payable would be £3,999 rather than today’s rates of £3,255 – so an extra tax charge of £744
Tax thresholds
The tax thresholds will remain the same and will be frozen for an additional three years from 2028 to 2031
YFT Comment – this means that the point at which people start paying higher rates of tax will be held. It can mean earners will be dragged into higher tax bands when they get a pay rise so they ultimately end up paying more tax
Appendix 1: Reminder of Tax bands
Income Tax Rates for 2025/26
The annual tax-free allowance has been frozen at £12,570.
Basic rate of 20% applies between £12,570 and £50,270
The higher rate threshold is £50,270 and the higher rate of tax is 40%.
The income limit to retain your personal allowance is £100,000. For every £2 that you earn above £100,000, the Personal Allowance reduces by £1. This means that if you earn £125,140 or more, your personal tax allowance is zero.
Additional rate tax is £45% and applies to income over £125,140 (This has reduced from £150,000 in 2022/23).
If you have any concerns or questions about the budget please feel free to get in touch.