How Rachel Reeves’ 2025 Tax Rises Will Affect Your Finances

Rachel Reeves’ Autumn Budget on 26 November 2025 confirmed a major tax rise across the UK.  As part of Rachel Reeves’ 2025 tax rises, the Office for Budget Responsibility (OBR) estimates an extra £26.1 billion a year in tax by the end of the forecast period. 

The overall tax burden is now forecast to reach 38.3% of GDP by 2030–31, the highest level in modern UK history, up from 36.3% in 2025–26. 

At Apex Accountants, we are already helping clients understand what this means in practice for wages, pensions, property income, savings, and long-term planning.

What Changed in the 2025 Budget?

Key points from the Autumn Budget summary and OBR report:

• Around £26bn a year in extra tax once the measures are fully in place.
  
• Tax-to-GDP ratio rising to 38.3% by 2030–31, a post-war high.
  
• Income tax and National Insurance thresholds frozen for three extra years, now running to 2030–31.
  
• New and higher taxes on:
  
  • Savings and investment income
    
  • Rental and property income
    
  • High-value homes over £2 million
    
  • Electric vehicles, via a new mileage-based road tax
    
• Cash ISA allowance cut for many under-65s. 

The OBR has also trimmed its growth forecast. It now expects UK real GDP to grow around 1.5% a year on average over the next five years, lower than it predicted in March, partly due to weak productivity. 

Why is the UK Tax Burden Hitting a Post-War High?

Rachel Reeves Autumn Budget focuses on raising more from the existing tax base rather than lifting basic income tax or VAT rates.

Several factors sit behind this strategy:

High public debt and interest costs

• Debt interest and long-term spending pressures on health, pensions, and social care remain heavy.
  

Tough fiscal rules

• The government must show that debt will fall as a share of GDP in five years’ time.
  
• The OBR now says Reeves has roughly £21.7bn of “headroom” against those rules, more than double the buffer it calculated in March.
  

Limited scope to cut spending quickly

• Some departments see modest increases.
  
• Deeper real cuts are pencilled in later in the decade and may be politically hard to deliver.
  

In short, the Budget shifts a larger share of the adjustment onto taxpayers, especially middle and higher earners, landlords, and wealthier households. 

Key Tax Changes And Who Pays More

Freeze on income tax and National Insurance thresholds

Reeves has extended the freeze on most personal tax thresholds until 2030–31, including: 

• Personal allowance
  
• Basic rate and higher rate income tax thresholds
  
• Key National Insurance limits
  

Because wages usually rise over time, more income is dragged into tax or higher tax bands. This is called “fiscal drag”.

The OBR and independent analysts estimate that the freeze will:

• Pull around 780,000 people into paying income tax for the first time.
  
• Push roughly 924,000 people into higher-rate bands by 2030–31.

Who is affected?

• Employees whose wages rise over the next five years
  
• Self-employed with growing profits
  
• Anyone close to the higher-rate or additional-rate thresholds today
  

Higher tax on savings interest and rental income

From April 2027, there will be a two-percentage-point rise in income tax on “unearned” income – mainly savings interest and rental income above the relevant allowances. 

New rates for income above the savings allowance are set to be:

• 22% for basic rate taxpayers (up from 20%)
  
• 42% for higher rate taxpayers (up from 40%)
  
• 47% for additional rate taxpayers (up from 45%)
  

Who is affected?

• Savers with large interest-bearing deposits outside ISAs
  
• Landlords with personal rental income
  
• Individuals with sizeable cash balances in high-interest accounts
  

Even a small rate increase can cut post-tax cash flow quite sharply, especially for landlords already restricted by mortgage interest rules. 

Dividend tax rises

From April 2026, tax on dividends outside ISAs will rise for many investors: 

• Ordinary rate: 8.75% → 10.75%
  
• Upper rate: 33.75% → 35.75%
  
• Additional rate: stays at 39.35%

Who is affected?

• Company directors taking profit as dividends
  
• Share investors with portfolios outside ISAs
  
• Landlords using limited companies to hold property
  

Cash ISA allowance cut for under-65s

From April 2027: 

• Annual Cash ISA allowance for those under 65 falls from £20,000 to £12,000.
  
• The overall ISA limit stays at £20,000, so more will need to be placed into stocks and shares ISAs or other types.
  
• Over-65s keep the £20,000 cash allowance, subject to final rules.
  

Some reforms will also tighten transfers from stocks and shares ISAs into cash ISAs and introduce tests for “cash-like” investments. 

Who is affected?

• Higher earners who use the full cash ISA allowance
• Cautious savers who prefer cash rather than investment risk
• Those who rely on ISAs to shelter interest from tax

Mansion tax on homes over £2 million

The Budget introduces a “mansion tax” – officially the High Value Council Tax Surcharge – on homes in England worth over £2 million. 

Key points:

• Applies to homeowners, not tenants.
• Paid on top of existing council tax bills.
• Annual charge expected in bands, roughly between £2,500 and £7,500 depending on property value. 
• The Valuation Office will run a targeted valuation exercise in 2026.
  
• First bills likely from April 2028, with revaluations every five years.

