The Commons erupted into its trademark school-yard jeering as the Chancellor approached the despatch box, all against a backdrop of smiling, nodding Labour MPs, eager to project unity across a fractured party.
Let’s unpack all the changes that matter.
Intro: A Leaky Budget
The lead up to Budget day was unusual not only for its flip flopping and press releases, but for how much of it was made public before the Chancellor stood up…
The OBR’s Economic and Fiscal Outlook was accidentally published early, revealing headline tax rises and fiscal headroom before the speech… oh dear.
MPs and media briefings had already trailed key measures, prompting the Deputy Speaker to quite rightly admonish the level of leaks from government and associated bodies.
Satire: … meanwhile Lindsay Hoyle was busy booking in a visit from Pimlico plumbers.
1. Fiscal Position & OBR Headroom
The OBR and press coverage give us the broad shape:
Borrowing around £138bn in 2025/26, falling over the forecast. (Reuters)
The current budget moves into surplus from 2027/28 onwards, with surpluses of around £10.9bn in 2027/28, £9.3bn in 2028/29 and £9.9bn in 2029/30, under earlier projections.
With this Budget, the OBR now reports fiscal headroom of “nearly £22bn in five years’ time” – i.e. in 2029/30 – against the main fiscal rule (current budget in balance and debt falling). (Reuters)
The overall tax burden rises to about 38% of GDP, the highest in the post-war period. (Reuters)
Crucially, that headroom is achieved mainly via higher tax receipts and threshold freezes, not a productivity boom.
2. The Macro Logic: AD = C + I + G + (X-M)
2.1 Remember this equation from school?
No? A quick refresher…..
Economists summarise the demand side of the economy with:
Aggregate Demand (AD) = C + I + G + (X − M)
Consumption + Investment + Government spending + Net exports
It’s the standard macroeconomic framework used since the work of Keynes and Hicks in the mid-20th century and sits behind the models used by:
The OBR,
The Bank of England, and
International bodies like the IMF and OECD. (OBR)
In short, higher AD = economy grows
2.2 How this Budget moves the components of AD
In this Budget:
G (Government spending) rises - more for the NHS, welfare, local authorities and specific capital programmes. (Reuters)
C (Consumption) is squeezed by higher effective tax (threshold freezes, higher taxes on savings, property and dividends).
I (Investment) gets only modest support (40% FYA) and faces a still-high 25% CT rate.
(X − M) net trade, is essentially untouched.
The OBR’s updated forecast shows modestly higher growth, but much of this is due to higher government spending (G) feeding directly into GDP, not a surge in consumer spending or private investment. (Reuters)
In plain language:
Headline growth improves… but it is artificial, fiscally driven growth, not evidence of a thriving, investment-led economy. Great.
Tax Changes - Let’s Get Into It…
3. Personal Tax
3.1 Income Tax & NIC Threshold Freezes (to April 2031)
Frozen:
Personal Allowance: £12,570
Higher-rate threshold: £50,270
Additional-rate threshold: £125,140
NIC thresholds broadly aligned
The freeze now runs through to 2030/31, extending the existing policy.
Effect: fiscal drag…with normal wage growth, e.g…
Someone on £45,000 is likely to enter higher-rate tax by around 2029/30.
On £40,000, the shift to higher rate comes a few years later.
The precise timing will depend on actual pay and inflation, but the direction is clear: more higher-rate taxpayers without any actual rate rises.
3.2 Dividend Tax - Before & After (From 6 April 2026)
New dividend tax rates
Band | Before | After (from 2026) | Change |
|---|---|---|---|
Basic | 8.75% | 10.75% | +2.0% |
Higher | 33.75% | 35.75% | +2.0% |
Additional | 39.35% | 39.35% | No change |
These rises were flagged in advance and confirmed as part of Reeves’ “tax on income from wealth” package.
Context for owner-managers:
Dividends still avoid employer and employee NICs, so they remain more efficient than salary.
But the gap narrows, especially in the higher-rate band.
Extraction strategies (salary vs dividend vs employer pension) will need fresh modelling post-2026.
