The Chancellor’s 2025 Budget introduced a wide range of tax measures that will affect individuals, families, and businesses across the UK. At Moore Barlow, we’ve prepared a summary of the key announcements to help you understand the changes and consider how they may impact your financial and succession planning.
Please find below a summary of some of the main tax announcements included within the Budget:
Income tax
- The various income tax thresholds will remain frozen until April 2031. Previously they were due to be frozen only until April 2028.
- Increased rates of income tax will apply to property income, of 22% (basic), 42% (higher) and 47% (additional) respectively, from April 2027. Relief for finance costs will also increase to 22%. This will include property income being treated as its own category of taxable income (as is already the case for savings income and dividend income).
- Increased rates of income tax will apply to savings income, of 22% (basic), 42% (higher) and 47% (additional) respectively, from April 2027. The existing 0% rate will remain unchanged.
- Increased rates of income tax will apply to dividend income, of 10.75% (basic) and 35.75% (higher), from April 2026. The existing 39.35% rate (additional) will remain unchanged.
- These increases mean that for discretionary trusts, the applicable rates will be 45%, 47% and 39.35%. Whilst for IIP trusts and estates, the applicable rates will be 20%, 22% and 10.75%.
- Any available income tax reliefs and allowances, including the personal allowance, must be applied to other income sources in priority to any property, savings or dividend income, from April 2027.
- For taxpayers who pay income tax via a mixture of PAYE and self-assessment, there is an intention to increase the share which can be collected via PAYE, from April 2029. A Government consultation is expected in 2026 to consider this further.
- The penalty regime for self-assessment will be amended to instead mirror the upcoming penalty regime for making tax digital, from April 2027.
- For taxpayers whose only source of income is state pension, they will not be required to pay any “small” amounts of income tax, from April 2027. Further detail will be released in 2026.
- Income tax relief for investments into Venture Capital Trusts (VCT) will be reduced to 20%, from April 2026. The maximum qualifying annual investment will remain at £200,000 (and hence the maximum amount of relief will become £60,000).
- As previously announced, pensioners with total taxable income of at least £35,000 per year will incur a Winter Fuel Payment Income Tax charge, from April 2025. This threshold has now been fixed until the end of the current parliament. Pensioners in receipt of certain state benefits will be exempted. The charge will be paid via their self-assessment tax returns (or PAYE if they are not within self-assessment).
Inheritance tax
- The £325,000 nil-rate band, and £175,000 residence nil-rate band, will remain frozen until at least April 2031. Previously they were due to be frozen only until April 2030.
- The £1m 100% relief allowance for APR and BPR (to be introduced as from April 2026) will also remain frozen until at least April 2031.
- Furthermore, when the £1m allowance is duly introduced, it will now be the case that any unused amount on first death will be transferable to a surviving spouse. This will even be the case if first death was before April 2026.
- Further to the previous announcement that pensions will be within the scope of IHT from April 2027, it has been confirmed that it will be the responsibility of the personal representatives to ensure that the correct amount of IHT is reported and paid, but they will have the power to direct pension scheme administrators to either make payments to HMRC (or reimburse to the estate), or to withhold funds from pension beneficiaries.
National insurance
- Relief from national insurance on salary-sacrificed pension contributions will be limited to £2,000 of contributions per annum, from April 2029. Any such pension contributions made in excess of this limit will be liable to national insurance (employee and employer).
Capital gains tax
- Relief from CGT on disposals to Employee Ownership Trusts (EOT) will be reduced to 50%, with immediate effect.
“High Value Council Tax Surcharge”
- This is a new annual charge to be applied from April 2028. It will apply as follows:
- Properties worth less than £2m = No surcharge
- Properties worth £2m – £2.5m = £2,500 annual surcharge
- Properties worth £2.5m – £3.5m = £3,500 annual surcharge
- Properties worth £3.5m – £5m = £5,000 annual surcharge
- Properties worth £5m+ = £7,500 annual surcharge
- The charge will be applied to the owner(s) of the property, regardless of whether they are the occupant.
- An initial valuation exercise will be undertaken by the Valuation Office, followed by revaluations every five years.
- A Government consultation is expected in 2026, to include consulting on what exemptions might be included and the timing of payment. There is a suggestion that some taxpayers may be able to claim to defer payment of the charge, until either they sell their property or they die. If this was to be the case, this might increase the administration for law firms. Property lawyers might be tasked with ensuring that deferred amounts are paid when overseeing a property sale; probate lawyers might be tasked with ensuring that deferred amounts are paid when obtaining probate. For now, we will have to wait and see.
ISAs
- The annual cash ISA limit for adults under the age of 65 will be reduced to £12,000, from April 2027. The combined cash-and-shares annual limit will remain at £20,000.
How Moore Barlow can help
These reforms will have significant implications for property owners, business leaders, and families planning for the future. Whether it’s navigating inheritance tax changes, preparing for new property surcharges, or structuring investments more efficiently, our experts are here to guide you.
To discuss how the Budget may affect you or your business, please contact our Private Wealth and Rural Services teams. We can help you plan ahead and make informed decisions in light of these changes.
