Budget 2025: What It Means For You (Without the Jargon)

The Chancellor’s second Budget was never going to be a giveaway – and sure enough, it’s a mixed bag of freezes, hikes, and a few sweeteners. Let’s break it down in everyday language.

Frozen thresholds – again
If you were hoping for a rise in personal allowances or income tax bands, no luck. The freeze now stretches all the way to 2031. That means more people will slowly creep into higher tax brackets, even if their pay only rises modestly.

Dividends and savings take a hit
From April 2026, dividend tax rates go up by 2 percentage points. And from April 2027, savings and property income will also be taxed more heavily. If you rely on investment income, this is one to watch.

ISAs capped for younger savers
Cash ISAs will be limited to £12,000 a year for under‑65s from April 2027. Over‑65s can still tuck away the full £20,000. It’s a subtle but important shift in how the government wants people to save.

Council tax surcharge – the ‘mansion tax’
Own a property worth more than £2 million? Expect a new annual surcharge ranging from £2,500 to £7,500. Landlords and tenants alike may feel the ripple effect in rents.

Electric car duty
Yes, even electric cars aren’t escaping. From 2027, a mileage‑based excise duty kicks in: 3p per mile for EVs, 1.5p for hybrids. It’s a big signal that the Treasury wants to claw back lost fuel duty revenue.

Inheritance tax shake‑up
Agricultural and business property reliefs are capped at £1 million from April 2026, though unused allowances can be transferred to a spouse or civil partner. Couples may still shield up to £3 million, but AIM shares lose their full relief. Estate planning just got trickier.

Capital gains tax tweaks
Business Asset Disposal Relief rises to 18%, and incorporation relief will need to be claimed explicitly from 2026. Employee Ownership Trusts lose their full CGT exemption – only half the gain is now sheltered.

National Insurance and payroll changes
NIC thresholds remain frozen, voluntary NICs rise slightly, and employers should prepare for mandatory payrolling of benefits by 2027. Salary sacrifice for pensions will also be capped for NIC relief from 2029.

Business rates and reliefs
Retail, hospitality, and leisure businesses get new lower multipliers from 2026, but high‑value properties will pay more. Transitional reliefs are available, so check your eligibility.

The bigger picture
Overall, the Budget is about raising revenue quietly – freezing thresholds, trimming reliefs, and introducing new duties. For households, it means higher effective tax bills over time. For businesses, it’s a reminder to stay nimble with planning and compliance.