Autumn Budget: The Ultimate Guide to UK Fiscal Policy and Tax Reforms

The Autumn Budget is the UK government’s primary annual financial statement, detailing pivotal changes to taxation, public spending, and economic forecasts that directly impact millions of households and businesses. In the most recent cycles (2024–2025), Chancellor Rachel Reeves introduced a series of historic measures designed to raise over £40 billion, including a 1.2% increase in Employer National Insurance to 15%, significant hikes in Capital Gains Tax (CGT) rates to a maximum of 24%, and a major reform of Inheritance Tax (IHT) that brings inherited pensions into the tax net from April 2027. This guide provides a deep dive into the specific legislative timelines for 2026, including the new “mansion tax” valuations, the permanent lower business rates for high-street sectors, and the end of the “non-dom” tax regime.

Employer National Insurance Increases

The most significant revenue-raising measure in recent history is the reform of Employer National Insurance Contributions (NICs). Starting in April 2025, the rate paid by employers increased from 13.8% to 15%, while the secondary threshold—the point at which employers begin paying tax on an employee’s salary—was lowered from £9,100 to £5,000 per year.

This “double-hit” is estimated to generate roughly £25 billion annually to fund the NHS and other public services. To protect the smallest firms, the Employment Allowance was doubled to £10,500, effectively shielding micro-businesses from the impact. However, for mid-to-large sized enterprises, these changes represent a substantial increase in the cost of employment, which may lead to tighter wage growth and revised hiring plans through 2026.

Capital Gains Tax Reform

The Chancellor has implemented a sharp rise in Capital Gains Tax (CGT) to align the taxation of wealth more closely with the taxation of income. Effective for disposals made on or after October 30, 2024, the lower rate of CGT rose from 10% to 18%, and the higher rate increased from 20% to 24% for most assets.

For business owners, the rates for Business Asset Disposal Relief (BADR) and Investors’ Relief are also on a steep upward trajectory. These rates will rise to 14% in April 2025 and will eventually hit 18% in April 2026. This phased approach allows entrepreneurs some time to plan for disposals, but it signifies the end of the deeply discounted 10% rate that had been a staple of the UK tax system for years.

Inheritance Tax and Pensions

One of the most controversial elements of the current fiscal plan is the inclusion of unused pension funds in the value of an estate for Inheritance Tax (IHT) purposes. From April 2027, pension death benefits will no longer be exempt from IHT, closing what the Treasury described as a “loophole” used for tax-free wealth transfer.

Agricultural and Business Relief

Starting in April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) will be significantly restricted. While the first £1 million of combined agricultural and business assets will remain fully exempt, any value above this will receive only 50% relief, resulting in an effective IHT rate of 20%. This change is expected to have a profound impact on the succession planning of family-run farms and small businesses across the UK.

The New “Mansion Tax” Surcharge

Formally referred to as the High Value Council Tax Surcharge, this new property tax targets residential homes in England valued at £2 million or more. The Valuation Office Agency (VOA) is scheduled to conduct a massive revaluation exercise throughout 2026 to identify which properties fall into these new high-value bands.

The surcharge is expected to range from £2,500 to £7,500 per year, depending on the property’s specific valuation. Although the valuations occur in 2026, the first payments are not scheduled for collection until April 2028. Crucially, the liability rests with the property owner rather than the occupier, marking a significant departure from standard council tax rules.

Income Tax and Fiscal Drag

While the government pledged not to increase the headline rates of Income Tax, it has maintained the freeze on personal tax thresholds until April 2028. By not raising the tax-free Personal Allowance (£12,570) in line with inflation, the government utilizes “fiscal drag” to bring more people into the tax system and push more earners into higher tax brackets.

From April 2028, these thresholds are finally scheduled to be uprated in line with inflation again. Until then, taxpayers will likely see their effective tax rates rise as wages increase. This “stealth tax” is a primary driver of the rising total tax burden, which is forecast to reach a post-war high of 38% of GDP by the end of the decade.

Property and Stamp Duty Changes

Landlords and second-home owners have seen immediate increases in their tax liabilities. The Stamp Duty Land Tax (SDLT) surcharge on additional dwellings was increased from 3% to 5% in late 2024. This change was designed to give first-time buyers a comparative advantage in the housing market by making buy-to-let investments more expensive.

Additionally, temporary Stamp Duty thresholds that benefited first-time buyers are set to expire in March 2025. This means the nil-rate threshold for many buyers will drop from £425,000 back to £250,000. Potential movers are encouraged to finalize transactions before this date to avoid an unexpected tax bill of up to several thousand pounds.

