November Budget 2025

Status: Information Only

Introduction

Rachel Reeves has delivered her latest Budget under the Labour Government to an excitable House.

Key announcements:

• Changes to the rules around salary sacrifice pension contributions from April 2029

• No changes announced to the rules around pension tax relief and pension commencement lump sums

• ISA allowance changes from April 2027 so that only the over 65s will be able to place the full £20,000 into Cash ISAs (capped at £12,000 into Cash ISAs for the under 65s).

Personal Finance and Taxation

Income Tax

Income tax thresholds will be frozen until April 2031, in England, Wales and Northern Ireland.

Scotland's income tax bands are set by the Scottish government, so Westminster budget announcements on income tax do not affect workers in Scotland, unless it is a change in the "personal allowance", which Scotland cannot change.

For all four nations, the personal allowance under which no income tax is paid remains £12,750

From 6 April 2026, dividend tax rates rise by 2 percentage points for basic rate taxpayers to 10.75% and higher-rate taxpayers to 35.75% from next year. Additional rate taxpayer’s rate remains at 39.35%

From 6 April 2027 tax on savings and property income rises by 2 percentage points from April 2027 for all tax bands.

From 6 April 2027, the government is changing income tax rules so that reliefs and allowances deductible at steps 2 and 3 of the income tax calculation will only be applied to property, savings and dividend income after they have been applied to other sources of income. From 6 April 2026, the government will uprate the Married Couple’s Allowance and the Blind Person’s Allowance by the September 2025 CPI rate of 3.8%.

National Insurance Contributions

Today’s announcement has confirmed that there is no change to employee NICs and no change to employer NICs.

The government is maintaining personal tax thresholds and the National Insurance contributions (NICs) secondary threshold from 2028 until 2031 and the Plan 2 student loan repayment threshold from 2027-28 until 2029-30.

From 6 April 2026, the government will remove access to pay voluntary Class 2 NICs abroad and increase the initial residency or contributions requirement to pay voluntary NICs outside of the UK to 10 years.

State Pensions

The State Pension will be uprated by 4.8%, so pensioners receiving the New State Pension will receive up to an additional £575 a year.

Government will continue to honour the ‘triple lock’.

The Pension Credit Standard Minimum Guarantee will also be uprated by 4.8% from April 2026.

Pensions

From 2029, only the first £2,000 of salary sacrificed into an employer sponsored pension scheme will be exempt from employer and employee National Insurance. Anything above that will be taxed like normal pension contributions.

There will be no change to income tax relief on pension contributions, or annual allowances.

There will be no change to pension commencement lump sums (tax free cash).

The government will enable well-funded DB pension schemes to pay surplus funds directly to scheme members over the normal minimum pension age, where scheme rules and trustees permit it, from April 2027.

The government will help protect members of the PPF and FAS from the impact of inflation by introducing CPI-linked increases, capped at 2.5 per cent a year, on pre-1997 pension accruals where their original schemes provided this benefit, from January 2027.

ISA

Cash ISA subscription allowance is to be reduced from April 2027

The overall total ISA limit remains at £20,000, but the cash ISA limit will drop from £20,000 to £12,000 to encourage further investment into S&S ISAs

Over-65s will keep the full £20,000 cash allowance.

The government is set to consult on lifetime ISA reform in early 2026, with plans to scrap the product.

IHT

IHT thresholds are frozen for a further year until 2031.

The forthcoming combined allowance for the 100% rate of agricultural property relief and business property relief will also be fixed at £1 million for a further year until 5 April 2031.

Any unused £1 million allowance for the 100% rate of agricultural property relief and business property relief will be transferable between spouses and civil partners, including if the first death was before 6 April 2026.

If personal representatives reasonably expect IHT to be due on a deceased member’s pension fund, they can direct pension scheme administrators to withhold 50% of the taxable benefits for up to 15 months from the date of death. Personal representatives can then direct pension scheme administrators to pay the IHT due to HMRC from the benefits that have been withheld before releasing the rest of those benefits to the pension beneficiaries.

