UK Autumn Budget VAT & Tax Update - 2025

Autumn Budget Summary

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The Chancellor Rachel Reeves delivered her Autumn budget today Wednesday 26th November and the key VAT and Tax Changes are outlined below.

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VAT Changes

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In the Autumn Budget, it was confirmed that Electronic Invoicing (e-invoicing) will be mandatory for all business to business (B2B) and business to government(B2G)invoicing with VAT from 1 April 2029. Further details including a road map will be published in the 2026 budget. 

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The introduction of e invoicing will deliver many efficiencies to businesses but will require planning and resources to ensure systems are up to date and compliant for the exchange of invoices electronically in the required format.  For more information on what e-invoicing is and the different models that underpin it including the associated efficiencies and benefits , please see our e-invoicing news page.

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Please also see the updated consultation document link below following the Autumn budget announcement. 

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Promoting electronic invoicing across UK businesses and ...

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VAT on Taxi or Ride Hailing Companies - Such as Uber or Bolt will no longer be able to apply the tour operators margin scheme and charge VAT only on their margins (How much they charge drivers or commission) and will have to apply VAT to the full ride sales value from 2 January 2026.   

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Pension Salary Sacrifice

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Salary sacrifice is when you agree to reduce your gross salary or sacrifice a bonus and, in return, your employer pays the same amount into your pension. under current rules, these contributions are exempt from national insurance.  However from 1 April 2029, this exemption will be capped at £2,000 meaning that payments under such schemes above this level will then attract employees and employers national insurance. 

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Note: - These contributions into employer pension schemes will continue to be exempt from income tax subject to the normal limits. 

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For more information please see the link to HMRC guidance.  Changes to salary sacrifice for pensions from April 2029

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Cash ISA's 

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Also announced in the Autumn budget that from April 2027, the amount of cash you can pay into a cash ISA annually will be reduced from the current level of £20,000 down to £12,000 unless you are above 65 years of age. However the overall ISA allowance will remain at £20,000 which means the other £8,000 can only be used for investments. (Unless over 65)

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The aim here was to create and encourage more investments in the UK. 

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Savings, Dividends and Property Income 

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The government is raising rates of tax on property, savings and dividend income to ensure income from assets is taxed more fairly on the basis that property, savings or dividend income does not attract national insurance and as such individuals with such income pay less tax than those whose income comes from employment or self-employment. The increase in tax on property, savings and dividend income will help to narrow this gap.

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• Tax on dividend income will increase by 2 percentage points. The ordinary rate will rise from 8.75% to 10.75%, and the upper rate from 33.75% to 35.75% from April 2026. The additional rate will remain unchanged at 39.35%.

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• Tax on savings income will increase by 2 percentage points across all bands. The basic rate will rise from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47% from April 2027.

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• Tax on Property to have individual rates (similar to tax on savings and dividends).  From April 2027, the property basic rate will be 22%, the property higher rate will be 42% and the property additional rate will be 47%. Finance cost relief will be provided at the separate property basic rate (22%).

 

For more information on the above changes, please see the attached HMRC guidance link. Changes to tax rates for property, savings & dividend income 

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Corporation Tax

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Capital allowances allow businesses to write off the costs of capital assets, such as plant or machinery, against their taxable income. They take the place of commercial depreciation, which is not allowed for tax.

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• Writing Down Allowances (WDA) which allows companies, sole traders and partnerships to deduct the cost of plant and machinery from their profits chargeable to corporation tax will be reduced from 18% to 14% from April 2026.

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• New 40% First Year Allowance (FYA) - which will allow both companies and unincorporated businesses (from 1 January 2026) to deduct 40% of the cost of the main pool of plant and machinery upfront from profits in the first year. This new relief is specifically beneficial to unincorporated businesses and  leasing providers who were previously not able to use the full expensing 100% FYA available to companies. Note - The existing 100% full expensing allowance available to companies will be available only up until March 2026 and then replaced by the new 40% FYA  as outlined above.  

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For more information on these changes, please refer to the HMRC guidance in this link. new first-year allowance and reducing main rate writing ...

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Energy 

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An estimated £150 will be cut from annual household domestic energy bills by eliminating or reducing green levies which are usually rolled up in standing charges. This will be funded by the Government cutting the Renewable Obligation Scheme by funding 75% of it, leaving only 25% to be passed on to consumers and the scrapping of Energy Company Obligation (ECO) scheme which forced energy suppliers to fund home energy efficiency improvements such as insulation.  

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