Autumn Budget 2025 for individuals

There will be an increase to the income tax rates applied to income received from property, savings and dividends, bringing the tax treatment of these income sources closer to income received from employment. These sources of income will, however, continue to remain outside the charge to National Insurance.

There will be a 2% increase to the rates of tax on dividend income, applicable UK-wide, however this will only be applied to the dividend ordinary rate (currently 8.75%) and the dividend upper rate (currently 33.75%). The additional rate of 39.35% will remain unchanged. These new tax rates of 10.75% and 35.75% respectively will come into effect from 6 April 2026, but there will be no change to the dividend allowance of £500. These changes will also have an impact on family companies and other close companies that have made loans to shareholders, because such loans can give rise to a charge to corporation tax at the dividend upper rate, which will now be increased to 35.75%. This could prompt further considerations around cash flow and funding arrangements for shareholders.

From 6 April 2027, there will be a separate rate of income tax for rental profits and income distributions from REITs across all tax bands. The government will engage with the devolved governments of Scotland and Wales to provide them with the ability to set their own rates.  There will be a new property basic rate of tax of 22%, a property higher rate of tax of 42% and a property additional rate of tax of 47%. The thresholds at which these rates will apply will be the same as those that apply to income tax generally. Property income will be taxed as the next slice of income after other non-savings income, but in priority to savings income. There are no changes to the availability or amount of the property allowance, the relief under the rent-a-room scheme or the relief for mortgage interest costs, however the latter will be relieved at the higher property basic rate of tax of 22% (compared to 20% currently).

There will also be a 2% increase in the rates of income tax for savings income (eg interest) across all bands, applicable UK-wide, with a new savings basic rate of tax of 22%, higher rate of 42% and additional rate of 47%. There will again be no change to the availability or amount of the starting rate band for savings income or the personal savings allowance.

There will be a further impact on savers through the reduction to the annual limit on the amount under 65s can contribute into a cash ISA, which is reducing to £12,000 per year from £20,000 effective from 6 April 2027. The overall combined cash and stocks and shares ISA contribution limit will remain at £20,000 and will be frozen at this level until 2031. This, coupled with the increase in tax rates, could influence the behaviours of those with surplus cash reserves, possibly increasing the popularity of other tax efficient investments.

The purpose of the loan charge was to tackle contrived and abusive remuneration schemes, which structured the payment of earnings to employees in the form of loans, to reduce their income tax and NIC liabilities. This charge has been the subject of much controversy and so an independent review into the loan charge was commissioned by the previous government in 2019.

Following this independent review in January 2025, the government has confirmed that legislation will be introduced to make changes to the loan charge to incorporate the review’s recommendations except for one, and in some areas go even further.

This legislation will create a new settlement opportunity for those subject to the loan charge to resolve their affairs with HMRC and it is expected that this settlement opportunity will significantly reduce the charge that most individuals will be required to pay.

Measures were announced regarding the collection of income tax from UK state pension income and winter fuel payments.

The government has confirmed that pensioners who become liable to income tax on their basic or new state pension due to this income exceeding their tax-free personal allowance of £12,570, will not be required to pay tax on this income from 6 April 2027, if this is their only source of income. Further details will be released next year on how this will apply in practice.

Finally, the winter fuel payment income tax charge has applied since 6 April 2025 for some individuals in receipt of a payment where taxable income exceeds £35,000; the charge acts to claw back the payment in full. The government has confirmed that this threshold will be maintained for the duration of the current Parliament.

Agricultural Property Relief (APR) and Business Property Relief (BPR)

The combined £1 million 100% relief allowance, which was not originally going to be transferable between spouses and civil partners, will now be transferable. That would give a £2 million allowance on the second death, assuming it was unused on the first death.

This is a surprising announcement given the government’s previous insistence that the allowance would not be transferable, but it is a very welcome extension. It will be particularly helpful for older farmers who were considering complicated changes to their wills and to the ownership structure of their farms and businesses to enable their families to benefit from two £1 million allowances.

Any unused allowance will be transferable to a spouse or civil partner even if the first death occurs before the new rules become effective on 6 April 2026.

The £1 million allowance will be frozen until April 2031, and index-linked thereafter. This coincides with the freezing of the nil-rate band and residence nil-rate band.

Shares in non-UK resident companies will now attract inheritance tax to the extent that they hold UK agricultural land or buildings. UK residential property owned by non-UK resident companies was brought into the UK inheritance tax net in 2017, and this provision extends the scope to UK farmland and agricultural buildings. This will apply to individuals who are not long-term UK resident, and to certain offshore trusts. This is not expected to raise significant additional tax and may be intended instead to limit the scope for tax avoidance once the changes to Agricultural Property Relief take effect from April 2026.

