UK Budget 2025: An SGS & Partners Overview
The Chancellor’s Red Book delivered a wide range of tax and policy changes—described by commentators as a “smorgasbord.” Here’s what you need to know and how it impacts your financial plans and business decisions.
Headline Measures
- Income Tax and National Insurance thresholds frozen until 2031: Many will pay more tax as wages rise, since thresholds remain static.
- Two-child cap lifted: From April 2026, families with more than two children can qualify for increased support.
- Cash ISA allowance cut to £12,000 (under 65s): A reduction from £20,000 limits tax-free savings options.
- ‘Mansion tax’ on homes over £2 million: New annual levy of at least £2,500 affects property owners in higher-value brackets.
- Pension salary sacrifice contributions capped at £2,000 a year (from 2029): Contributions above this will incur National Insurance, impacting tax-efficient retirement planning.
- Dividend tax rise: Rates will increase by 2 percentage points next year, raising the cost for shareholders extracting profits from companies.
- Capital gains tax relief reduced: Especially for disposals to employee ownership trusts.
Before vs. After: At a Glance
| Measure | Previous System | New System/Budget 2025 |
| Tax thresholds | Risen with inflation | Frozen until 2031 |
| Child benefits cap | Two-child cap active | Lifted (from April 2026) |
| Cash ISA allowance | £20,000/yr | £12,000/yr (under 65s) |
| Mansion tax | No annual property levy | £2,500+ for >£2m homes |
| Pension contributions | No salary sacrifice cap | £2,000/yr cap from 2029 |
| Dividend tax | Rates steady | Increased by 2% next year |
Real-World Impacts
- As thresholds remain static, more clients will face higher personal tax bills; payroll planning and reviewing allowances are more important than ever.
- The lowered ISA allowance may require new saving and investment strategies.
- Businesses and individuals with high-value property should anticipate increased annual costs.
- Family planning and retirement saving approaches will need to adapt for the new budget rules and caps.
- Shareholders and company directors will see dividend tax rates rise by 2 percentage points next year, increasing the cost of extracting profits from limited companies and reducing post-tax yields for personal investors.
SGS & Partners recommends a thorough review of payroll, benefit, investment, and retirement plans to ensure clients make the most of the new opportunities and mitigate added tax costs. Please reach out for expert guidance tailored to your situation.
