The latest Budget introduces some of the biggest changes to the tax system in recent years. Some measures will come into force as early as 2026, while others will not take effect until 2029, but their impact on the self-employed, small businesses and property investors will be significant. Below we provide a detailed overview of the key points, along with practical tax takeaways.
Freezing Income Tax and National Insurance thresholds until 2031
The Government has decided to extend the freeze on tax thresholds through to 2031. This means thresholds will not rise in line with inflation or wage growth. The result will be so‑called fiscal drag — a gradual pull of taxpayers into higher bands despite no real increase in purchasing power.
Implications:
- By 2029/30, around 780,000 additional taxpayers are expected to be brought into the tax system.
- Real ‘after‑tax’ pay is likely to fall, despite nominal wage growth.
- The self‑employed and small business owners may feel an increase in their effective tax burden.
Recommendations:
- Plan annual income and optimise the timing of salary or dividend payments.
- Review available tax‑deductible costs to reduce unwanted movement into a higher band.
A 2% rise in tax on dividends, property income and savings
From the 2026/27 tax year, tax rates on dividends, rental income and savings interest will increase by 2 percentage points.
Who does this affect?
- Owners of small LTD companies paying dividends.
- Landlords earning income from Buy‑to‑Let.
- Individuals with savings and investments generating interest income.
Practical effects:
- Higher tax liabilities for company owners.
- Lower real returns from investments and property lettings.
- An effective increase in tax on so‑called ‘unearned income’.
Recommendations:
- Review the extraction strategy from an LTD — for many businesses, a larger proportion via payroll may become more cost‑effective.
- For landlords — analyse allowable expenses and the ownership structure of the property.
£2,000 cap on Salary Sacrifice (from 2029)
From 2029, pension contributions made via salary sacrifice will be subject to National Insurance above a limit of £2,000 per year.
This means:
- Higher earners making extensive use of salary sacrifice will lose a significant portion of the current benefit.
- Employers may be forced to change their benefits policies.
Recommendations:
- Plan your pension strategy early.
- Review alternative saving mechanisms.
Writing Down Allowance reduced to 14% + new 40% First‑Year Allowance
This change affects businesses acquiring capital assets that do not qualify for full expensing.
Implications:
- Higher long‑term tax for investment in main‑rate pool (Class B) assets.
- Leasing becomes more attractive than outright purchase.
- Expected additional Exchequer revenues of £1.5bn by 2029/30.
Recommendations:
- Before buying equipment, compare the tax impact of leasing versus outright purchase.
- Plan investment timing for periods when more favourable reliefs are available.
National Minimum Wage rises to £12.71
This change applies to workers aged 21 and over and will affect around 2.7 million people.
Business impacts:
- Higher operating costs, especially in retail, hospitality and care.
- Potential increases in the prices of goods and services.
- At the same time, improved staff retention.
Recommendations:
- Review cashflow and wage budgets.
- Optimise processes and automate areas with a high share of manual work.
ISA reform — £12,000 annual limit (except those aged 65+)
The Cash ISA subscription limit will fall to £12,000. People aged over 65 will retain the existing £20,000 limit.
Implications:
- Less flexibility for younger savers.
- Pressure to invest more via Stocks & Shares ISAs.
- Potentially higher exposure to market risk.
Road tax for electric vehicles (EV)
From 2028, EV drivers will pay 3p per mile, while hybrid owners will pay 1.5p per mile.
Effects:
- Higher running costs for company vehicles.
- Faster investment in charging infrastructure and a road maintenance fund.
Changes for landlords — indirect consequences
Although the Budget did not introduce a direct new tax for landlords, the combined package of measures (dividend tax, higher financing costs, threshold freezes) means:
- Higher overall tax pressure for holders of BTL portfolios.
- Greater need for structural planning — including considering (among other things) LLP → LTD, cost planning, or changing the letting model.
Business Rates cuts for 750,000 firms
Businesses in retail, hospitality and leisure will benefit from reduced rates, which will be partly funded by higher charges on commercial properties above £500,000.
Recommendations:
- Businesses benefiting from the relief should check their rates and ensure applications are up to date.
- For larger businesses — budget for higher property costs.
Summary
The Budget introduces wide‑ranging changes that in the coming years will be felt by:
- the self‑employed,
- small business owners,
- investors and landlords,
- individuals using dividends and savings,
- employers with staff in lower pay bands.
In many cases, these changes will increase overall tax burdens, so the key will be:
✔ income and cost planning,
✔ analysis of the business structure,
✔ optimisation of withdrawals and investments,
✔ regular tax reviews.