Business Rates Reform 2026

The retail, hospitality, and leisure (RHL) sectors are set for a major structural change in business rates starting in April 2026. The government will introduce permanently lower multipliers for these properties, moving away from the temporary relief measures that have been common since the pandemic.

In the interim, the 2025/26 tax year provides a 40% relief for RHL properties, capped at £110,000 per business. While this is lower than the previous 75% relief, the shift toward a permanently lower multiplier in 2026 is intended to provide the “high street” with greater long-term certainty and stability.

Fuel, Alcohol, and Vaping Duties

In a move to support the cost of living, the 5p cut in fuel duty was extended until September 2026. After this date, a staggered reversal of the cut will begin, with rates expected to rise by 2p in late 2026 and another 3p in early 2027.

• Alcohol Duty: Most rates will increase in line with RPI inflation starting February 2026, though a 1p cut on the duty for a draught pint has been maintained to support pubs.
• Vaping Duty: A new excise duty on all vaping liquids will be introduced on October 1, 2026. This will be accompanied by a one-off increase in tobacco duty to ensure that vaping remains financially preferable to smoking for those attempting to quit.

Practical Information and Planning

Navigating these changes requires a clear understanding of the implementation dates and how they overlap with the financial year.

• Key Review Date: April 6th of each year is the standard date for most personal tax changes.
• Business Planning: Employers should factor in the 1.2% NIC increase for all payroll budgeting starting in 2025.
• Asset Disposal: Those planning to sell business assets should aim to do so before April 2026 to benefit from the 14% BADR rate before it hits 18%.
• Estate Planning: Review pension expressions of wish and life insurance policies before 2027 to account for the new IHT rules on death benefits.

Summary of Implementation Timeline (2025–2028)

Frequently Asked Questions

When does the increase in Employer National Insurance start? 

The increase from 13.8% to 15% takes effect on April 6, 2025. At the same time, the threshold at which employers start paying this tax drops from £9,100 to £5,000.

Is Capital Gains Tax going up again in 2026? 

The main rates (18% and 24%) have already increased. However, the special rate for Business Asset Disposal Relief will increase from 14% to 18% in April 2026.

How does the “Mansion Tax” work? 

It is a surcharge on properties in England worth £2 million or more. A valuation exercise will take place in 2026, with the first annual surcharge payments due in April 2028.

Will my pension be taxed when I die? 

Starting in April 2027, unused pension funds and death benefits will be included in your estate for Inheritance Tax (IHT) purposes. They may be subject to a 40% tax if your total estate exceeds the nil-rate bands.

What is the “Non-Dom” change? 

The old non-domiciled tax regime is being abolished in April 2025. It will be replaced by a new residence-based system that allows new arrivals to the UK to avoid tax on foreign income for only their first four years.

When will the fuel duty cut end? 

The 5p cut has been extended until September 2026. After that, the government plans a staggered reversal to bring duty rates back to their previous levels.

How much is the National Living Wage rising in 2025 and 2026? 

In April 2025, it rises to £12.21 per hour. Forecasts for April 2026 suggest a further increase to approximately £12.71, though this will be confirmed in late 2025.

Are there changes to ISA limits? 

The annual £20,000 limit remains. However, from April 2027, those under 65 will only be allowed to put a maximum of £12,000 into a Cash ISA, with the remainder required to go into a Stocks and Shares ISA.

What is the 2026 change for family farms? 

From April 2026, the 100% relief for agricultural land (APR) is capped at the first £1 million of value. Values above this will be taxed at an effective rate of 20% on death.

What is the 40% First Year Allowance? 

Introduced in 2026, this is a permanent tax relief for businesses that purchase plants and machinery specifically for leasing or hiring out to other companies.

Final Thoughts

The Autumn Budget changes implemented by Chancellor Rachel Reeves mark a historic pivot toward a high-investment, high-tax economy designed to “rebuild Britain.” By the arrival of 2026, the focus has shifted from the immediate shock of tax hikes to the long-term goal of stabilizing the UK’s debt-to-GDP ratio, which is forecast to reach approximately 97% by 2029 before beginning a gradual decline.

While the Office for Budget Responsibility (OBR) initially projected a boost in near-term growth to 2.0% in 2025, the outlook for 2026 remains more cautious, with GDP growth expected to moderate to around 1.5%. The success of this fiscal strategy hinges on whether the massive £100 billion capital investment program can successfully unlock private sector productivity to overcome the headwinds of “fiscal drag” and increased operational costs for businesses.

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