Unused pension funds and death benefits

As previously announced, from April 2027 pension funds will fall within the scope of UK inheritance tax on the death of the individual based on the value of the fund remaining on death. HMRC has been considering how the tax will be paid.

The Budget confirmed that the administrators of pension schemes can be asked by the executors of an estate to withhold 50% of the fund for up to 15 months following the individual’s death and will be able to pay the inheritance tax directly to HMRC. This will be a welcome clarification for executors, who would otherwise potentially have to pay the inheritance tax liability, despite not being able to access the relevant funds.

Relief will be available for executors where pensions are found after HMRC has confirmed that the inheritance tax on an estate has been fully paid.

Gifts to charities

A small change is being made to the inheritance tax exemption for gifts made to charities. Only gifts made to UK charities and Community Amateur Sports Clubs (CASCs) will qualify for the exemption from the date of the Budget. Trusts that have been set up for charitable purposes but are not themselves registered charities will no longer qualify for the relief and trustees of these trusts will need to consider the impact of these changes carefully.

Infected blood compensation payments

Compensation from the infected blood scandal will be exempt from inheritance tax when passed on by the original recipient. Previously, the exemption did not extend to a recipient of the compensation payment if the person affected by the infected blood had already died.

The Chancellor has announced that the rumoured ‘mansion tax’ will be introduced on residential properties in England with a value of more than £2 million, from April 2028.

This will take the form of a surcharge applied to council tax and is formally named the High Value Council Tax Surcharge (HVCTS).

A ‘targeted valuation exercise’ is expected to be carried out by the Valuation Office in 2026, and it is the 2026 valuations that will be used for the charge two years later. A similar exercise is expected to occur every five years.

The amount of the HVCTS payable each year will depend on the band the property value falls within. The thresholds at the outset are as follows:

The HVCTS will increase in line with the Consumer Price Index each year from 2029-30.

The surcharge is to be administered alongside the existing council tax by local authorities, which will collect the revenue on behalf of central government. Homeowners, rather than occupiers, will be liable for the charge.

The full details of the HVCTS are not yet finalised and a public consultation will be held in 2026 before it is implemented. The consultation will cover a range of topics, including:

• A support scheme for individuals who may struggle to pay the charge,
• A full set of reliefs and exemptions,
• Rules for complex ownership structures, such as companies, funds, trusts and partnerships, and
• Treatment for individuals who are required to live in a property as condition of their job.

Removal of dividend tax credit for non-UK residents

Currently, non-UK tax residents in receipt of UK dividend income can claim a tax credit at the ordinary rate (8.75%). This provision will be repealed effective from 6 April 2026. This will also have an impact on non-UK tax resident life interest trusts receiving UK dividend income.

Non-UK residents’ ability to pay voluntary NIC abolished

From 6 April 2026, non-UK tax residents will no longer be able to pay voluntary NICs (ie Class 2 or Class 3) and as such will be unable to preserve or accrue UK state pension entitlement.

Changes to non-resident CGT (NRCGT) for Protected Cell Companies (PCCs)

Currently, a PCC is deemed to be property-rich if the PCC as a whole derives at least 75% of its value from UK land. Where this test is satisfied, a disposal of shares in the PCC will be subject to NRCGT. Effective from 26 November 2025, the property rich test will not apply to the entire PCC, but instead each cell will be considered on an individual basis.

This measure is expected to have a negligible impact on tax receipts, but underscores the government’s commitment to tighten the taxation of offshore structures.

Temporary non-residence (‘TNR’) rules

The TNR rules are UK anti-avoidance provisions designed to stop individuals leaving the UK for a short period, realising certain types of income or gains tax-free while abroad, and then returning without paying any UK tax on the realised income and gains. An individual needs to remain non-UK tax resident for more than five years before returning to the UK in order to avoid being caught by these rules. If the individual is non-UK tax resident for five years or less, they will be immediately taxable on certain income and gains that were realised during their time abroad.

For an individual caught by the TNR rules returning to the UK from 6 April 2026, the announcements made in this Budget will have various impacts on the provisions:

• Post-departure trade profits: the scope of the anti-avoidance provisions has been widened to include distributions or dividends received from a UK close company (or a non-UK company which would be close if it were UK tax resident) irrespective of when the trade profit is made. This is an extension to the current rule which allows dividends paid from post-departure trade profits from being outside the scope of the TNR provisions. Such payments will be liable to UK tax if the individual returns to the UK during the TNR period.

• The government is also expanding the type of distributions and income that are caught by the TNR rules to capture indirect payments. These broadly concentrate on distributions, dividends or stock dividends that are received through an indirect corporate structure or via another individual, and may include some loan arrangements.

Consideration should be given to the interactions of these new rules and their application when a participator becomes non-UK tax resident and looks to take advantage of extracting funds from their closely held companies.

