The release of this year’s budget comes later than usual, building even more anticipation as businesses across the country have waited eagerly to understand what it means for them. Now that it’s finally here, we can dive straight into the key points, highlighting the measures and tax changes that will have the greatest impact on businesses in the new financial year.
Minimum Wage
Minimum wage will increase from April 2026. The hourly rate for over 21s will rise by 50p to £12.71. Workers aged 18-20 will be seeing an 85p rise to £10.85. With plans for all adults to be on the same hourly rate.
See table below for a comparison of the minimum wage.
|
|
21
and over
|
18
to 20
|
Under
18
|
Apprentice
|
|
Currently
|
£12.21
|
£10.00
|
£7.55
|
£7.55
|
|
From
April 2026
|
£12.71
|
£10.85
|
£8.00
|
£8.00
|
Tax Thresholds
The chancellor has confirmed that both income tax thresholds and the equivalent National Insurance contributions thresholds will remain frozen for a further three years until April 2031.
That means the tax-free income threshold (our Personal Allowance) stays at £12,570. The last time the Personal Allowance was increased was prior to 2021, since then it has remained unchanged.
If your total income in a tax year is £12,570 or less, you pay no income tax. Only the portion above that is taxed, so, someone earning £30,000 would pay income tax only on £17,430 at a rate of 20%.
Tax rate depends on your taxable income.
|
|
Taxable
Income
|
Tax
Rate
|
|
Personal
Allowance
|
Up
to £12,570
|
0%
|
|
Basic
Rate
|
£12,571
to £50,270
|
20%
|
|
Higher
Rate
|
£50,271
to £125,410
|
40%
|
|
Additional
Rate
|
Over
£125,410
|
45%
|
Pensions
Starting April 2029, the amount that can be paid into a pension via salary sacrifice while saving on National Insurance will be capped at £2,000. Any contributions above this limit will be treated like standard employee pension payments and will save on Income Tax and not National Insurance.
According to the OBR, removing these tax advantages from salary-sacrifice pension arrangements is expected to generate an additional £4.7bn in National Insurance revenue.
Individual Savings Accounts (ISA)
An ISA is a type of savings account where the interest you earn is completely tax-free. At the moment, you can save up to £20,000 each tax year in a cash ISA.
From April 2027, the Chancellor has announced that the annual cash ISA limit will be reduced to £12,000, the first decrease since 2017. The aim is to encourage more people to invest through stocks and shares ISAs instead.
These are the affects this will have:
- If you’re 65 or over: Nothing changes. You can still put up to £20,000 a year into a cash ISA.
- If you’re 64 or under: Your cash ISA allowance will drop to £12,000, but only for new contributions made from April 2027 onwards. Any savings already held in a cash ISA won’t be affected.
- Stocks and shares ISAs: The annual limit stays at £20,000.
- Overall ISA limit: Still £20,000 per tax year for everyone, meaning you can continue to spread your allowance across different ISA types as you wish.
Dividends, Savings Interest and Property Income
If you receive dividend income, your tax rates will increase from April 2026. This applies if you hold investments outside a stocks & shares ISA, your total income exceeds the Personal Allowance (currently £12,570) and your dividend earnings are above the annual dividend allowance (currently £500).
Dividend tax rates will rise by 2%: the basic rate will move from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%. The additional rate will remain at 39.35%.
Savings interest tax rates will also rise but from April 2027. For those who do pay tax on savings interest, the basic rate will increase from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47%.
Those earning income from property will see similar changes from April 2027. Although this income is currently taxed at the standard Income Tax rates, property income will be given its own set of rates. These will sit 2% above today’s general Income Tax rates: 22% for basic rate, 42% for higher rate, and 47% for additional rate.
It’s not all negative, there are some welcome positives in this year’s announcements, including increases to the state pension and the removal of the two-child limit for Universal Credit.
The Chancellor confirmed that around 13 million pensioners will receive an above inflation rise to the state pension from April 2026. Both the new and old basic state pension will go up in line with average wage growth, currently 4.8% giving pensioners a meaningful cash increase.
Another major change is the scrapping of the two-child cap on benefits. Currently families receiving Universal Credit only receive the child element for their first two children. Removing this cap from April 2026 is expected to lift around 450,000 children out of poverty, according to the Government.
If you’d like to discuss any part of the budget in more detail, please feel free to give us a call or send us a message, we’re here to help. You can read the full budget by clicking here. If you want support planning for the upcoming minimum wage increase and what it means for your business, we can guide you through the numbers so you’re fully prepared. Despite the challenges and changes ahead, keep pushing forward. With the right planning and mindset, we can all work towards a strong finish to 2025 and an even more successful 2026.
