Budget 2025: What the Key Tax Changes Mean for You – SC Tax Analysis

The Chancellor’s much anticipated 2025 Budget introduces some of the most significant tax changes in recent years.

At SC Tax, supporting clients across the UK and overseas, we’ve reviewed the measures in detail to help you understand how the changes may affect your income, investments and long-term planning.

While headline tax rates remain mostly unchanged, this is a Budget built around freezes, caps and targeted increases.

Although the Budget introduces a range of adjustments, it also brings something valuable: clarity.

With clear rules and known timelines, clients can plan more effectively than ever.

At SC Tax, we see this Budget not as a challenge but as an opportunity to:

• simplify structures

• improve tax efficiency

• diversify savings strategies

• protect long-term wealth

• make informed financial decisions

  
  

With proactive planning, many clients will be able to offset increases and in some cases reduce their overall tax burden.

If you’d like to explore how these changes affect you, our team is here to help.

1. Income Tax Thresholds Frozen Again

The Government has extended the freeze on the main income tax thresholds. As earnings rise, more taxpayers will naturally drift into higher tax bands even without any increase in headline rates.

This will affect employees, directors, contractors and business owners across the UK who experience pay rises or inflation-linked adjustments.

2. Higher Taxes on Savings, Dividends and Rental Income

A major shift is the 2 percentage point increase on tax applied to “unearned” income, including:

• dividends

• savings interest (above existing allowances)

• rental and property income

  
  

This impacts landlords, investors, company owners and expatriates relying on UK-sourced investment or rental income.

3. Cash ISA Allowance Reduced to £12,000

From 2027, the annual Cash ISA allowance will fall from £20,000 to £12,000.This significantly reduces scope for tax-free saving and will require many clients to reconsider how they structure their longer-term investments.

4. New Surcharge on Properties Over £2 Million

The Budget introduces an annual surcharge on residential properties valued at £2 million+ — effectively a “mansion tax” in all but name.

Clients with high-value homes or investment properties — whether in the UK or abroad but subject to UK property tax rules — should factor this into future ownership and planning decisions.

5. Salary-Sacrifice Pension Contributions Restricted

From 2029, the first £2,000 of salary-sacrifice pension contributions per year will remain exempt from National Insurance.However, contributions above that level will attract NI, reducing the long-standing tax advantage for senior employees, directors and high earners.

6. Additional Targeted Measures

The Budget also includes a series of sector-specific and structural changes, such as:

• increased taxes on gambling and remote gaming

• the introduction of a per-mile tax on electric vehicles from 2028

• a planned reversal of the fuel-duty cut from 2026

  
  

Though these vary in impact, they contribute to an environment of gradually rising tax pressure across households and businesses.

What This Means for You

The combination of frozen thresholds, reduced allowances and higher taxes on investment income means many people will pay more tax even if their circumstances haven’t significantly changed.

For clients in the UK and overseas, this reinforces the importance of:

• proactive planning

• reviewing how income is structured

• making full use of existing allowances

• exploring alternative tax-efficient investment strategies

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At SC Tax, we’re working with clients to understand the short-term impact and to put long-term planning in place ahead of these changes coming into effect.

If you would like tailored advice on how the 2025 Budget affects your situation, please get in touch with our team.