Temporary Repatriation Facility (TRF)

The TRF is a time-limited UK tax relief that allows individuals who previously used the remittance basis to bring pre-6 April 2025 foreign income and gains into the UK at a reduced flat tax rate (12% in 2025-26 and 2026-27, rising to 15% in 2027-28). Once taxed under the TRF, the funds can be remitted to the UK without further tax.

The government has published much needed clarifications on how these rules operate, particularly in relation to offshore income gains and the designation of qualifying overseas capital.

Specifically, clarity was provided in relation to the application of TRF when an amount designated can represent multiple forms of qualifying overseas capital. In practice, this could arise where a trust was settled with foreign income or capital gains which were previously protected from taxation by the remittance basis and where there is a subsequent capital payment from the trust which represents pre-5 April 2025 relevant income and capital gains. In this instance, it would be necessary to make two designations to fully benefit under the TRF.

Residence of personal representatives

For CGT purposes, the definition used for determining whether personal representatives are UK resident has been tightened and now will only apply if the deceased was UK tax resident at the date of death (rather than if the deceased was UK tax resident or a UK long-term resident (LTR) at the date of death). This change applies retrospectively from 6 April 2025.

Inheritance tax cap on relevant property charges on excluded property in pre-30 October 2024 settlements

In the 2024 Autumn Budget, the Chancellor abolished the domicile-based inheritance tax regime and replaced it with a new residence-based model. For many this meant that excluded property in settlements became relevant property on 6 April 2025 (or later) depending on whether the settlor is a UK LTR. If the settlor leaves the UK, they will have an inheritance tax ‘tail’ that is between three to 10 years long. Once this tail period has elapsed, the non-UK assets will pass outside the relevant property regime and an exit charge will need to be paid.

In a retrospective measure, effective from 6 April 2025, the government is introducing a £5 million inheritance tax cap, meaning that in any relevant period the maximum amount of inheritance tax due on property that was excluded property in a settlement before 30 October 2024 will not exceed £5 million. A relevant period is defined as either:

• The period of time between 6 April 2025 and the next 10-year anniversary, or
• Each subsequent period of 10 years.

In essence, this will benefit trusts that have more than around £83 million of pre-30 October 2024 excluded property and are preparing for large inheritance tax charges in the future whether by way of 10-year anniversaries or exit charges (either on the settlor ceasing to be LTR or on capital distributions).

It is imperative to note that this measure will apply per settlement, and consideration will therefore be needed with regards to the excluded property held in each settlement at 30 October 2024 and each subsequent inheritance tax chargeable event.

Other international inheritance tax measures

A disapplication of certain exemptions from inheritance tax exit charges has been introduced effective from 26 November 2025 in relation to property that was comprised in a settlement where there was a change to the long-term residence status of the settlor, however, the assets in question are UK situated and therefore remain within the relevant property regime.

Effective from 6 April 2025, a foreign diplomat is treated as having been non-UK tax resident for any tax year where they were subject to statutory international exemptions.

Currently, only private jets with a maximum take-off weight (MTOW) of 20 tonnes or more pay the higher rate of APD. Many private jet journeys are therefore not subject to the higher rate of APD meaning that the same rate of APD is payable as for commercial airline passengers.

With effect from 1 April 2027, the higher rate of APD will be extended to cover journeys on private jets with a MTOW between 5.7 tonnes and 20 tonnes. This measure is clearly designed to impact ultra-high-net-worth individuals.

From the same date, all rates of APD will be updated in line with the Retail Price Index.

HMRC has been exploring several different options to align the economic and tax positions of DeFi arrangements.

These have focused on creating a chargeable disposal when lending cryptoassets in DeFi transactions. The current legislation can create tax charges, even though the effective economic ownership of the cryptoassets is retained by the lender.

HMRC has stated they are considering making specific defined DeFi disposals a ‘no gain, no loss’ transaction for CGT purposes. They would still be treated as a disposal for capital gains purposes but with deemed proceeds equal to cost, so no gain and tax charge would arise.  When the cryptoasset is received back from the platform, it is reacquired at the previous base cost.

The government will legislate that image right payments that relate to an employment relationship will be treated as employment income and are subject to income tax and NICs. This will take effect from 6 April 2027.

Having access to an individual’s commercial image rights, above those normally contained within an employment contract, can have significant commercial value. The Budget documentation states this will apply to “all image rights payments related to an employment” and we await to see how wide or narrowly ‘related’ is defined for this purpose.

The Autumn Budget 2025 strengthens HMRC’s powers to tackle tax advisers who deliberately facilitate non-compliance. The changes make it easier for HMRC to obtain information from suspected advisers, introduce tougher penalties and allow HMRC to publish details of sanctioned advisers. These measures aim to protect compliant taxpayers and improve trust in the tax system.