The Dead Simple Guide To What Actually Changes And When
The 2025 Budget introduces several important updates that affect savers, employers, business owners and anyone running electric or plug in hybrid cars.
💷 Minimum Wage Increases (Effective April 2026)
Coming into force next April so very soon
• Age 21 and over rises from £12.21 to £12.71- an increase of 50p/hour
• Age 18 to 20 rises from £10.00 to £10.85 – an increase of 85p/hour
• Under 18 rises from £7.55 to £8.00 – an increase of 45p/hour
🏢Employers will see higher payroll costs.
🧍Employees benefit from a stronger hourly rate.
📦 VAT Threshold And Income Tax Bands (Frozen from April 2026 for 3 years)
No increases at all.
VAT threshold
• Stays at £90,000pa
Income tax bands remain frozen at the following levels
• Personal allowance £12,570
• Basic rate band up to £50,270
• Higher rate band up to £125,140
• Additional rate above £125,140
❄️ Frozen thresholds mean more people gradually move into higher tax brackets.
📈 Dividend Tax Changes (Effective April 2026)
Coming into force next April so very soon
• The dividend allowance stays at just £500.
• The basic dividend tax rate increases to 10.75% from 8.75%
• The higher dividend tax rate increases to 35.75% from 33.75%
• The additional dividend tax rate stays the same at 39.35%
🧮 Worked Examples
(Using popular small company salary plus dividend setups)
Example 1
£12,570 salary plus £37,700 dividends
First £12,570 income is covered by the personal allowance.
First £500 dividends are covered by the dividend allowance.
The remaining £37,200 dividends are taxed at the new basic dividend rate of 10.75% which equals £3,999.
Under today’s rules: £3,255 tax payable.
From April 2026: £3,999.
Extra tax hit: £744.
⸻
Example 2
£12,570 salary plus £50,000 dividends
Personal allowance covers the first £12,570.
Dividend allowance covers the first £500 of dividends.
£37,200 is taxed at 10.75% which equals £3,999.
Remaining £12,300 is taxed at the new higher dividend rate of 35.75% which equals £4,399.
Under today’s rules: £7,406 tax payable.
From April 2026: £8,398.
Extra tax hit: £992.
🏠 Property Income Tax Changes (Effective April 2027)
From April 2027
Profits from renting out property will be taxed 2% higher than before
• Basic Rate 22%
• Higher Rate will be 42%
• Additional Rate will be 47%
• The property allowance remains unchanged at £1,000pa
• The Rent a Room Scheme remains unchanged at £7,500pa
• Carried forward property losses must still be used only against property income
• The mortgage interest relief rate increases from 20% to 22% from 6 April 2027
This is quite a major shift for landlords but note that this applies from April 2027.
💵 Savings Income Changes (Effective April 2027)
Similar to property earnings mentioned above, savings income will be taxed from April 2027 at
• Basic Rate 22%
• Higher Rate will be 42%
• Additional Rate will be 47%
💰 ISA Changes (Effective April 2027)
From April 2027, anyone under age 65 can put no more than £12,000 into a Cash ISA each tax year.
This is a reduction from today’s full £20,000 flexibility.
The remaining £8,000 can still be added into a Stocks and Shares ISA.
So you can still use your full £20,000 ISA allowance, but the split is simply restricted.
👵 Anyone aged 65 or over keeps full freedom to choose where the entire £20,000 goes.
⚡🚗 Electric And Plug In Hybrid Cars Pay Per Mile (Effective April 2028)
A completely new tax on road usage.
From April 2028 – so a while away still:
• Fully electric vehicles charged 3p per mile.
• Plug in hybrid vehicles charged 1.5p per mile.
• These rates will rise every year in line with inflation.
🏢Impact for businesses
Electric fleets become more expensive to run through the business.
🧍Impact for employees
Personal running costs increase
🧓👵 Pensions And Salary Sacrifice NI Changes (Effective April 2029)
From April 2029 so admittedly quite a while away yet
• Only the first £2,000 of salary sacrifice pension contributions remains exempt from National Insurance.
• Any amount sacrificed above £2,000 becomes subject to NI.
🏢Impact for businesses
Payroll costs will rise for staff using sacrifice heavily.
🧍Impact for employees
Pension contributions may become slightly more expensive due to NI being charged above the £2,000 level.
Fantastic Calculators you should check out
Sky News Just put in some details about your current earnings, and it calculates how much additional tax, NI etc you can expect to pay from April
Warren AI A super intelligent questionnaire & AI bot which we wish we’d come up with first(!)
📝 Quick Summary For Busy Readers
From April 2026
📈 Dividend Tax
• Dividend allowance stays £500
• Basic dividend rate rises 8.75% → 10.75%
• Higher dividend rate rises 33.75% → 35.75%
• Additional rate stays 39.35%
💷 Minimum Wage
• Age 21 and over: £12.21 → £12.71
• Age 18 to 20: £10.00 → £10.85
• Under 18: £7.55 → £8.00
📊 Income Tax Thresholds
• Thresholds remain frozen, and are now locked in until 2030 to 2031
From April 2027
💵 Savings Income
• Savings basic rate rises 20% → 22%
• Savings higher rate rises 40% → 42%
• Savings additional rate rises 45% → 47%
🏠 Property Income
• Property basic rate rises 20% → 22%
• Property higher rate rises 40% → 42%
• Property additional rate rises 45% → 47%
• Mortgage interest relief given at 22%
• Property allowance and Rent a Room Scheme unchanged
💰 ISAs
• Under 65s: max £12,000 allowed into Cash ISAs
• Remaining £8,000 can be used in Stocks and Shares ISAs
• Over 65s keep full £20,000 flexibility
• Total ISA limit stays £20,000
From April 2028
⚡🚗 Electric and Plug In Hybrid Cars
• Electric vehicles: 3p per mile road charge
• Plug in hybrids: 1.5p per mile
• Rates rise annually with inflation
From April 2029
🧓👵 Pensions and Salary Sacrifice NI
• Only the first £2,000 per year of pension contributions via salary sacrifice remains NI free
• Pension sacrifice above £2,000 attracts both employer and employee NI
We hope you’ve found this concise article helpful & if you’d like to know more specific info just reach out on email or book in a call with one of the team.
