UK Autumn Budget Statement 2025

The Chancellor of the Exchequer delivered her Autumn Budget statement on 26th November 2025, albeit in an unusual turn of events the Office of Budgetary Responsibility had already released key details of her plans before she stood up before Parliament.

The Budget has been labelled as a £30 billion raid on the taxpayer, with an estimated one in four workers, those who the Labour Government had previously suggested that they are determined to shelter, facing higher taxes.    

The additional revenue for the Exchequer, estimated at around £12.7 billion per annum, has been allocated principally to welfare spending, with the removal of the cap on two-child benefit, for example.  Alarmingly, the annual spend on welfare is projected to rise by around 17% by 2029/30.  This was a political move designed to placate certain members of the Labour party.

Tax Measures

Individuals

Income tax and national insurance allowances and bandings have been frozen across the board for the three years from 6th April 2028 onwards.  This represents a further effective increase in income tax in times of sustained price rises.  It was a backtrack on the Chancellor’s comment in October last year when she stated that allowances and bandings were set to track inflation from 2028/29 onwards.

Although the standard rates of income tax have not changed, special rates of income tax have effectively been implemented.  The ordinary and upper rates of dividend tax are to be increased by 2% from 6th April 2026, and for property and savings income, all marginal income tax rates will increase by 2%, a further backtrack on Labour’s election manifesto pledge.   Siege has again clearly been laid on investors and savers; a further announcement regarding a reduction in the current annual ISA allowance from £20,000 to £12,000 per annum with effect from 6th April 2027 confirming the policy.  

Salary sacrifice schemes came under attack, with a limit on the national insurance exemption that will be granted on the element of sacrificed salary, down to only £2,000 per employee per annum with effect from 6th April 2029.  This could easily become relevant in the Isle of Man, given that our local practice is driven by UK law in this area, although there are no indications of a such a change at present.  It is hoped that Isle of Man Treasury would ultimately view this as an incentivising tax differentiator for new movers.

As expected, residential property owners in the higher value bracket have been hit with what seems to be the first step towards a form of wealth tax.  Those with properties valued in excess of £2m will incur a ‘higher-value council tax surcharge’ of £2,500 per annum, increasing to £7,500 for properties valued in excess of £5m.  

Businesses

A number of business tax measures were announced.  Whilst there were no show-stopping announcements, a reduction in availability of writing down allowances on capital assets was confirmed which again, represented a complete about turn on previous commitments made to UK businesses.  

The key changes announced were:

• Capital Allowances changes – main pool writing down allowances are reduced to 14% (from 18%) from April 2026.  A new First Year Allowance (‘FYA’) of 40% was introduced for certain main pool expenditure that does not qualify for other FYAs;
• An advanced tax clearance service was launched to provide those driving major investment projects with certainty on the application of tax law to their specific circumstances.  The scheme will cover Corporation Tax, VAT, Stamp Taxes, PAYE and the operation of the Construction Industry Scheme, and will apply to taxpayers who plan to invest £1 billion or more in the UK over the lifetime of a project;
• Changes to anti-avoidance measures for share exchanges and reorganisations (so called ‘share for share’ exchanges) to ensure that a CGT advantage cannot be obtained where one of the main purposes for the transaction is to secure a tax advantage;
• Corporation Tax fixed late filing penalties are to double for tax returns with filing date on or after 1st April 2026;
• HMRC communications to move to a ‘digital by default’ methodology from Spring 2026.  Digital communications will be rolled out gradually, when different services and IT systems become ready.  There will be an opt-out of digital communications for those that need to use the postal system;
• International tax simplifications:  some changes were announced around the application of Transfer Pricing rules and the classification of Permanent Establishment for foreign companies. 

Indirect Taxes

As the Isle of Man is part of the UK VAT and Customs area, any related changes in the UK have immediate effect on the Island.  However, there were no changes to VAT rates or thresholds in the Budget.

From 26th November 2025, the UK will revert to unconditional whole entity cross-border VAT grouping, where a single legal entity (such as a company with an overseas branch) that joins a UK VAT group is included in its entirety, regardless of its global locations, in contrast to the “establishment only” approach.  This may reduce internal VAT friction within corporate groups.  Some VAT groups that have accounted for VAT under the previous guidance may now be eligible to reclaim overpaid VAT.

There is a new VAT relief for business donations of goods to charity for onward distribution or use in the delivery of their non-business services, effective from 1st April 2026.  The Government will also consult on the reform of VAT rules to provide incentive for the development of land intended for social housing.

There were various measures announced to reduce the “tax gap”, including the requirement for all VAT invoices to be issued in a specified electronic format (e-invoices) from April 2029.  This is similar to, albeit earlier than, the measures being introduced in the EU.  There is also an increase in penalties for late payment of VAT from 1st April 2027.  The tax gap measures are forecast to generate £2.4 billion of additional revenue for the UK Treasury in 2029/30.

Predicted reforms to gambling taxes were introduced, including an increase in remote gaming duty from 21% to 40% and the introduction of a new Remote Betting Rate at 25% from 1st April 2027.  The rates apply to gross gambling profits from UK customers, regardless of where in the world the operators are located, so these will therefore impact offshore businesses making such supplies to UK recipients.

The customs duty relief for low value imports, meaning goods with a value of £135 or less, is being removed from March 2029, with a consultation opened by the Government regarding the technical detail of the new arrangements.

The freeze on fuel duties has been extended until September 2026, but the Government is introducing a new mileage-based charge on electric and plug-in hybrid cars.  The latter does not automatically apply to the Isle of Man, but it may guide future policy decisions in the Island.

Offshore Matters

There was little in the Budget that would significantly impact non-UK residents and offshore structures.  In particular, a much-vaunted exit charge did not transpire.

Effective from 6th April 2026, the dividend tax credit will be abolished for non-UK residents.  This will impact those non-UK resident individuals who are liable to UK income on multiple UK income sources, including disregarded income (dividends and savings income) and sources that are taxable on first principles, such as UK source rental income.  

There are two bases of calculation of income tax liability in these circumstances, and the taxpayer will be  liable under the base that yields the lower amount of income tax.  Although it will affect some non-UK residents, the overall impact of this measure has been assessed as negligible by the Exchequer.   

In relation to Non-Resident Capital Gains Tax (‘NRCGT’), one tax avoidance measure is to be introduced to tackle a perceived abuse.  Disposals of shares in property-rich companies have been within the scope of the NRCGT regime since April 2019, although Protected Cell Companies (‘PCCs’) continued to offer protection against the charge on the disposal of a property-rich cell in the company.  This has been addressed, each cell will now be viewed as a company in its own right from 26th November 2025.    

Final Thoughts

Again, despite previous comments by the Labour government and their manifesto pledges, the only real winners seem to be welfare recipients.  There was nothing in the Budget that would seem to encourage economic stimulus, the entrepreneurial spirit and the creation of a positive tax environment for new entrants.

At Equiom Tax Services Limited, we combine global expertise with local insight to guide individuals and businesses through complex international tax matters. For any questions or to explore how Equiom can support you, contact Andrew Cardwell today.

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