Who is affected?

• Owners of homes worth more than £2m in 2026
  
• Many properties in higher-value parts of London and the South East
  
• Some owners of country houses and estates elsewhere
  

New mileage-based tax on electric vehicles

From Spring 2028, electric car and plug-in hybrid drivers will face a per-mile road tax, sometimes called EV Excise Duty. 

Headline proposals:

• 3p per mile for full battery electric vehicles
  
• 1.5p per mile for plug-in hybrids
  
• Charges rise each year with inflation
  
• Likely collected alongside Vehicle Excise Duty, based on self-reported mileage or MOT readings
  

The OBR expects the measure to raise about £1.1bn in 2028–29, rising further by 2030–31. 

Who is affected?

• Private EV drivers from 2028
  
• Businesses running electric fleets
  
• Employees with electric company cars (though Benefit-in-Kind rules stay favourable)
  

Pensions and salary sacrifice

Rachel Reeves Autumn Budget scales back some of the generosity of pension tax advantages, with a focus on salary sacrifice (also called salary exchange): 

• Extra National Insurance–style charges on some employer pension contributions via salary sacrifice.
  
• Aim is to reduce the gap between taxed salary and tax-advantaged contributions for higher earners.
  
• Details will phase in over several years and could change after consultation.
  

Who is affected?

• Higher-earning employees using salary sacrifice to cut NICs
  
• Employers with large salary sacrifice pension schemes
  
• Professionals in sectors with generous pension packages
  

Who bears the brunt overall?

Independent analysis suggests: 

• Middle and higher earners carry most of the extra tax, through frozen thresholds and higher tax on savings, dividends, and property.
• Lower earners see some offset from:
  
  • Welfare changes, including the removal of the two-child limit for Universal Credit
    
  • Higher minimum wage
    
  • Support with energy bills
    
• Landlords, investors, and high-value homeowners see a clear rise in effective tax rates.
  

What does this mean for you in practice?

Below are typical groups and how they may feel the changes.

Employees on PAYE

• Pay rises between now and 2030–31 will be taxed more heavily.
  
• You may move into higher-rate bands even if your living standard feels similar.
  
• Child benefit and other threshold-based rules may bite earlier.
  

Self-employed and business owners

• Profits that rise with inflation will pull you deeper into higher-rate tax.
  
• Dividend increases will cut the net value of taking money from your company.
  
• Cash held in business or personal accounts may attract more tax if interest is high.
  

Landlords

• Personal landlords face:
  
  • Higher tax on rental profits from 2027
    
  • No relief for all mortgage interest, due to existing rules
    
• Company landlords face higher dividend tax when extracting profits.
  

Savers and investors

• High-balance cash savers see more interest taxed at 22%, 42% or 47%.
  
• Investors outside ISAs lose more of their dividends to tax from 2026.
  

High-value homeowners

• From 2028, many owners of £2m+ properties will pay the High Value Council Tax Surcharge each year.
  

Electric vehicle drivers

• EV running costs rise, though they still tend to be cheaper than petrol or diesel once all taxes are considered.
  

Practical steps to consider now

This Budget does not only affect “the wealthy”. It shapes the tax position of almost every working adult over the next decade.

You may wish to review:

Pay structure and timing

• Check whether bonus timing can help manage threshold effects.
• Consider spreading income rather than bunching it in one tax year.
  

Use of ISAs

• Make full use of current allowances before the cash ISA cut in 2027. 
• Consider a plan for shifting more long-term savings into stocks and shares ISAs if suitable for your risk profile.
  

Pension contributions

• Review salary sacrifice schemes and personal contributions.
• Check whether moving to different contribution structures could preserve relief.
  

Property and landlord planning

• Assess whether your rental portfolio works better in a company or in your own name.
• Model the impact of the higher unearned income rates from 2027.

Home value and potential mansion tax

• If your property is near the £2m mark, consider timing of major improvements and potential valuation disputes.

EV usage and business fleets

• Build the pay-per-mile charge into cost projections from 2028.

Good planning cannot remove these tax rises. It can, however, reduce unnecessary leakage and support more stable long-term finances.

How Apex Accountants Can Help Navigate Rachel Reeves’ Autumn Budget Changes

At Apex Accountants, we help individuals and businesses respond to changes like the Rachel Reeves’ Autumn Budget 2025 with clear, practical advice.

We can support you with:

Personal tax reviews

• Bespoke analysis of how the threshold freeze and new rates affect you.
  
• Scenario planning for pay rises, bonuses, and business profit.

Landlord and property tax planning

• Restructuring advice for personal and corporate landlords.
  
• Cash-flow modelling under higher rental and dividend tax.
  
• Guidance on the new mansion tax, including valuation disputes and payment strategies.
  

Savings, ISA, and investment tax advice

• Planning for the cash ISA allowance cut.
  
• Structuring portfolios between ISAs, pensions, and general accounts to reduce future tax.

Pension and salary sacrifice optimisation

• Reviewing salary sacrifice schemes in light of the new rules.
  
• Coordinating employer and employee contributions for long-term efficiency.

