I was making a cup of tea yesterday afternoon when the Chancellor dropped the Budget, and I nearly spilled it everywhere. Not because I’m normally that clumsy – but because the numbers flashing across the screen were eye-watering.
Forty billion pounds of tax rises. Let that sink in for a second. That’s not a rounding error. That’s the biggest tax-raising Budget since the early 1990s, and it touches almost every corner of British life. Whether you’re an employee, employer, landlord, investor, pension saver or someone just hoping to pass something on to the kids, there’s something in here with your name on it.
So let’s stop panicking and start understanding exactly what’s coming.
The Big Picture: £40 Billion and Counting
First things first – the headline figure isn’t £26 billion or £35 billion, whatever you might have read in the immediate aftermath. The Office for Budget Responsibility says the total tax take will be £40 billion a year higher by 2029-30 once everything is fully in force. That’s roughly £1,400 for every household in the country.
And no, it’s not “only on the rich”. The OBR’s own distribution analysis shows the biggest proportionate losses in the second, third and fourth income deciles – classic middle Britain.
1. The Income Tax Threshold Freeze – The Silent Wealth Destroyer
Remember when Rishi Sunak froze the personal allowance at £12,570 back in 2021 and everyone said “it’s only until 2028”? Well, Rachel Reeves just extended that freeze to 2031-32. That’s another four years of fiscal drag.
What does that actually mean? Every time your salary goes up with inflation (or even a decent pay rise), you’re dragged into a higher tax bracket without Parliament ever voting to increase rates. The OBR expects 4 million more people to be paying tax and 3 million more to be higher-rate taxpayers by 2030.
- Personal allowance stays £12,570 until April 2032
- Higher-rate threshold stays £50,270 until April 2032
- Result: someone earning £60,000 today will pay an extra £6,500 a year in tax by 2030 compared to if thresholds had risen with inflation
I ran the numbers for a teacher friend of mine earning £45,000. She’s currently a basic-rate taxpayer. By 2030 she’ll be paying the higher rate on nearly £10,000 of her income. That’s an extra £4,000 tax a year from doing exactly the same job.
2. Employer National Insurance – The “Jobs Tax” Nobody Voted For
This is the one that made business owners choke on their coffee.
From April 2025:
- Employer NI rate rises from 13.8% to 15%
- The threshold at which employers start paying drops from £9,100 per employee to £5,000
The Treasury says this will raise £25 billion a year – more than income tax and corporation tax rises combined. But here’s what they’re not shouting about: most economists expect at least some of this to be passed on to workers through lower wage rises or fewer jobs.
“Calling this a ‘tax on employers’ is disingenuous. Ultimately it’s a tax on work.”
Institute of Directors, 2025
3. Capital Gains Tax – Now Pretty Much Income Tax
If you were hoping to sell shares, a second home, or crypto any time soon, brace yourself.
The rates are going up immediately:
| Asset type | Old basic rate | New basic rate | Old higher rate | New higher rate |
| Shares & crypto | 10% | 18% | 20% | 24% |
| Residential property | 18% | 18% | 28% | 24% |
Yes, you read that right – the higher rate on shares is now only 4% below income tax. The gap that made share investing worthwhile for higher earners has essentially vanished overnight.
And Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) rate is rising from 10% to 14% in April and then 18% from 2026. Another nail in the “build a business, sell it, retire comfortably” dream.
4. Inheritance Tax – Farms, Family Businesses and Pensions in the Crosshairs
The Chancellor spent weeks insisting she wouldn’t touch inheritance tax. Then she announced:
- From 2027, inherited pensions will be inside the estate for IHT purposes
- Agricultural and business property relief limited to £1m each, 20% on the rest from 2026
- No more “downstreaming” assets into pensions to avoid IHT
That pension change alone is massive. Someone with a £1 million SIPP who dies at 70 could now leave their family with a £270,000 tax bill that didn’t exist last week.
5. The Smaller (But Still Painful) Stuff
- Dividend allowance cut from £1,000 to £500
- Capital gains annual exempt amount cut from £6,000 to £3,000
- Non-dom regime replaced with a 4-year foreign income exemption for new arrivals (old non-doms lose protected status after 15 years)
- Furnished holiday lets lose their special tax status
- Stamp duty on second homes rises by 2% to 5% surcharge
- Carried interest to be taxed as income from 2026 (28-45% instead of 28%)
What Can You Actually Do About It?
Yes, some of this is already law, but there are still moves worth considering before April:
- Realise gains before 5 April 2025 if you’re sitting on large unrealised profits (bed & ISA, etc.)
- Max out your ISA allowance before it potentially gets touched in future Budgets
- Consider gifting assets now while IHT reliefs are still generous
- Use pension contributions to reduce adjusted net income (still works for child benefit and personal allowance taper)
- If you’re a business owner, look at salary/dividend mix for 2025/26 before employer NI bites
The honest truth? A lot of the low-hanging fruit has now been picked. We’re into the era of proper tax planning rather than simple allowance harvesting.
The Autumn Budget 2025 wasn’t a few tweaks around the edges. It was a fundamental rewiring of the British tax system towards higher rates, fewer reliefs, and much more drag from frozen thresholds.
Whether that money fixes public services or just gets absorbed into day-to-day spending, only time will tell. What we do know is that the tax burden is now heading for levels not seen since the late 1940s.
So maybe keep that kettle handy. We’re going to need a lot more tea.