The government will update legislation so that payments made under the Infected Blood Compensation Scheme and Infected Blood Interim Compensation Payment Scheme are relieved from inheritance tax in cases where the original infected or affected person eligible for compensation has died before the compensation is paid.

CGT

No change to personal rates.

With immediate effect, the government is restricting Employee Ownership Trust Capital Gains Tax relief from 100% to 50%.

Stamp Duty Land Tax

There are no change to personal rates.

Newly UK-listed companies will be eligible for a three-year exemption from Stamp Duty Reserve Tax

Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS)

The government will increase the VCT and EIS company investment limit to £10 million, and £20 million for Knowledge Intensive Companies (KICs) and increase the lifetime company investment limit to £24 million, and £40 million for KICs.

The gross assets test will increase to £30 million before share issue, and £35 million after, from April 2026. Alongside this, the VCT income tax relief will decrease from 30% to 20%. These changes will be legislated in Finance Bill 2025-26.

New council tax surcharge (“mansion tax”)

From April 2028, households will pay an extra annual charge if their home is valued at:

Over £2m – £2,500 a year rising to £7,500 a year for properties valued above £5m.

Minimum Wage

Announced ahead of the Budget, minimum wages will rise for all over 21 from 1 April 2025. The minimum wage for over 21s (known officially as the National Living Wage), will rise by 4.1%, to £12.71.

For 18 to 20-year-olds, the minimum wage will rise to £10.85.

Apprentices will get an increase to £8.00 an hour.

State Benefits

The Government will remove the two-child limit on means-tested benefits in full from April 2026.

The associated “rape clause” exemption will also be abolished.

Working age benefits will be uprated in line with the September CPI inflation of 3.8% from April 2026. Rates for the Universal Credit Standard Allowance and Health Element remain set in legislation until April 2029.

Miscellaneous

Fuel Duty

Freezing fuel duty continuing to honour the 5p cut, extended to September 2026.

Electric Vehicles

Mileage charge for electric vehicles from 2028

Fully electric cars will be charged 3p per mile

Plug-in hybrids will be charged 1.5p per mile

This is payable alongside normal vehicle excise duty.

Gambling tax

Remote Gaming Duty rises from 21% to 40%

Online betting duty rises from 15% to 25%

Bingo duty will be abolished from 2026

Energy bills: ECO scheme scrapped

The long-running ECO insulation levy on energy bills will be abolished, along with several other legacy charges. These costs will move to general taxation instead.

The Government says this will cut the average household energy bill by around £150 from April.

Tobacco Duty Rates – Duty rates on all tobacco products will increase by RPI inflation +2 percentage points. These changes will take effect from 6pm on 26 November 2025. The one-off increase of £2.20 per 100 cigarettes or 50g of other tobacco products and annual uprating of tobacco duty by RPI + 2 percentage points next year will take effect from 1 October 2026

Alcohol Duty

Alcohol duty will be uprated with the RPI on 1 February 2026 to maintain its current real-terms value.

Soft Drinks Industry Levy (SDIL) consultation response – The government will reduce the threshold at which the SDIL applies from 5g to 4.5g sugar per 100ml and remove the exemptions for milk-based and milk substitute drinks with added sugar to create a level playing field between pre-packaged beverages.

Rail Fares

A one-year freeze of regulated rail fares from March 2026.

Prescription Charges

A one-year freeze on prescription charges 2026-27.

Private Jets

The government will extend the scope of the higher rate of Air Passenger Duty to cover all private jets above 5.7 tonnes from April 2027.

Mineworkers Pension Scheme

The government has decided to transfer the surplus in the British Coal Staff Superannuation Scheme back to its members

OBR Forecast

The OBR’s updated forecasts show:

• Economic growth slightly stronger in 2025 but weaker from 2026

• Inflation higher in the near term before gradually easing

• Productivity growth expected to remain weak for several years

• Government borrowing falling steadily over the next five years

• A larger-than-expected buffer (“fiscal headroom”) against debt targets