Labour’s first budget – October 2024 – was bad enough. Two of the worst examples of the budget changes were:

 (1) Changing the Inheritance Tax rules for farmers and small business owners. The owners of these trading assets were fully exempt from IHT but as from 6th April 2026, the rules change dramatically. For example, a farmer with 1,000 acres of arable land worth £10K per acre, would leave his successors with an IHT bill of £1.8million. And

 (2) Breaking their manifesto promise not to increase National Insurance. The consequences of increasing employers’ NIC from 13.2% to 15% of salary has caused unmitigated grief in the private sector including unemployment, business closures and low morale.

Labour’s second budget, November 26th, 2025.

Where to begin?

I have been sending out Budget Newsletters for many years, but this is the most shambolic Budget I have ever witnessed.

Firstly, there was far too much chit chat from Ms Reeves prior to the Budget, leading in the last few months to speculation, a fall in business confidence and general anxiety.

As for the Budget itself, yet another manifesto commitment has been broken. Namely, an income tax increase by stealth; whereby the freeze on annual increases in tax allowances and tax bands will be extended for an additional 2 years to April 2031. (Known as fiscal drag).

There was little in this budget to promote Mr Reeves obsessive drive for growth. Rather the opposite. Higher taxes – see note below -  and higher spending including her abolition of the 2 child benefit cap;   extending this benefit to those with more than 2 children.  All very well, but this spending increase has been costed at about £4 billion per annum and is being paid for by tax payers across the board – i.e. not just the rich but those on lower and middle incomes.

A summary of the main tax changes

A note of the main tax rates for 25/26 can be found at the very end of this bulletin. Note that I have divided these up into 2 groups – one labelled NTCs ( No Tax Changes) and the other labelled WTT( Wearisome Tax Tinkering ).

Finally, I hope you will enjoy this excellent FT video from the Financial Times’s Claer Barrett.

 Andrew Hamilton, Chartered Tax Advisor & DipPFS

NTCs

  • Almost no changes to the tax relief on pensions (but see below)

  • No changes to corporation tax rates

  • No changes yet to Scottish rates of tax on 2025/26 – the next Scottish Budget is on 13th January 2026.

  • No changes to Inheritance Tax until April 2027 – when Private Pensions, Agricultural Property, AIM shares and shares in unquoted trading companies  will become liable to IHT. ( Pensions at the 40% rate and the other assets at 20% after a 100% exemption on the first £1M)

  • Almost no changes to CGT rates and allowances except to Employee Ownership Trusts.

WTT ( A long and mostly unnecessary list of tax changes).

  • Increases in tax rates on dividends – up by 2% from April 2026 ( NB the dividend tax rates depend on which income tax band you fall into - ordinary, upper or additional.)

  • Tax rates on income from property and savings - up by 2% from April 2027

  • Property, savings and dividend incomes will be “taxed later in the income tax calculation , reducing the effect of tax reliefs”.

  • From April 2027, Cash ISA subscriptions for those aged under 65, will see their Cash ISA annual allowance cut from £20,000 to £12,000 (note you can invest £20,000 in your stocks and shares ISA into “cash” funds).

  • From 26th November 2025, Capital Gains Tax (CGT) relief on qualifying disposals to Employee Ownership Trusts ( EOTs), will reduce from 100% to 50%.

  • Currently both employers and employees save NIC by the “salary sacrifice” scheme used for employee’s pension premiums. As from April 2029, apart from the first £2,000 per annum,  both employees and employers will lose the NIC saving. ( Employees currently save up to 8pc of salary and employers up to 15% of salary.)

  • Mansion Tax is a new council tax surcharge for high-value English properties to come into effect in 2028. It punishes owners whose houses are worth more than £2million starting at £2,500 p.a going up to £7,500 p.a for houses worth more than £5million.

  • Enterprise Investment Scheme & Venture Capital Trusts – these schemes will benefit from some changes to investment limits but the income tax relief that can be claimed by an individual will reduce from 30% to 20% on Venture Capital Trusts from 06 April 2026.

Kindly reproduced with the permission of Robert Thomson