The Autumn Budget 2025 arrives at a crucial moment for the UK economy. With slow growth forecasts, rising operating costs, and squeezed household budgets, the government’s choices this year were shaped by the need to raise revenue without putting excessive pressure on working families and small businesses.
While the new property surcharge on £2 million+ homes took centre stage in the headlines, the reality is that many of the Budget’s ripple effects will be felt much more widely.
Whether you are a landlord, small business owner, or contractor, here is a simple breakdown of what truly matters — and what you should plan for next.
What the Autumn Budget means for landlords & property investors
Property remains a central target for new tax revenue. Whether you own a single rental unit or manage several properties, the Budget contains changes that will influence your tax planning for years to come.
High-value property surcharge from 2028
One of the headline measures is the introduction of a new annual council tax surcharge for high-value homes, now known as the ‘mansion tax’. From 2028, properties valued at £2 million or more (using 2026 assessments) will face an additional yearly charge starting at around £2,500. A higher band applies to properties worth over £5 million.
The official bands are:
- £2–£2.5 m: £2,500/year
- £2.5–£3.5 m: £3,500/year
- £3.5–£5 m: £5,000/year
- £5 m+: £7,500/year
While this affects a relatively small proportion of landlords, the policy clearly signals a long-term shift towards recurring, wealth-based property taxation rather than occasional one-off levies. Even landlords below the threshold should be alert to the possibility of expanded banding in future years.
2% rise in property income tax from April 2027
The most financially significant change for everyday landlords is the 2 percentage-point increase to all property income tax bands. From 2027, rental profits will be taxed at 22% (basic rate), 42% (higher rate) and 47% (additional rate).
For landlords with mortgages—already dealing with reduced interest deductibility and increased running costs—this extra tax pressure will reduce net yields and could influence decisions around portfolio growth or disposals.
New local powers to tax short-term and holiday lets
Local authorities will gain powers to introduce visitor levies on short-term accommodation, including holiday lets and serviced apartments. Depending on how councils implement these charges, landlords operating in the short-let market may face reduced profitability or the need to increase nightly rates.
Frozen thresholds increase long-term tax pressure
With income-tax thresholds frozen, more landlords will gradually be pushed into higher tax brackets—even without real income growth. Combined with rising rates and potential local levies, the Budget underscores the importance of proactive tax planning for all property investors.
Capital Gains Tax (CGT)
No new CGT rates were introduced for property disposals in this Budget. Only existing rates apply.
Inheritance Tax (IHT) / reliefs
Nil-rate bands remain frozen until 2031, and Business/Agricultural Property Relief allowances remain but with some transferrable options.
Timing and preparation
The high-value surcharge only comes into effect in 2028, so landlords have time to review property portfolios, cash flow, and tax planning.
For rental income tax increases, planning can start now (e.g., reviewing expenses, mortgage structuring, or offsetting reliefs).
Key measures affecting small businesses
Small businesses form the backbone of the UK economy, and the government avoided major tax rises that would disrupt trading. However, this stability may be short-term.
Business rates relief continues
For high-street and customer-facing businesses — including retail, beauty, cafés, and small hospitality venues — the extension of business rates relief is a welcome decision. It helps reduce a significant fixed cost during a time of lower consumer spending.
VAT remains unchanged
VAT has not been increased — a relief for small businesses already experiencing margin pressure from wages, utilities, and supply chain costs.
But it also means:
- No simplified schemes
- No reduced rates for hospitality
- No further sector-based adjustments
Stability is beneficial, but many small businesses were hoping for more direct support.
Dividend tax is increasing
From April 2026, dividend tax rates will increase by 2 percentage points. Many small business owners pay themselves through dividends. This change will reduce their take-home income and increase the cost of withdrawing profits.
Minimum wage is rising
The National Living Wage will increase to £12.71 an hour for workers aged 21 and over. This will raise wage bills for small businesses, especially those that rely on entry-level or hourly staff.
Pressure on business growth remains
With weak economic forecasts, small businesses may continue to struggle with:
- Reduced customer demand
- Higher borrowing costs
- Limited access to investment
While the Budget wasn’t harmful to the sector, it also wasn’t transformative.
What contractors should know
Contractors and freelancers — especially those in IT, consulting, construction, and creative sectors — operate differently from traditional small businesses, and the Budget affects them in several ways.
1. No major IR35 changes — but scrutiny continues
The government did not announce new IR35 reforms, but HMRC will continue monitoring compliance. Contractors should:
- Review IR35 assessments
- Ensure contracts reflect actual working practices
- Keep documentation up to date
2. Dividend tax increase
From April 2026, the basic and higher dividend tax rates rise by 2 percentage points:
- Basic rate: 10.75%
- Higher rate: 35.75%
- The additional rate remains at 39.35%.
Limited company contractors withdrawing dividends could see:
- £800 extra tax on £40,000 dividends
- £1,800 extra tax on £90,000 dividends
3. Salary sacrifice pensions hit
Contractors using umbrella companies will face National Insurance on salary-sacrificed pension contributions over £2,000 from April 2029. This removes a tax-efficient savings route and may impact retirement planning.
4. Income tax and NIC stability
No increases to income tax or National Insurance contributions were announced, providing some stability to take-home pay.
5. Implications for financial planning
- Contractors relying on dividends or portfolio income need to factor in higher taxes.
- The focus on wealth and asset taxation signals a shift from taxing wages to taxing assets, affecting long-term strategies.
What business owners should do now
Regardless of your sector — small business, contracting, or hospitality — the Budget signals an important shift in the UK’s tax system. Here are the practical steps to take:
1. Review your cost structure
With no VAT or income tax rises, this is a good time to strengthen cash flow planning before future tax consultations land.
2. Keep an eye on upcoming consultations
Reforms to property taxation and business taxation will roll out in stages.
3. Prepare for more HMRC checks (especially for contractors)
Ensure IR35 compliance and maintain strong documentation.
4. Seek specialist advice early
Understanding how the measures apply to your business or self-employment setup can help you reduce future tax exposure.
Conclusion
The Autumn Budget 2025 signals a major shift in how UK taxation will work in the years ahead. At 3Es Accountants, we work closely with landlords, contractors, and small business owners to help them stay compliant, plan ahead, and reduce their tax exposure. With early guidance, the Budget’s challenges can often be managed — and turned into opportunities.