3.3 Savings Income - Before & After (From 6 April 2027)
New savings income tax rates
Band | Before | After (from 2027) | Change |
|---|---|---|---|
Basic | 20% | 22% | +2% |
Higher | 40% | 42% | +2% |
Additional | 45% | 47% | +2% |
Again, this is part of aligning tax on income from assets more closely with tax on work.
ISA allowances now become even more valuable for sheltered savings interest.
3.4 ISA Allowance
The ISA allowance stays at £20,000, but the Chancellor alluded to a mandated split of:
£12,000 in Cash ISAs,
£8,000 in Stocks & Shares ISAs,
(this split doesn’t apply to over 65’s)
She argued that putting money into an stocks and shares ISA, every year since 1990 would not have beaten cash on returns….huh?
That claim is broadly only true if:
you restrict yourself to UK equities (which no good investor would do), and/or
compare against periods where gilts and cash were unusually strong.
On any long-run global equity view (e.g. MSCI World), equities massively outperform cash over 30+ years. The comment reads more as political reassurance to cautious savers than robust investment analysis.
3.5 Pension Salary Sacrifice & NIC Relief Cap (From 6 April 2029)
From April 2029:
Only the first £2,000 of salary given up under pension salary sacrifice each year benefits from NIC relief.
Above that, normal employer and employee NICs apply; income tax relief is unchanged.
This change is specifically aimed at higher earners and employers using aggressive sacrifice strategies.
Planning: There is a window between now and April 2029 to maximise the current, more generous regime.
3.6 Triple Lock & Pension Taxation
The Chancellor confirmed:
The State Pension triple lock remains in place.
There are no changes to:
the 25% tax-free lump sum, or
pension commencement lump sum rules.
However, because the personal allowance is frozen to 2030/31, and the State Pension is uprated by the triple lock, more pensioners will be pushed into paying income tax over the rest of the decade.
3.7 Minimum Wage and National Living Wage Increases
The Budget sits alongside already-announced rises in wage floors:
From 1 April 2025 (based on previous Budget decisions) the rates are:
National Living Wage (21+): £12.21 per hour
18–20: £10.00 per hour
Under 18 and apprentices: £7.55 per hour
In this Budget, Reeves builds on that by confirming further uplifts from April 2026, with briefed figures including:
An increase for 21+ to around £12.70+ per hour,
Larger percentage rises for younger workers (18–20, 16–17, apprentices). These changes are part of a stated ambition to narrow the gap between youth and adult rates and move toward a single adult wage baseline.
The interaction with frozen thresholds means some low-to-middle earners will see more of these wage gains pulled into tax over time.
5. Property & Housing
5.1 Property Income Tax - Another Hit for Landlords (From April 2027)
New property income tax rates
Band | Before | After (from 2027) | Change |
|---|---|---|---|
Basic | 20% | 22% | +2% |
Higher | 40% | 42% | +2% |
Additional | 45% | 47% | +2% |
In addition:
From 2027/28, personal allowances and reliefs are applied to other income first, then to property/savings/dividends.
This means more rental profit ends up taxed at these new, higher rates.
For landlords, this comes on top of:
Section 24 mortgage interest restrictions
SDLT surcharges, loss of wear-and-tear allowance
The forthcoming Renters’ Reform Bill (no-fault eviction ban, new redress schemes, tighter regulation).
The direction of travel is clear: smaller, highly leveraged private landlords are being steadily squeezed out. Portfolios should be re-modelled for 2027/28 onwards.
Importantly…Finance Interest Relief – Credit Increasing to 22%
From April 2027 onwards… a key technical change for landlords is that the finance-cost tax credit (applied to mortgage interest under Section 24 rules) will increase from 20% to 22% when the new property income regime comes into force.
This matters because, until now, mortgage interest has only attracted a 20% credit, even for higher-rate taxpayers. Under the new structure:
Mortgage interest will continue to be non-deductible,
But the tax reducer applied to those interest costs will rise from 20% → 22%,
Bringing it into line with the new basic property rate.
