After months of speculation over tax increases, the 2025 Autumn Budget was finally announced yesterday. Rachel Reeves’ make-or-break autumn budget was shaped by weak growth, high borrowing costs and the cost-of-living crisis, as the government faced pressure to close a multibillion-pound gap in the public finances while signalling long-term reform. Ahead of the budget, the accidental release of the government’s official economic analysis by the Office for Budget Responsibility (OBR) surprised markets and briefly pushed Sterling higher. Below, we analyse the key announcements and what they mean for your business and international markets.
Tax Measures that made it
Inheritance tax, capital gains tax and other tax hikes announced
The government announced almost £30bn in taxes, with most of the revenue coming from the extension of the fiscal drag and scaling back pensions and employee salary sacrifice schemes. Additional increases to property tax, gambling tax, and Electric Vehicle (EV) tax were also announced, but these tax hikes were offset by £12bn of extra spending elsewhere.
Inheritance (IHT)
The inheritance tax threshold has been frozen for an extra year. In last year’s budget, Reeves confirmed the threshold would be frozen until 2030, but yesterday she announced that both the main nil rate band and residence nil rate band will remain frozen until April 2031.
EV
A new vehicle excise duty for electric vehicles (EVs) was also announced, with EV drivers facing a 3p per mile tax from 2028/29 while hybrid cars face a 1.5p per mile. The charge will increase in line with inflation and will raise £1.1bn in its first year, increasing to £1.9bn by 2030-31. The government is planning to raise the threshold for the expensive car supplement from £40,000 to £50,000 for EVs from April 2026, offering some relief.
Property
Reeves confirmed a council tax surcharge, or ‘mansion tax’, for homes worth more than £2m which will come into effect from April 2028. Properties worth £2m to 2.5m will incur a surcharge of £2,500 while those worth more than £5m or more will incur an annual charge of £7,500. Property income tax will increase from April 2027 by two percentage points.
Salary sacrificed pension
Salary-sacrificed pension contributions above an annual £2,000 threshold will be subject to both employer and employee National Insurance, and the policy is anticipated to raise £4.7bn in 2029-30 and £2.6bn in 2030-31.
Savings and dividends
From April 2026, the basic and higher rates of tax on dividends is also rising by two percentage points to 10.75% and 35.75% respectively.
From April 2027, savings income tax will increase by two percentage points, to 22%, 42% and 47% for the basic higher and additional rates.
Capital gains tax reform
Reeves said she is cutting the 100% relief on capital gains tax on businesses sold to employee ownership trusts down to 50%, with immediate effect.
Fiscal drag continues
Reeves confirmed an extension of the income tax threshold freeze prolonging fiscal drag for another three years beyond the planned 2028-29 deadline to 2030-31. By the end of the freeze, an estimated £8 billion could be generated for the Exchequer according to the OBR report as workers end up paying more tax.
Trade & Tariff impact
The Budget acknowledged trade- and supply-chain headwinds but didn’t directly address any major new policies or agreements. In her opening speech on Wednesday, Reeves pointed towards the three trade deals with the US, India and the EU as well as other reforms by saying, “We are rebuilding our economy,” but there was no clear indication of tariff-reduction measures for imports or exports, or of customs reforms.
Spending & Plan adjustments
Welfare announcements
The Chancellor confirmed reforms to work-related benefits, including tightened eligibility and new assessment procedures designed to reduce fraud with the return of face-to-face assessments for disability benefits.
Welfare spending is expected to increase following higher unemployment and policy changes. Reeves announced the decision to abolish the two-child benefit cap which will cost £3bn a year by 2029-30.
The budget also confirmed the removal of Motability tax breaks, a move which will generate savings by removing around £300m of taxpayer subsidies. Reeves explained that the Motability scheme was established to help disabled people and not to subsidise leases on luxury cars.
Business and growth incentives
Reeves reiterated the government’s commitment to making the UK the best place in the world for businesses, by expanding entrepreneurial investment schemes and supporting UK stock market listings with a three-year exemption from stamp duty.
A consultation on how to attract more entrepreneurs will also be launched, and she emphasised that “If you build here, Britain will back you.”
A 40% allowance will also help businesses offset a greater share of their initial investment costs.
750,00 retail, hospitality and leisure businesses will see their business rates permanently reduced, funded by higher charges on properties valued above £500,000 and used mainly by “warehouse giants.” £4.3bn will be used to support properties hit with a large increase in their bill.
As part of the effort to get more young people into work, the Chancellor announced that the cost of apprenticeships for under 25-year-olds will be completely free for SMEs, allowing small businesses to invest in future talent without needing to part-fund the apprenticeship.
Currency & Market reaction
GBP/USD and GBP/EUR impact
The budget removed fiscal uncertainty in the near term and supported Sterling. GBP/USD strengthened as markets digested the OBR projections and the budget. Looking ahead, GBP/USD’s direction will depend on how investors understand the balance between persistent inflation and weaker medium-term growth and how this will impact monetary policy.
GBP/EUR was also higher as the budget eased fears and offered reassurance with moderate fiscal measures.
Market confidence outlook
The budget was well received by investors as it eased concerns of major fiscal risks by providing limited near-term tightening and bigger fiscal headroom.
Conclusion: What businesses should do next
For businesses, investors and individuals exposed to currency, international trade or cross-border assets, now is a great time to review your risk, reassess your hedging strategies and budget rates for 2026. Contact our team today to assess your position and stay one step ahead.
