Ahead of the Budget there had been talk of a possible “exit tax” on individuals leaving the UK, be that a new levy on unrealised gains when people cease to be UK tax resident. In the end, that plan seemed to vanish. The Budget made no mention of an exit tax, suggesting the concept has been dropped (at least for now). 

This blog summarises the key tax changes and explains how they may affect you. 

Key changes 

Income tax and National Insurance 

• Personal tax thresholds remain frozen until April 2031, including the personal allowance and higher rate thresholds. 
• Headline tax rates stay the same for both income tax and National Insurance. 
• The freeze increases the number of people who move into higher tax bands as wages rise. This is known as fiscal drag.

Savings, dividends and property income 

• Dividend tax will rise from April 2026. The standard rate will increase by 2 percentage points from 8.75% to 10.75%. The higher rate will increase by 2 percentage points from 33.75% to 35.75%. 
• Tax on savings income and rental income will also increase from April 2027.

Pension contributions through salary sacrifice 

• From April 2029 only the first £2,000 of pension contributions made through salary sacrifice will be free of National Insurance. 
• Amounts above this will attract both employee and employer National Insurance. 
• Pension contributions made outside salary sacrifice keep their current treatment.

Property wealth and high value homes 

From April 2028 the government will introduce a new council tax surcharge for high value homes, as below: 

• Homes valued between 2.0 million and 2.5 million pounds: £2,500py 
• Homes valued between 2.5 million and 3.5 million pounds: £3,500py 
• Homes valued between 3.5 million and 5.0 million pounds: £5,000py 
• Homes valued above 5.0 million pounds: £7,500py 

Taxes on electric cars 

From April 2028 the government will introduce a mileage-based road tax for electric vehicles and plug in hybrids. The rates will be: 

• Battery electric cars: 3p per mile 
• Plug in hybrid cars: 1.5p per mile 

So, what do we think of this? 

Minimum wage and recruitment 

A rise in the minimum wage, expected to be confirmed in the new year, would shape the labour market at the same time as the tax changes. 

A higher wage floor improves pay for lower earning workers and helps offset some of the effect of fiscal drag. It also makes roles more appealing and may support hiring in sectors that struggle to attract staff. 

The challenge is that not all employers can increase wages at the same pace. Businesses with tight margins, especially in retail, hospitality and care, may struggle to fill roles if they cannot match rising pay. They may also need to raise wages across other job levels to maintain relative differences. This can put pressure on staffing budgets and lead to tougher recruitment decisions. 

Inflation pressures 

When the minimum wage rises it increases incomes for lower paid workers, which can strengthen demand at a time when prices remain high. This supports households but may add to short term inflation pressure. 

Higher staffing costs can feed into the prices that businesses charge. Some sectors feel this more than others. If wage pressure spreads across wider pay bands, the effect on inflation can increase. 

The overall impact depends on how quickly productivity improves and how businesses adjust their operations. If productivity stays flat, wage pressure is more likely to pass through to prices.

Fiscal drag in practice 

The freeze on tax thresholds is one of the strongest revenue raising tools in the Budget. Even without a rise in headline tax rates many people will pay more tax over time as their income grows. The change is gradual and often overlooked, but it still increases the tax burden for a wide range of households.

The shift from asset income to work income 

Higher taxes on dividends, savings and rental income signal a clear direction. The government wants to bring more balance between the tax paid by workers and the tax paid by those who earn from assets. This reduces the advantage previously held by investment income.

Pension changes and long-term planning 

The salary sacrifice change does not remove the benefit but reduces it for larger contributions. Higher earners may need to review how they save for retirement once the limit takes effect in 2029.

Tax on electric car mileage

The new mileage tax for electric cars begins to pull back the reliefs that encouraged people to switch to cleaner vehicles. Many drivers may see this as unfair, especially if they moved to electric cars based on lower running costs and tax support. 

The government has not explained how the system will be monitored. It may rely on mileage checks during servicing or MOT visits, or some form of digital reporting. Each method raises questions on accuracy and privacy. 

What this means for you 

Most households will notice the effect of fiscal drag as wages rise. Even if your tax rate stays the same you may pay more tax each year. 

People with investment income will feel the changes to dividends and rental income. You may want to check how the new rates affect your portfolio or property plans. 

If you use salary sacrifice for pension saving, review how your contributions will work once the new limit arrives in 2029. 

The council tax surcharge will only affect owners of very high value homes.



Conclusion 

Autumn Budget 2025 sets a clear direction for the years ahead. It raises revenue through frozen thresholds and higher taxes on asset-based income while keeping headline tax rates stable. At the same time possible rises in the minimum wage may add pressure to recruitment and could influence inflation in the short term.

For households the main message is to stay aware of how these shifts affect your income, savings and long-term plans. A careful review now can help you adapt before the changes come into full effect.