5.2 High Value Council Tax Surcharge (From 1 April 2028)
Official policy (Red Book / OBR coverage):
A new “mansion surcharge” on residential properties in England valued over £2m.
Takes effect from 2028/29.
In her statement, Reeves indicated that:
Homes £2m–£5m would face an annual surcharge of around £2,500,
Homes over £5m would face around £7,500 per year,
(though precise amounts and valuation methodology will be finalised through consultation.)
It was rumoured (pre-budget) that there would be two further bandings sat in the middle of £2.5 - £5m range however… no budget document details as such and no verbal confirmation by the Chancellor at the despatch box.
Importantly:
No new council tax bands are being created,
There is no full national revaluation,
While Ed Miliband was nodding along in agreement, perhaps inside he was shaking his head given his £3.7m North London Property.
6. Welfare & Labour Market
6.1 Abolition of the Two-Child Cap (From April 2026)
The two-child limit on child elements in Universal Credit and tax credits:
Introduced by the Conservative government in April 2017, applicable to third and subsequent children born on or after 6 April 2017, under then-PM Theresa May.
Designed to align welfare with the choices of working households and constrain welfare spending.
The Budget abolishes the cap from April 2026.
The OBR estimates the policy will cost around £3.1bn in 2029/30 and will lift roughly 450,000 children out of poverty.
This is one of the clearest signals of a shift toward a larger, more redistributive welfare state.
7. Capital Gains, Carried Interest & Employee Ownership Trusts
7.1 BADR & Investors’ Relief - Rates Rising
Business Asset Disposal Relief (BADR) and Investors’ Relief move from 10% to:
14% (from April 2025)
18% (from April 2026).
The days of the universal 10% “entrepreneurs’ relief” are effectively over.
7.2 Carried Interest - Alignment with Income Tax and Hold-Period Test (From 6 April 2026)
The previous budget delivered a major overhaul of how carried interest is taxed.
Previously:
Carried interest was taxed largely as a capital gain, often at 20% (or 28% where residential property exposure applied).
Structuring and timing could soften liabilities.
From April 2026:
Carried interest will be taxed using a hybrid formula:
Effective rate = Marginal income tax rate × 72.5% multiplier
So:
A higher-rate individual (40%) pays roughly 32% on qualifying carry.
An additional-rate individual (45%) pays roughly 32–36%.
Crucial: hold-period requirement
The reduced “72.5% multiplier” only applies where a minimum hold period is met, widely expected to be three years, following US-style “long-term carry” rules. If that test is not met:
7.3 Employee Ownership Trusts (EOTs) - CGT Relief Cut from 100% to 50% (From 26 November 2025)
Under the old rules:
Founders selling a controlling interest to an EOT could benefit from 100% CGT relief, making EOTs a powerful exit tool, combining succession and culture preservation.
From 26 November 2025:
Only 50% of the gain on a qualifying disposal to an EOT will be CGT-free;
The remaining 50% is taxed at the appropriate CGT rate (and not qualify for BADR relief)
In practice:
Founders still get material relief, but
EOTs will no longer always beat a trade sale on a purely tax basis, especially where consideration is paid out of future profits over time.
The Treasury’s rationale is concern about abuse and overly aggressive tax-driven EOT structures; the result is a middle ground where EOTs remain viable but no longer “too good to be true.”
8. EIS, VCT & EMI Schemes
EIS, VCT & EMI – Expanded Capital Raising Limits (Subject to Legislation)
Alongside extending EIS and VCT to 2035, the government has signalled a significant expansion in how much capital qualifying companies will be able to raise through these schemes.
Press briefings indicate the annual EIS/VCT fundraising cap will rise from £5m to £10m, with lifetime limits increasing from £12m to £24m, and from £20m to £30m for knowledge-intensive companies. Company-size thresholds are also set to increase to support larger scale-ups.
These increases have not yet been legislated, but represent a major uplift in the UK’s tax-efficient investment regime if enacted.
