26 November 2025

Budget Update 2025

Essential budget takeaways for employers and employees

By Anissa Hallworth, Managing Director and Head of Employment Law

National Minimum and Living Wage Increases:

From April 2026:

21 years and over National Living Wage: £12.71 per hour
18–20 year olds: £10.85 per hour
16–17 year olds and apprentices: £8.00 per hour

Employer impact: Payroll costs will rise across all staff levels. Budgets may need adjusting, particularly for junior or entry-level roles.

Employer National Insurance contributions

Employer National Insurance rate increases from 13.8% to 15%
Threshold for paying National Insurance drops from £9,100 to £5,000 per year
Employment Allowance increases to £10,500, with the previous cap removed

Employer impact: Staffing costs will increase. Review payroll and budgets to ensure compliance.

Pension and salary sacrifice changes

From April 2029, only the first £2,000 of salary-sacrifice pension contributions will remain National Insurance-free

Employer impact: Pension offerings may need updating. Contributions above £2,000 will attract National Insurance, so staff communications should be clear.

Apprenticeships and Skills Investment £1.5 billion allocated to training, apprenticeships, and early-career support

Employer impact: Opportunities to recruit, train, and upskill staff with government-backed funding.

Youth Guarantee Scheme: Six-month paid placements for 18–21 year olds moving from benefits into work

Employer impact: Access to early-career talent with financial support from the government.

Key budget changes for homebuyers and property owners

By Jim Pallister, Director and Head of Residential Property

High value home Council Tax surcharge

From April 2028, residential properties valued at £2 million or more will face an additional annual council tax surcharge: £2,500 for properties between £2 million and £2.5 million, rising to £7,500 for homes above £5 million.

Impact on owners: High value homeowners should plan for this new annual cost and consider its effect on cash flow and estate planning.

Property income tax changes

From April 2027, rental and other property income will be taxed under a separate regime with rates of 22 per cent, 42 per cent, and 47 per cent depending on income bracket.

Impact on landlords: Rental yields and cash flow will be affected. Landlords may need to review rents, expenses, and long term investment strategies.

No Change to Main Residence Capital Gains Tax Relief

The Budget confirmed that gains on main residences continue to be treated under the existing capital gains tax rules.

Impact on homeowners: Selling a main home remains exempt from new capital gains tax. Homeowners can plan sales without additional tax liabilities for now.

Stamp duty and second homes

While the Budget did not change Stamp Duty thresholds for first-time buyers or main residences, combined tax changes make owning second homes or buy to-let properties more costly.

Impact on owners and investors: Those with second homes or investment properties may face lower returns and should carefully assess their property portfolios.

Planning and strategy are more important than ever

High-value properties and rental portfolios will be affected by new taxes on property income and council tax surcharges.

Impact on owners and landlords: Professional advice on valuations, cash flow, estate planning, and investment strategies is now essential to navigate the changing property-tax landscape.

What the budget means for wills, estates and personal planning

By Kieran Athow, Senior Associate Solicitor, Hayes + Storr.

In the 2024 budget announcement, Rachel Reeves announced that the higher rate of 100% relief in respect of Agricultural Property Relief and Business Property Relief on all qualifying assets will be restricted to the first £1,000,000, with any excess value thereafter qualifying for a reduced rate of relief of 50%. As part of the 2025 Budget, the Chancellor has now announced that the threshold cap for 100% relief will be transferable between spouses and civil partners from 6th April 2026.

This could potentially avoid married couples/civil partners from needing to offload a share of qualifying agricultural and business assets on the first of their deaths.

Further, the current standard Nil-Rate Band allowance of up to £325,000 and additional residence Nil-Rate Band allowance of up to £175,000 shall remain frozen until April 2031 – this represents a one-year extension of the freeze previously announced in the 2024 Budget and, ultimately, will result in more estates becoming liable to Inheritance Tax during this period.

In addition, the Chancellor has extended the existing relief from Inheritance Tax for payments made under the Infected Blood Compensation Schemes. As part of these changes, if an ‘infected’ or ‘affected’ person has died before compensation is paid, an Inheritance Tax credit will instead apply on the death of the first living recipient of that payment, such as to ensure no Inheritance Tax is charged on the value of the payment.

It is proposed that the credit will apply to each recipient’s estate in the event that the first living recipient benefits concurrently with others, with reference to each recipient’s share of the compensation payment.

Further, the government intend to legislate to allow the first living recipient(s) to gift some or all of their compensation payment without attracting a charge to Inheritance Tax, with such gifted amount potentially also retaining an equivalent Inheritance Tax credit when the recipient of the gift dies. This applies to compensation payments made before or after 26th November 2025 and to gifts made on or after 4th December 2025.

Moreover, there were several announced changes to Income Tax which are summarised as follows:

From April 2026, the Income Tax rate applied to basic and higher rate dividend income will increase by 2%;
From 6th April 2027, the Income Tax rate applied to savings income will increase by 2% across all bands;
From 6th April 2027, property income will have its own Income Tax rates, with the basic rate being 22%, higher rate being 42% and additional rate being £47%l;
The current Income Tax thresholds are frozen until 2031, thereby bringing more individuals within the scope of Income Tax during this period.

Budget updates affecting farmers and rural businesses

By Emily Ellerby-Calladine, Solicitor, Agricultural Services.

Rachel Reeve’s autumn statement offered little cheer for agriculture, with higher fuel duty and minimum wage adding pressure. Agricultural and business property relief remains largely unchanged: £1 million relief is transferable between spouses, giving a potential £2 million exemption, while assets above £1 million receive 50% relief. Business rates and capital gains changes increase tax planning importance for estates and commercial properties.