The Chancellor delivered the government’s second budget on 26 November 2025, introducing significant tax changes that will impact businesses and individuals across the UK. At Lexarox Accounts, we’ve analysed the key announcements to help you understand what matters most for your financial planning.
Major tax changes coming your way
Personal tax thresholds frozen until 2031
Income tax and National Insurance thresholds will remain frozen for an additional three years (April 2028 to April 2031). This “stealth tax” means as your income grows, more of it will be taxed at higher rates. By 2030/31, this measure alone will raise over £23 billion—making it one of the largest tax increases in 60 years.
What this means for you: Even without a rate increase, you’ll likely pay more tax as inflation pushes your income into higher brackets.
Dividend Tax increase
From April 2026, dividend tax rates will rise by 2 percentage points across all bands. If you’re a limited company director taking dividends as part of your remuneration strategy, this will directly impact your take-home income.
The new rates will be:
- Basic rate: 10% (currently 8.75%)
- Higher rate: 35% (currently 33.75%)
- Additional rate: 41.5% (currently 39.35%)
Our advice: Now is the time to review your salary-dividend mix and explore tax-efficient alternatives before these changes take effect.
Property and savings income hit
From April 2027, tax on property rental income and savings income will increase by 2 percentage points at all rates. Landlords and investors will see their tax bills rise accordingly.
Pension contributions cap
From 2029, National Insurance relief on salary sacrifice pension contributions will be capped at the first £2,000 per person. While 74% of basic rate taxpayers won’t be affected, higher earners using this strategy will face increased costs.
Capital Gains Tax changes
Relief on disposals to employee ownership trusts has been cut from 100% to 50%, effective immediately from 26 November 2025. This impacts business owners considering employee ownership structures.
The good news
National Living Wage increase
The National Living Wage will rise by 4.1% to £12.71 per hour from April 2026 for workers aged 21 and over. This represents a £900 annual increase for full-time workers and benefits approximately 2.4 million low-paid workers.
Rates for younger workers are also increasing:
- 18-20 year olds: up 8.5% to £10.85
- 16-17 year olds and apprentices: up 6.0% to £8.00
Enterprise Management Incentives (EMI) expansion
From April 2026, the EMI scheme will expand to include scale-ups, not just start-ups. This valuable employee share scheme helps attract and retain talent through tax-efficient equity incentives.
Two-Child Universal Credit Limit removed
From April 2026, the two-child limit in universal credit will be removed, lifting an estimated 450,000 children out of poverty and providing relief to larger families.
Energy bills reduction
Household energy bills will fall by approximately £150 on average in Great Britain from April 2026, providing welcome relief during challenging economic times.
Why regular tax planning matters
The UK tax burden will reach an all-time high of 38% of GDP by 2030/31. With such significant changes on the horizon, reactive tax management is no longer enough.
The cost of not planning: Many business owners only speak with their accountant once a year at year-end. This approach often results in unpleasant surprises—discovering you owe substantial tax with limited options to reduce it.
The value of proactive planning: Regular consultations throughout the year allow us to:
- Identify tax-saving opportunities before deadlines pass
- Adjust your remuneration strategy to minimise tax liability
- Capitalise expenses appropriately to reduce taxable profits
- Plan major transactions with tax efficiency in mind
- Prepare for upcoming changes before they take effect
At Lexarox Accounts, our annual reviews include value-added consultancy and tax optimisation as standard. We look beyond basic compliance to identify overlooked deductions, categorise expenses correctly, and structure your finances for maximum efficiency.
What should you do now?
Review your current structure: If you take dividends, have rental income, or use salary sacrifice for pensions, these changes will affect you.
Plan ahead: With most tax rises taking effect between 2026 and 2029, you have time to adjust your strategy—but only if you act now.
Book a consultation: Every business situation is unique. A personalised review can identify specific opportunities and help you navigate these changes effectively.
Don’t wait until your next tax bill arrives to discover how these changes impact you. The decisions you make now can save you thousands in the years ahead.
Get in touch
If you’d like to discuss how the Budget 2025 affects your specific situation or explore tax optimisation strategies, we’re here to help.
Contact Lexarox Accounts:
- Call us: Speak directly with our UK-based team – Tel: 0208 533 1358, Mobile: 0792 883 0368/ 0747 235 6282
- Email us: Get your questions answered in writing – info@lexaroxaccounts.co.uk
- Book online: Schedule a consultancy session at lexaroxaccounts.co.uk
Our multilingual team (English, Romanian, Italian, Spanish) provides expert guidance tailored to your industry and circumstances. As HMRC-authorised agents with AAT qualifications and legal expertise, we combine technical knowledge with practical, strategic advice.
Let’s work together to turn these budget challenges into opportunities for smarter tax planning.
_________________________
Lexarox Accounts – Your trusted partner for bookkeeping, tax returns, and strategic financial planning since 2013.
