The 2025 Budget marks one of the most significant tax-shifting moments in recent years. While the Government avoided raising headline income tax or VAT rates, it has instead leaned heavily on fiscal drag, asset-based taxes, and tightened reliefs to increase revenue.
Across the commentary from major outlets this morning, one message is consistent: millions will feel the impact not because tax rates rose, but because thresholds didn’t.
Below is a clear, structured breakdown of the key announcements, written for business owners, landlords, employees, and anyone seeking practical clarity.
The Government has extended freezes on key tax thresholds, ensuring more people drift into higher tax bands over time.
Thresholds for income tax and NI will remain frozen until 2030-31, meaning:
More people will become higher-rate taxpayers
Wage increases may be absorbed by taxes
Fiscal drag intensifies its long-term effect
VAT threshold remains at £90,000
Inheritance Tax thresholds remain frozen until 2030
Student loan repayment thresholds frozen at the 2026/27 level.
Fuel duty, rail fares, and prescription costs are frozen.
Freezes like these are subtle but powerful, and they have the same revenue impact as raising taxes, just without the political noise.
A number of targeted tax increases are central to the Budget’s revenue strategy.
Rates on property income, dividends, and savings income rise by 2% on both the basic and higher rates.
And crucially:
Property income tax rates will rise again from April 2027.
This is one of the biggest long-term revenue levers in the Budget.
A new surcharge applies to homes valued above £2 million, rising:
By approx. £2,500 for homes between £2m- £2.5m
Up to £7,500 for homes worth £5m
A move aimed at wealthier households, but likely to ripple across the property market.
Business Asset Disposal Relief increases from 14% → 18% (from April 2026)
Agricultural & Business Property Relief capped at £1m
A notable shift in how the system treats business and agricultural inheritance.
From 1 April 2026:
21+: £12.71/hr
18-20: £10.85/hr
16-17: £8/hr
Businesses will need to plan for increased payroll costs over the next year.
Remote gaming duty: 21% → 40%
Online betting tax: 15% → 25%
A significant change in the gaming sector’s tax landscape.
Rises from April 2026:
New State Pension: £230.25 → £241.30
Old State Pension: £176.45 → £184.90
A new road-use tax for low-emission vehicles:
EVs: 3p per mile
Hybrids: 1.5p per mile
From 2029, only the first £2,000 of salary-sacrifice pension contributions will be exempt from National Insurance.
A major change for higher earners who use pensions as a planning tool.
A three year Stamp Duty holiday for newly listed companies on the London Stock Exchange
Mandatory customs duty for online firms
New AI research centres in Wales
A nuclear energy research hub announced
These represent efforts to stimulate growth in targeted sectors.
Bingo duty abolished
Business rates relief continues for retail, hospitality & leisure (although larger premises face increases)
Energy bills cut by £150
Two-child benefit cap removed
This Budget is shaped by economic reality: the Government needs revenue, but has avoided headline increases that would attract political backlash.
Instead, the Budget:
Freezes thresholds
Targets wealth and property
Limits traditional tax-efficient strategies
Boosts wages at the lower end
Provides limited but meaningful household support
For workers: expect long-term pressure from fiscal drag.
For landlords and investors: property and investment income becomes less tax-efficient.
For businesses: wage and compliance costs rise, but selected reliefs (e.g., hospitality) offer offsetting support.
For households: support measures help, but inflation, taxes, and wage adjustments will shape real take-home income.
Budget 2025 is a balancing act between political promises and economic necessity. It raises revenue quietly, redistributes through targeted support, and shifts much of the tax burden towards wealth, property, and higher-value consumption.
Whether you’re an individual taxpayer or a business owner, the long-term message is clear:
– Fiscal drag will continue to tighten, and planning ahead will be more important than ever.
