The UK’s Autumn Budget 2025 has been one of the most heavily trailed fiscal events in recent memory—not for what it contains, but for what was floated and then abandoned in the weeks leading up to it. This phenomenon, known as “political kite flying,” has dominated the pre-Budget narrative.
Kite flying is the practice of leaking potential tax or spending measures to gauge public and market reaction before committing. Proposals such as an income tax rise, changes to inheritance tax, and reforms to capital gains were all sent aloft, only to be shot down amid backlash from party members and voters.
And then to cap it all, the ultimate kite was flown on Budget Day when the Office for Budget Responsibility released its report in advance of the actual speech (albeit by error), taking the wind out of the sails of many of the kites that had been launched earlier.
Behind all this, there is a serious challenge: Reeves faces what pundits call an “impossible trilemma”—plugging a £20–30 billion fiscal hole, adhering to strict fiscal rules, and honouring manifesto pledges not to raise income tax, VAT, or National Insurance. With growth anaemic and borrowing costs at 30-year highs, the Chancellor has few easy levers to pull.
Key measures introduced included:
- As widely leaked before the Budget, income tax thresholds are to remain frozen until 2031
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- Increases in income tax for
– landlords – an increase in tax rates on property income by two percentage points
– dividends – an increase on the basic and higher rate, but not the additional rate by 2 %ge pts
– savers – an increase in tax rates on savings income by two percentage points
- Increases in income tax for
- National minimum wage to rise by 4.1% from April 2026
- A “mansion tax” will be introduced as a council tax surcharge on over £2m houses coming into effect in 2028. There will be four price bands with the surcharge rising from £2,500 for a property valued in the £2m to £2.5m band, to £7,500 for a property valued in the highest band of £5m or more
- Capital allowances: a reduction to the writing down allowance (WDA) main rate from 18 to 14 per cent from April 2026, alongside a new 40 per cent first-year allowance from January 2026, on top of the existing £1m Annual Investment Allowance of 100%
- Capital Gains Tax relief on the disposal of Employee Ownership Trusts has been reduced from 100% to 50%
- Extension to the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes. This will provide additional scope for income tax deductions for investors.
- National Insurance will be levied on pension salary sacrifice over £2,000 from 2029
- Lower tax rates for retail, hospitality and leisure properties – while large warehouses, particularly those used by online retailers, are facing generally higher rates or will see them increase significantly from April 2026.
- ISA reform – £20k allowance but £8k needs to be in stoc and shares ISAa – over 65s keep the full £20k allowance
- Car tax for electric and plug-in hybrids – tax to be paid per mile
- Two-child benefit cap scrapped
- The cost of apprenticeships for under-25-year-olds will be completely free for SMEs, meaning more small businesses can invest in future talent without the burden of part-funding the apprenticeship
- Customs duty on packages of any size and value
Get in touch with one of BHP’s tax specialists today if you have any questions regarding the Budget announcement.
