Budget 2025: What These Tax Changes Mean For You

Key takeaways:

• Pensions will count towards Inheritance Tax from April 2027
• The tax rate for gains that qualify for Business Asset Disposal Relief and Investors’ Relief rose from 10% to 14% in April 2025 and will rise again to 18% from April 2026
• The existing £1 million allowance for 100% APR and BPR will become transferable between spouses and civil partners from April 2026
• Homes worth over £2 million will face a new annual surcharge from 2028.
• Rental income will be taxed at the Property Basic Rate (22%), Property Higher Rate (42%), and Property Additional Rate (47%) from 2027
• Dividend and savings tax rates will rise
• Salary sacrifice NICs relief will be capped from 2029
• Tax thresholds will remain frozen until 2031

The highly anticipated November 2025 Budget brought in a wide set of tax changes that will affect pensions, property, business sales, rental income, and long-term estate planning. Many of the changes apply to people with savings, investments, high-value homes, or business assets, and several reforms start within the next two years. This guide explains the key points in plain English so you can understand what is changing and what steps you may need to take.

1. Pensions and inheritance tax

What is changing?

From 6^th April 2027, any unspent pension money will count towards your estate for Inheritance Tax.

Why it matters:

Many people use pensions to pass on money without paying tax. This option will reduce once the new rule begins.

What you should do:

Review your Will, check your pension nominations, and get advice before April 2027.

2. Selling a business or investments

What is changing?

Gains that qualify for Capital Gain Tax (CGT) Business Asset Disposal Relief or Investors’ Relief will rise to 18% from 6^th April 2026.

Why it matters:

Anyone planning a business sale or disposal of qualifying investments needs to factor in the increases.

What you should do:

If you plan to sell, consider whether you should complete the sale before April 2026.

3. APR and BPR transferability

What is changing?

From 6^th April 2026, the existing £1 million allowance for the 100% rate of Agricultural Property Relief (APR) and Business Property Relief (BPR) will be transferable between spouses and civil partners.

Why it matters:

This change affects how family-owned farms and trading businesses are passed down. Couples will be able to share the allowance more flexibly.

What you should do:

Review your Wills, trusts, and ownership structures to make sure they make full use of the new transfer rules.

4. New Property Surcharge for High-Value Homes

What is changing?

From April 2028, homes in England valued over £2 million (using 2026 values) will face an annual surcharge of between £2,500 to £7,500. This is called the ‘High Value Council Tax Surcharge’ (HVCTS); the rates are as follows:

Threshold (£m)	Rate (£)
£2.0-2.5	£2,500
£2.5-3.5	£3,500
£3.5-5.0	£5,000
£5+	£7,500

Why it matters:

This cost applies to main homes, second homes, and investment properties. It will apply even if Council Tax discounts normally reduce your bill.

What you should do:

Check your likely 2026 valuation and plan for the new yearly cost.

5. Higher Tax on Rental Income

What is changing?

From April 2027, rental income will be taxed at three new rates:

• Property Basic Rate: 22%

• Property Higher Rate: 42%

• Property Additional Rate: 47%

Why it matters:

Landlords will pay more tax on rental profits.

What you should do:

Review whether to keep properties in personal ownership or move them into a company, and review your long-term rental strategy.

6. Higher Tax on Dividends and Savings

What is changing?

• Dividend tax will rise by 2% from April 2026.
• Savings income tax will rise by 2% from April 2027 – The ordinary rate will be increased by 2% to 10.75% and the upper rate will be increased by 2% to 35.75%.

Why it matters:

People with large investment portfolios or high cash savings will pay more tax.

What you should do:

Use your ISA allowance and review how you take income from your company.

7. Salary Sacrifice Cap

What is changing?

From April 2029, only the first £2,000 of an employee’s pension contributions via salary sacrifice each year will be exempt from National Insurance Contributions (NICs).

Why it matters:

High earners who use salary sacrifice to boost pension savings will see reduced tax advantages.

What you should do:

Review pension funding plans early.

8. Freeze on Tax Thresholds Until 2031

What is changing?

Income Tax and National Insurance Tax thresholds will stay at current levels until April 2031.

Why it matters:

As incomes rise, more people will move into higher tax bands.

What you should do:

Review your estate plan regularly to reduce unnecessary future taxes.

Final Words

The Budget 2025 brings in major changes that will affect pensions, businesses, property, savings, and long-term planning. The updates to rates and reliefs mean clients need to act early, especially if they are selling a business, own high-value property, or rely on pension and investment structures for estate planning. Speaking to a private client or tax Solicitor now will help you prepare for the upcoming deadlines and avoid avoidable tax costs.

FAQs

1. Will my pension definitely be taxed when I pass away?

From April 2027, unspent pension money will be included in your estate for Inheritance Tax. Planning can reduce the impact.

2. I am selling my business in 2026. What tax rate will I pay?

If your sale qualifies for Business Asset Disposal Relief or Investors’ Relief, the rate will be 14% from April 2025 and 18% from April 2026.

3. Will all landlords pay more tax?

If you receive rental income, you will fall under the new Property Basic, Property Higher, or Property Additional Rate from April 2027.

4. Does the freeze on tax thresholds mean I will pay more tax over time?

Yes, as incomes and property values rise, more people will cross into higher tax bands. Early planning helps manage this.