EIS / VCT Funding Limits - Before vs After (Reported Future Changes)
Measure | Current Limit (2024/25 rules) | Reported New Limit (Budget briefings & press) | Status |
|---|---|---|---|
Annual EIS/VCT fundraising limit | £5 million in any 12-month period | £10 million per year | Reported by The Times (Scale-Up Reform), government-briefed but not yet legislated |
Lifetime funding cap (standard companies) | £12 million lifetime | £24 million lifetime | Same as above — policy direction stated, awaiting formal legislation |
Lifetime funding cap (Knowledge-Intensive Companies) | £20 million lifetime | £40 million lifetime | As above - not yet enacted |
Company gross-asset limit | £15 million pre-investment, £16 million post-investment | £30 million pre-investment, £35 million post-investment | Reported; subject to consultation & legislation |
Employee limit | < 250 employees | Expected increase to support larger scale-ups | To be confirmed |
EMI | £3m unexercised options; £250k per employee | Government reaffirmed stability of scheme | No numerical change yet |
The core tax-relief rates for EIS and VCT remain unchanged for now, with 30% Income Tax Relief still applying to qualifying subscriptions. However, several Budget-week press reports indicated that the government is considering reducing VCT Income Tax Relief to 20% from April 2026 as part of wider reforms to investment-income taxation. This has not yet appeared in any published legislation or HMRC guidance, so should be treated as a possible, not confirmed, change.
9. Corporation Tax & Investment Incentives
9.1 Corporation Tax Rate
The main CT rate stays at 25%.
No headline change here, the focus is on the allowances.
9.2 New 40% First Year Allowance (FYA) - What We Know So Far
From 1 January 2026:
A 40% First Year Allowance will be available for qualifying plant and machinery in the main pool.
The standard writing-down allowance for that pool will fall to 14% from April 2026.
Known / expected points:
Likely to exclude cars and most structures (as now).
Expected to apply to owned rather than leased assets (subject to detailed legislation).
Designed as a compromise between full expensing and traditional allowances.
Still to be defined in legislation:
The full list of qualifying assets
Interaction with the Annual Investment Allowance (AIA), which already gives 100% relief up to its limit
Treatment of integral features and long-life assets
Anti-avoidance around bringing forward spending to capture the 40% rate
For many SMEs, AIA may still give a better overall result, but mid-sized and larger firms with heavy, recurring capex will benefit from the new profile.
10. Key Planning Points
Individuals
Maximise pension salary sacrifice before April 2029 where appropriate.
Fully utilise ISAs, especially for interest-bearing and dividend-paying investments.
Anticipate higher tax on savings and investment income from 2026/27.
Landlords
Re-model cashflows for 2027/28 using the 22/42/47% property rates and new allowance ordering.
Consider incorporation, partial disposal, or deleveraging strategies.
Factor in the potential £2,500 / £7,500 mansion surcharge for £2m+ properties from 2028.
Owner-managed businesses
Dividends still beat salary on tax/NIC grounds at the basic rate, but with less headroom than before. Speak to us about optimal salary / dividend mix at the higher / additional rate as things have certainly changed.
Employer pension contributions and timing of distributions will matter more in planning.
PE / founders / management teams
Re-run IRR and promote models under the post-2026 carried-interest regime.
Reassess whether EOTs still meet commercial and shareholder objectives, given 50% reduction & no access to BADR relief on remaining 50%.
Consider alternative equity and incentive structures that work under the new tax profile, e.g. growth shares.
Pensioners & near-retirees
Expect more of the State Pension to be taxed over time as thresholds remain frozen.
No change to the 25% tax-free lump sum, but sequencing of DB, DC and State Pension income remains critical.
If you made it this far - thank you, we hope you enjoyed reading.
As a reward… a good ice breaker (when stuck in a dull conversation about the budget):
The Chancellor of the Exchequer is one of the few people allowed to drink alcohol in the House of Commons chamber. The exception exists because Budget speeches can be long, and past Chancellors often kept a whisky at hand. The tradition still technically applies today, even though most now stick to water.
Any queries, please don’t hesitate to get in touch with Sam or myself.
All information detailed above is accurate to the time of writing, being Thursday 27th November 12:00 GMT.