After a spectacular build up and unparalleled noise around potential measures that could have been announced, this week’s UK Budget 2025 was perhaps not as seismic as it could have been. Here, we outline some of the key takeaways for international businesses…
While there were a lot of rumours in advance of this year’s UK Budget, the actual measures announced were, in contrast, quite tame.
Announced on 26 November, the 2025 UK Budget will clearly have repercussions across the economy, taking taxes in the UK to the highest level in history, with Chancellor Rachel Reeves faced with the task of addressing a significant gap in public funding and an economy that grew by just 0.1% in the three months to September this year.
Ultimately, though, the UK’s largest fiscal event of the year largely built on and extended measures first set out in 2024, rather than introducing a fundamentally new framework.
Key measures announced that could potentially impact international businesses include the following:
- The ‘Mansion tax’: a ‘high value council tax surcharge’ will apply to expensive residential properties, with those valued at £2m plus being subject to a surcharge of £2,500/annum, rising to £7,500 for those valued at £5m. It’s expected to affect in the region of 80,000 higher value homes, many in prime London postcodes.
- Dividends tax: the basic and higher rates of dividends tax is rising by 2% to 10.75% and 35.75% - respectively from April 2026.
- Savings and property income rates: from April 2027, tax on savings income and property income will each increase by 2 percentage points; for individual landlords, this produces effective headline rates of approximately 22%, 42% and 47%, depending on the band.
- The personal allowance and income tax thresholds: these are to be frozen until at least the 2030/31 tax year, this extension of the freeze ensures that 'fiscal drag' will pull low earners into paying the 20% basic rate for the first time, and push middle-to-high earners into the 40% and 45% bands as their wages increase.
- Pension death benefits: from 2027, pension death benefits will generally fall within the scope of the estate for inheritance tax purposes, in line with a direction of travel previously signalled by the government.
- Capital Gains Tax: the CGT Business Asset Disposal Relief rate will rise from 14% to 18% from April 2026.
- Enterprise Management Incentive (EMI) share schemes: these are being made more flexible, while the Employee Ownership Trust CGT relief is being reduced from a 100% exemption to a 50% relief, materially reducing the tax advantage for qualifying disposals to EOTs. This policy will likely be particularly unpopular amongst entrepreneurs.
- National Insurance Contributions: from April 2029, the NIC benefit of salary sacrifice pension contributions will be capped, significantly limiting the advantage of large salary sacrifice arrangements used by higher earners. In addition, Class 2 voluntary NICs for certain overseas individuals are being abolished.
- Business Property and Agricultural Relief: The previous budget announced that from 6 April 2026, the 100% Business Property Relief (BPR) and Agricultural Property Relief (APR) on assets like trading company shares and farmland will be capped at £1 million per individual. Values exceeding this threshold qualify for only 50% relief, yielding an effective 20% IHT charge. Positively from this budget, it has now been updated so any unused portion of the £1 million allowance transfers between spouses or civil partners, aligning it with the transferable nil-rate band and easing the burden on high-value estates. The government will also legislate against avoidance via non-UK entities holding UK agricultural land.
- Corporation Tax: this will be capped at 25% for the duration of parliament, which is encouraging.
International businesses will no doubt be wanting to assess the small print of these new measures to ensure they plan a sensible and robust route ahead, adapting as necessary and – with the support of experts where needed – taking a holistic view of their international strategies.
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