EV and company car strategies

• Comparing petrol, hybrid, and EV options after the pay-per-mile charge.
  
• Advising on company car policies, Benefit-in-Kind, and fleet planning.

Business tax and forecasting

• Integrating all new measures into long-term cash flow and investment plans.
  
• Helping you keep the business compliant while still backing growth.
  

If you would like a tailored review, we can walk through the numbers for your situation and set out clear next steps.

Conclusion

Rachel Reeves’ 2025 Budget marks a structural shift in how the UK raises revenue. This autumn budget summary highlights how the government is leaning on stealthier levers – frozen thresholds, wealth-related taxes, and higher rates on savings, dividends, and property – to raise money without lifting headline income tax rates.

For many households, the impact will not be dramatic in one single year. Instead, the effect builds steadily through the 2020s as wages, rents, and asset values rise into fixed thresholds and new charges begin.

Planning early can help you stay in control. Good records, clear forecasts, and structured tax planning make a real difference once these measures bite. Contact us today for tailored guidance on how to prepare for these changes.

FAQs – Rachel Reeves’ 2025 Tax Rises and What They Mean For You

1. What are the main tax changes in Rachel Reeves’ 2025 Budget?

The key changes include:

• Extending the freeze on income tax and NI thresholds to 2030–31. 
• A two-percentage-point rise in tax on savings interest and rental income from April 2027.
• Higher dividend tax rates from April 2026.
• A cut in the cash ISA allowance for under-65s to £12,000 from April 2027.
• A new mansion tax on homes over £2m in England from 2028. 
• A new per-mile EV tax from 2028.

2. How does freezing income tax thresholds affect my tax bill?

When thresholds stay fixed but earnings rise, more of your income:

• Moves from untaxed to taxed
  
• Or moves from basic to higher rates
  

The OBR expects hundreds of thousands more people to pay income tax or join higher-rate bands by 2030–31. 

Even if your headline tax rate does not change, the share of your income lost to tax usually increases.

3. Who will pay the new mansion tax?

The High Value Council Tax Surcharge applies to homes in England worth over £2 million in 2026 valuations. 

• It is paid by homeowners, not tenants.
  
• It sits on top of normal council tax.
  
• Annual charges start around £2,500 and can reach about £7,500 or more for very expensive properties.
  

If your home is near the threshold, professional advice on valuation and appeals will be important.

4. How will the Budget affect landlords?

Landlords face several pressures:

• Higher tax on rental profits from 2027 as property income joins the new 22%, 42%, and 47% unearned income rates.
  
• Company landlords pay more when extracting profits as dividends, due to the higher dividend tax.
  
• Existing mortgage interest restrictions remain in place. 

Many landlords may seek higher rents to offset their own higher bills, which could affect tenants.

5. What does the Budget mean for my savings and ISAs?

Key points for savers:

• Cash ISA allowance for under-65s falls to £12,000 from April 2027. 
• Overall ISA allowance stays at £20,000, so more may go into stocks and shares ISAs.
• Tax on savings interest outside ISAs rises by two percentage points from April 2027.
  

If you hold large cash balances, it may be worth reviewing whether the mix between cash, ISAs, and investments still suits your goals and risk tolerance.

6. How are pensions and salary sacrifice changing?

The Budget reduces some of the gains from pension salary sacrifice by adding or increasing social security-style charges on certain employer contributions. 

This does not remove pension tax relief. It simply narrows the gap between:

• Taking salary now, and
  
• Receiving tax-advantaged pension contributions
  

Higher earners and large schemes are most affected. A review of contribution structures and timing can help keep your plan on track.

7. What is the new tax on electric vehicles?

From 2028, EV drivers will pay: 

• Around 3p per mile for full battery EVs
  
• Around 1.5p per mile for plug-in hybrids
  

The charge is designed to replace fuel duty revenue as more drivers switch from petrol and diesel. EVs should still be cheaper per mile than many fossil-fuel cars, but the tax advantage narrows.

8. Will taxes rise again after this Budget?

Reeves has not promised that this will be the last round of tax rises. Some commentators, including bond markets analysts, believe further measures may follow if: 

• Growth disappoints
  
• Debt interest costs rise
  
• Spending cuts prove politically hard to deliver
  

This makes flexible planning important. Building in margins for future change can reduce shocks.

9. Does this Budget help or hurt growth?

The OBR expects growth to be steady but subdued, averaging about 1.5% a year and weaker than earlier forecasts. 

Higher taxes may weigh on:

• Business investment
  
• Housing and rental markets
  
• Consumer spending

However, some measures may support growth in other ways, such as:

• Support for poorer households via welfare changes
  
• Stability from a credible plan to control debt
  

The net effect will depend on how businesses and households respond.

10. How can Apex Accountants help me respond?

We can:

• Analyse your current position under the new tax rules.
  
• Model your likely tax bills over the rest of the decade.
  
• Suggest practical adjustments to pay, pensions, savings, property holdings, and EV or company car decisions.
  
• Liaise with HMRC where needed and keep you updated as details are clarified.
  

If you would like us to apply this to your situation, we can review your figures and create a clear action plan.