The 2025 UK Budget: Everything you need to know

Written By Artem Klyepcha

Autumn Budget Statement, 26 November 2025: What it means for individuals, owner-managers, landlords and EV drivers

Chancellor Rachel Reeves’ Autumn Budget Statement (26 November 2025) introduced a series of personal tax changes that, taken together, increase the ongoing cost of holding investments personally, extracting profits via dividends, owning high-value homes, and running electric vehicles. Several measures are phased in over multiple years, so the full impact builds from 2026/27 through to 2028/29 and beyond.

Below is a practical summary of the headline changes for individuals, with a focus on the potential downsides and planning implications.

Key changes at a glance, with start dates

From 6 April 2026

  • Dividend tax rates rise by 2 percentage points (ordinary and upper rates).

  • The “expensive car supplement” threshold for zero-emission cars rises from £40,000 to £50,000 (this helps some EV buyers, but many premium EVs remain caught).

From 6 April 2027

  • A new set of separate property income tax rates applies to residential property income (higher than employment income rates).

  • Savings income tax rates rise by 2 percentage points across bands.

  • Income tax relief ordering changes, which can reduce the effectiveness of certain reliefs against property, savings and dividend income, depending on your profile.

From April 2028

  • A new Electric Vehicle Excise Duty (eVED) mileage charge starts for EVs and plug-in hybrids, payable alongside existing VED.

  • A new High Value Council Tax Surcharge starts for owners of residential property in England valued at £2 million or more.

From April 2029

  • National Insurance advantages for pension salary sacrifice are restricted, with the NIC-free amount capped at £2,000 per year.

1) Higher tax on dividends, property income and savings, why this matters

Dividends (from 2026/27)

For directors and shareholders who rely on dividends, the Budget increases the tax cost of profit extraction. This is particularly relevant because dividends do not attract National Insurance, and the government has explicitly moved to narrow that gap.

Practical downside: many owner-managers will see higher personal tax for the same cash drawings, especially where dividends fall into the higher rate band.

Buy-to-let and personally held property income (from 2027/28)

From April 2027, property income becomes subject to separate, higher income tax rates. For many landlords who already face higher interest costs, stricter regulation, and restricted finance cost relief, this further compresses net yields.

Practical downside: reduced after-tax rental profit, potentially accelerating decisions to sell, deleverage, or restructure holdings.

Savings income (from 2027/28)

Savings income tax rates also rise, which affects interest received outside ISAs and other shelters.

Practical downside: higher effective tax on cash returns at a time when many households keep larger cash buffers.

2) Electric cars: new pay-per-mile tax and the “luxury car” supplement

eVED, pay-per-mile from April 2028

A new mileage-based tax applies to:

  • Battery electric cars at 3p per mile

  • Plug-in hybrids at 1.5p per mile

This is in addition to existing VED, so EV running costs rise, even if the vehicle is otherwise “road tax efficient” today.

Practical downside: EV drivers face a new recurring cost linked directly to usage, which is material for high-mileage drivers and for business owners who do significant personal mileage.

Expensive car supplement and premium EVs

The Budget increases the “expensive car supplement” threshold for zero-emission cars to £50,000 from April 2026, but many premium EVs will still exceed this and continue to pay the supplement (at the prevailing annual rate for the relevant years).

Practical downside: drivers of higher-spec EVs can face both the expensive car supplement and, from 2028, the new mileage charge.

3) Expensive houses: High Value Council Tax Surcharge from April 2028

From April 2028, owners of residential property in England valued at £2 million or more will pay an additional annual charge on top of ordinary council tax, starting at £2,500 per year and increasing for higher value bands (up to £7,500 per year for properties valued at £5 million or more, with indexation over time).

Practical downside: this adds an ongoing holding cost for high-value homes, which may influence decisions on downsizing, second homes, and how property is owned within the family (bearing in mind that the charge is aimed at owners rather than occupiers).

4) Pensions: salary sacrifice NIC advantage restricted from April 2029

Salary sacrifice has been a widely used method to boost pension contributions efficiently, because sacrificed pay generally saves both employee and employer NICs. From April 2029, the Budget caps the NIC-free amount at £2,000 per year, and NICs become due above that level.

Practical downside: higher earners and directors using large salary sacrifice pension contributions may see lower net benefit, unless their employer adjusts contribution design and remuneration strategy.

Worked example: director with dividends, buy-to-let income, an EV, and a high-value home

Assumptions (illustrative):

  • Director receives £40,000 taxable dividends per year (after dividend allowance), taxed at the higher dividend rate.

  • Director receives £20,000 taxable buy-to-let profit per year, taxed at the higher property income rate once introduced.

  • Drives a fully electric car 12,000 miles per year.

  • Owns a home in England valued between £2.0m and £2.5m.

Estimated additional annual cost once the measures are in force:

  • Dividend tax rise (2%): £40,000 × 2% = £800

  • Property income tax rise (2%): £20,000 × 2% = £400

  • eVED mileage charge: 12,000 × £0.03 = £360

  • High Value Council Tax Surcharge (minimum band): £2,500

Total estimated additional annual cost: £4,060

This excludes any impact from the expensive car supplement (which depends on list price and the VED year), finance cost relief interactions for leveraged landlords, and the salary sacrifice NIC restriction (from 2029).

Practical planning actions to consider

  • Review director remuneration strategy: model salary, dividends, and pension contributions together, rather than in isolation.

  • Landlords: reassess portfolio performance under the new property income tax rates, and consider whether holding structure (personal vs corporate) still meets your objectives.

  • Maximise tax shelters where appropriate: ISAs and pensions remain key tools, but contribution routes matter more after the salary sacrifice NIC cap.

  • EV drivers: budget for eVED from 2028, especially if mileage is high, and factor this into vehicle replacement cycles and total cost of ownership.

  • High-value homeowners: plan early for the council tax surcharge, particularly where the household is asset-rich but income constrained.

Artem Klyepcha