Chancellor Rachel Reeves has delivered the 2025 Budget against a backdrop of sluggish medium-term growth forecasts and a significantly expanded fiscal headroom.

With the Office for Budget Responsibility (OBR) inadvertently releasing its Economic and Fiscal Outlook early, many measures were anticipated, yet the Budget still includes substantial tax changes, reforms to investment incentives and several shifts that will directly impact business owners, investors and higher-earning individuals. Below we summarise the announcements:

Major Measures Affecting Business Owners, High Earners and Investors

1. Further Freeze of Income Tax Thresholds to 2030–31

  • Personal allowance (£12,570), higher-rate threshold (£50,270) and additional-rate threshold (£125,140) remain frozen until 2030–31.
  • Fiscal drag will continue to pull more individuals into higher tax bands, contributing significantly to the government’s planned £26bn tax uplift by 2029–30.

2. Dividend, Property and Savings Income Tax Rates Increased by 2 Percentage Points

  • The Chancellor confirmed higher tax rates across non-wage income streams, raising an estimated £2.1bn.
  • High-earning individuals with substantial investment portfolios or rental income will feel this most strongly.

3. Salary Sacrifice Pension Contributions Above £2,000 to Attract National Insurance (from April 2029)

  • A major change for remuneration planning.
  • Salary-sacrifice pension arrangements will remain NI-exempt only up to £2,000 annually, contributions above this will attract employer and employee NICs.

4. Introduction of a ‘Mansion Tax’ for Homes Worth Over £2m

  • A new council tax surcharge will apply to high-value properties (those valued at over £2m).
  • Aimed at addressing regional council tax disparities.

5. Capital Gains Tax Relief Cut for Employee Ownership Trust Sales

  • The current 100% CGT relief for business owners selling to Employee Ownership Trusts (EOTs) will be reduced to 50%.
  • This change materially impacts exit planning for SMEs considering EOT structures.

6. Stamp Duty Exemption for Newly Listed UK Companies

  • Three-year stamp duty exemption for firms listing on UK markets.
  • Intended to encourage domestic listings and strengthen capital markets.

7. ISA Reform – £8,000 Ring-Fenced for Stocks & Shares

  • The overall £20,000 ISA limit remains unchanged.
  • However, an £8,000 portion must now be invested in stocks and shares, not cash ISAs.
  • Part of a broader push to increase UK retail investment.

8. Electricity Price Reduction for Many Manufacturers

  • Measures introduced to reduce power costs for energy-intensive manufacturers.
  • Expected to support competitiveness and investment.

9. New Vehicle Excise Duty (VED) for Electric Vehicles

  • EVs will no longer be exempt from VED, aligning them gradually with combustion-engine vehicles.

10. Remote Gambling Duty Increased to 40%

  • Up from 21%, raising over £1bn by 2031.
  • No changes for in-person gambling; bingo duty abolished.

11. Apprenticeship Funding for Under-25s Free for SMEs

  • Full funding for apprentices aged under 25, removing a significant cost barrier for smaller employers.

12. Welfare and Compliance Measures Affecting Employers

  • Increased checks on fraudulent welfare claims.
  • Disability benefit assessments to return to face-to-face formats.
  • Potential administrative implications for businesses engaging with government-supported employment schemes.

13. Changes to Government Procurement – ‘Buy British’ for National Security

  • Procurement rules updated to prioritise UK suppliers where national security is relevant.

14. Devolution of £13bn in Funding to Mayors and Regional Initiatives

  • Additional targeted funding for Cornwall, Leeds, Peterborough, Darlington, and devolved nations.

Other Notable Household and Consumer Measures

While these affect individuals more than businesses, they will still be relevant for financial planning:

  • Two-child benefit cap abolished from April next year.
  • State pension increased (£440 extra per year for standard pension; more for the new state pension).
  • National Living Wage and Minimum Wage increased.
  • Fuel duty 5p cut extended until 2026.
  • ECO insulation scheme scrapped, reducing average household energy bills by £150 annually.
  • Blood infection compensation payments exempt from inheritance tax.

Economic and Fiscal Outlook Highlights

  • Fiscal headroom doubled – from £9.9bn to ~£22bn.
  • Tax take projected to rise to 38% of GDP, a historic high.
  • GDP growth revised down for 2026–2029 (steady at 1.4–1.5%).
  • National debt forecast to fall as a proportion of GDP by the end of the forecast period.
  • OBR assessments of fiscal rules will shift to once per year rather than twice.

Conclusion

The Budget 2025 delivers a blend of tax rises, targeted incentives and structural reforms aimed at stabilising public finances and encouraging investment. For business owners, high earners and investors, the most significant impacts will come from the freezing of tax thresholds, higher tax rates on investment income, the new NI regime for salary-sacrifice pensions and reduced reliefs for business disposals to EOTs.

We will continue to analyse the detailed policy papers as they are released and advise clients on planning opportunities and compliance considerations.

If you would like to discuss how these changes affect your business or personal finances, please contact our team.