2025 Budget Update
28th November 2025
We hope this update finds you well. Yesterday the Chancellor, Rachel Reeves, set out the Government’s latest tax and spending plans in the Budget. Here is a rundown of some of the key points which could affect you and your business.
Dividends: There will be a two percentage point rise to the ordinary and upper tax rates on dividend income from April 2026, and all rates on savings income from April 2027.
Business Rates: Relief on business rates bills for retail, hospitality and leisure businesses in England will be reduced, meaning bills will go up for those affected. The current 40 per cent discount will be replaced by a 5p reduction on the multiplier – the formula used to calculate the rate. In effect, it means the eduction will go down to just 12 per cent, although this will be on a permanent basis whereas previous reliefs have been time-limited. A 40 per cent relief rate will be maintained for film studios until 2034.
National Living Wage: This will rise by 50p (4.1%) to £12.71 per hour from April 2026 for employees aged 21 and over. At the same time, the rate for 18-20 year olds will rise 8.5 per cent to £10.85 per hour.
Pensions: National Insurance will be applied to employer and employee salary-sacrifice pension contributions above £2,000 per year from 2029.
Income Tax: The thresholds at which the different bands of Income Tax kick in will be frozen for a further three years from 2028 to 2031.
Corporation Tax: This will remain at its current rate of 25 per cent.
Apprenticeships: Training for apprentices under the age of 25 will be free for SMEs in England.
Rental income: Tax on rental income will go up two percentage points from April 2027.
Low value imports: Customs duty will apply to parcels of any value entering the UK from overseas from 2029, ending the current exemption for packages from overseas retailers worth under £135.
Electric vehicles: A new 3p per mile tax will be added to electric vehicles and plug-in hybrid cars from 2028, in addition to existing road taxes.
Fuel duty: A 5p temporary cut in fuel duty on petrol and diesel will be extended to September 2026, after which the duty will rise again over a six month period.
E-invoicing: The Government will require the use of electronic invoicing for all VAT invoices for business-to-business and business-to-government transactions from 2029.
Tourism tax: Elected mayors in England will be given powers to levy a ‘tourist tax’ on visitors to the area who stay overnight.
Betting and bingo: The tax on profits made by gambling firms from online bets will rise from 21 per cent to 40 percent in April 2026, while the current 10 per cent bingo tax will be abolished.
The FSB gave its response to the Budget, criticising the lack of pro-growth measures and the fact that it will take the overall tax burden to a new record high. We’ve been making the small business voice heard on this in a number of media interviews, including FSB Policy Chair Tina McKenzie speaking to BBC News and Talk TV.
If you have any questions or require further information, please do not hesitate to contact the practice.
Warmly,
Chris Gardiner
Director
