UK Budget 2025: updates on personal tax, property income and business reliefs

The Chancellor’s 2025 Budget focuses on stability and targeted revenue measures rather than sweeping reform. Many anticipated changes – such as an exit tax, a wealth tax, restrictions on main home relief, and changes to lifetime gifting – did not materialise.

While headline rates like corporation tax and Stamp Duty Land Tax (SDLT) remain unchanged, the Budget introduces freezes to key allowances, higher rates on property and investment income, reforms to investment schemes, and new anti-avoidance measures.

Key highlights from the Budget

• No changes to capital gains tax (CGT) or inheritance tax (IHT) rates, SDLT, or Principal Private Residence relief.
• Corporation tax remains at 25%, the lowest in the G7.
• No new wealth tax, exit tax, or National Insurance contributions (NICs) on LLP partners.
• UK’s competitive corporate tax regime remains intact.

Personal tax and allowances

• Income tax bands and allowances frozen until April 2031 – top rate stays at 45%.
• IHT nil-rate bands and the £1m agricultural property relief (APR) and business property relief (BPR) allowance remain unchanged until April 2031.

Property and investment income

• From April 2026: dividend tax rises by 2 percentage points for basic and higher rates (additional rate unchanged).
• From April 2027:
  • Property and savings income tax rates:
    • Basic: 22%
    • Higher: 42%
    • Additional: 47%
  • Finance cost relief for landlords aligns to the new 22% basic rate.

Property tax

• High-Value Council Tax Surcharge: from April 2028, annual surcharge applies to properties over £2m (£2,500-£7,500 depending on band). Valuations will be undertaken by the Valuation Office and repeated every five years. The surcharge is payable by property owners.

Business and investor measures

• Venture Capital Trusts (VCT) and Enterprise Investment Scheme (EIS): from April 2026, asset and investment limits double; VCT income tax relief reduces from 30% to 20%.
• Enterprise Management Incentives (EMI) share options: from April 2026, asset and employee limits rise, option limits double to £6m, and exercise periods extend to 15 years (including existing arrangements).
• Employee Ownership Trusts: CGT exemption on sales reduced to 50% with immediate effect.
• Stamp Duty Reserve Tax: transfers of shares in newly listed companies exempt for three years post-listing from November 2025.
• Capital investment incentives: new 'advanced assurance' pilot for Research & Development (R&D) tax relief and permanent 40% first year allowance for certain assets.

Compliance and anti-avoidance

• Capital gains and reorganisations: rules for share exchanges and company reorganisations tightened.
• Offshore personal tax: anti-avoidance rules will be reviewed and simplified; HMRC to consult.
• Inheritance tax: UK agricultural property held via non-UK entities treated as UK-situated; charity exemptions restricted to direct gifts to UK charities and clubs.
• Stronger enforcement: new powers against promoters, tougher sanctions for advisers, and whistleblower rewards of up to 30% for tips leading to major recoveries.

UK Budget 2025 insights

The 2025 Budget marks a defining moment for the Government’s fiscal strategy, with measures aimed at stabilising the economy and supporting sustainable growth through uncertain times.

At Farrer & Co, we examine what the announcements mean in practice. From tax and property to employment and private wealth, our lawyers consider the Budget’s key provisions and the opportunities they create across sectors. Our insight is designed to help clients anticipate change and plan strategically for the year ahead.

READ our Budget insights

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, November 2025