Budget 2025: What Actually Matters | A Practical Breakdown for Businesses & Advisers
Rachel Reeves’ second Budget confirmed what most businesses suspected: higher taxes, tighter rules, and a long list of measures designed to raise £26.1 billion a year by 2029/30.
Labour can still technically say they’ve not raised Income Tax, NI or VAT for “working people”, but once you get into the fine print, the effect for owner-managed businesses, landlords, and investors is unmistakable: almost everything gets more expensive.
Here’s the picture as it actually affects CCM clients — in the order you will use it.
Fiscal Drag: The Core Revenue Raiser
Personal allowance (£12,570) and the higher-rate threshold (£50,270) are frozen until 2030/31.
That single decision raises £7.6 billion a year by the end of the decade.
The result for individuals and business owners in Greater Manchester, Lancashire and Cheshire is simple: more people pushed into higher bands with no increase in real income.
National Insurance stays where it is:
- Employers: 15% above £5,000 earnings
- Employees: 8% up to £50,270, then 2%
No help for payroll budgets. No easing of the wage bill for local SMEs.
Dividends, Property & Savings: Across-the-Board Squeezes
Dividend tax: +2% from April 2026
- 10.75% (basic)
- 35.75% (higher)
- 39.35% (additional)
With the £500 allowance now almost irrelevant, this is another cost increase for OMBs drawing income via dividends.
Non-residents
Lose the notional tax credit from April 2026 — now taxed the same as UK residents.
Property income gets its own tax bands (April 2027)
- 22%
- 42%
- 47%
Income types will be taxed in a new sequence: non-property first, then property, then savings/dividends.
Savings tax +2% (from April 2027)
All bands rise by two points.
The personal savings allowance remains — but now strictly for savings only.
Inheritance Tax: The Most Far-Reaching Changes
APR/BPR overhaul from April 2026
- A single £1m allowance at 100% relief
- Above £1m: 50% relief
- AIM shares: only eligible for the 50% band
- Payment can be spread interest-free over 10 years
The £1m allowance will index with CPI from 2031. Everything else stays frozen until then.
Pensions come into IHT (from April 2027)
Unused funds and death benefits are now part of the taxable estate.
Nil-rate band (£325k) and RNRB (£175k) remain frozen until 2030/31.
Capital Allowances: Upfront Generosity, Slower Later
From January 2026: 40% first-year allowance.
From April 2026: main Writing Down Allowance drops from 18% to 14%.
Other points (no changes):
- Special rate pool at 6%
- Full expensing continues
- AIA stays at £1m
Good upfront, slower afterwards.
Property Taxes: A Mansion Tax in AllButName
From April 2028, properties above £2m get an annual charge:
- £2m–£2.5m: £2,500
- £2.5m–£5m: up to £5,000
- £5m+: up to £7,500
Bands F–H are being revalued.
Payment can be deferred to sale or death.
Salary Sacrifice, Benefits & PHEVs
Pension salary sacrifice capped
From April 2029, anything above £2,000 sacrificed attracts NI (8%/2% employee, 15% employer).
The first £2,000 remains NI-free.
Wider tax-free benefits (from April 2026)
Reimbursed eye tests, flu jabs and home-working kit get the same relief as provided benefits.
PHEV BIK easement
Backdated to 1 Jan 2025 until 5 Apr 2028:
Qualifying PHEVs treated as 1g/km CO₂ for BIK.
Umbrella Companies & PAYE: Liability Moves Upstream
From April 2026, HMRC can pursue recruitment agencies or the end client if an umbrella company fails to pay PAYE/NICs.
Joint and several liability now applies.
Compliance & Administration: Much Tougher Rules
Making Tax Digital
Soft landing: no penalty points on the first four quarterly updates for those joining MTD from April 2026.
Corporation Tax penalties double (April 2026)
- £100 → £200
- £200 → £400
- £500 → £1,000
- £1,000 → £2,000
Mandatory adviser registration (May 2026)
Tax advisers must:
- Register with HMRC
- Confirm AML annually
- Meet minimum standards
HMRC gains faster information powers and can publish details of sanctioned advisers.
Anti-avoidance clamps
DOTAS tightened with additional notices and targeted criminal penalties.
Loan Charge settlement scheme
- Recalculation at original loan-year rates
- Discounts on promoter fees (up to £10k/year)
- Flat £5k reduction
- No IHT or late interest
- 5-year payment plans
- Max reduction capped at £70k
Most affected taxpayers will see at least a 50% cut.
Investment Reliefs: More Room for EMI, Less for VCT
EMI widened (April 2026)
- Options limit: £3m → £6m
- Gross assets: £30m → £120m
- Headcount: 250 → 500
- Exercise period: 10 → 15 years
EIS & VCT changes
- Company limit: £5m → £10m (£20m for KICs)
- Lifetime limit: £12m → £24m (£40m for KICs)
- VCT income tax relief: 30% → 20%
- Reinvestment relief extended to 2035
EIS investor limits unchanged.
VAT & CIS Updates
VAT
- From April 2026, VAT relief extends to goods donated for charitable use, not just resale.
- No new margin scheme/reduced rate for PHVs.
PHV/taxi operators excluded from TOMS unless part of a bundled travel service.
CIS
HMRC gains stronger tools:
- Can directly amend EPS CIS claims
- Tighter materials rules
- New £3m rolling expenditure test
- New failure-to-prevent-fraud offence
Capital Gains Tax
From April 2026:
- Incorporation relief must be claimed via SA with full transaction details
- BADR rate rises from 14% to 18% on the first £1m of gains
Electric Vehicles & Motoring
Mileage tax (from April 2028)
- Battery EVs: 3p/mile
- PHEVs: 1.5p/mile
EV allowances
No major changes: chargepoints and qualifying infrastructure still receive enhanced relief.
Final Word for CCM Clients
This is a tightening Budget across the board.
More tax through freezes and rate rises, more restrictions on dividends and property income, major changes to IHT, slower allowances, and much heavier compliance.
The detail matters — but the impact shows up first in cashflow.
Most of the big measures have long lead-ins. That creates a clear window: the clients who plan early will protect themselves; the clients who don’t will pay for delay.
