Find out how the the Chancellor's plans will change tax rates, thresholds and rules for you or your business, from the big adjustments to the tiny ones you may have missed.
Article last updated 1 December 2025.
Considering the months of speculation, the dramatic headlines covering increases to almost every personal tax we have, and the threatened introduction of a number of new taxes targeting those with the “broadest shoulders”, as politicians are wont to put it, you might be forgiven for thinking you got off fairly lightly in Rachel Reeves’ second Budget.
Inheritance tax
After significant changes last year, there was only one addition to reforms to inheritance tax (IHT). The £1mn Agriculture Relief (AR) and Business Relief (BR) allowance on qualifying agricultural and business assets will be transferable between spouses and civil partners from April 2026.
You’ll still have the ability to make substantial gifts without an immediate tax charge in place, subject to a 7-year clock.
Pensions
Similarly, the perennial threat to cut pension tax-free cash once again proved unfounded.
A £2,000 cap on salary sacrifice will certainly hit those in employment who fund pensions in this way. However, with many well-off people’s pension contributions already limited either by their high earnings or by the fact that they don’t have much earned income, the impact of the change will be insignificant.
Property/mansion tax
When compared to a new tax on overall wealth or even a separate annual percentage charge on high value properties, the ‘mansion tax’ on homes over £2mn might be considered a more favourable alternative. Properties valued at more than £2mn are set to face an annual charge of £2,500, while homes worth over £5mn will see an additional bill of £7,500 or more every year. The tax increase is only expected to raise £400-500mn. Moreover, many property valuations will inevitably be contested and in some cases downgraded.
However, with a smorgasbord approach to tax rises and a continued unwillingness to tackle government spending, it seems likely that we will be back again next year for more tax rises. Once again, those with the “broadest shoulders” could be firmly in the crosshairs.
Income tax
There was speculation that the Chancellor might look to apply National Insurance to forms of income on which it did not currently apply, but instead she opted for a 2% income tax increase on dividends and income from savings and property. This change still leaves dividends as an attractive option at the lower rates. Individuals who have income liable for the higher rates of tax will still need to explore ways to control who receives that income and when it is taxed.
UK exit tax / Capital gains tax
The very fact that an ‘exit tax’ was mentioned in the pre-Budget kite-flying is of concern. With such a tax already in place in countries like France, Germany and the US, it’s only a matter of time before this is considered more seriously.
Similarly, with the extended freeze on income tax thresholds until 2031– effectively an increase in income tax for many – there will be continued pressure to increase taxes on people who draw the majority of their income from capital.
The difference between capital gains tax at the basic and higher rate remains just 6%, and there is scope to increase this gap. Taken alongside a potential exit tax, and long overdue reform of elements of the IHT regime, movement in this direction would be worrying to anyone expecting significant capital gains in the coming years.
