The Chancellor, Rachel Reeves, delivered a Budget on 26 November that has already generated considerable debate, partly because of the OBR’s Economic and Fiscal Forecast being released ahead of schedule.
Even so, the Chancellor set out her plans with a focus on “rebuilding the economy,” underpinned by earlier commitments to reduce borrowing and restore confidence through long-term investment and stability.
Main measures
Below is a summary of the major announcements:
- Income Tax and National Insurance thresholds will remain frozen for an extra three years through to April 2031. As incomes rise, more individuals will drift into higher tax brackets, effectively increasing the overall tax take without changing rates.
- From April 2026, dividend tax rates will rise by 2%. The basic rate increases from 8.75% to 10.75%, and the higher rate from 33.75% to 35.75%. The additional rate stays at 39.35%. Limited company contractors taking most of their income as dividends may have to consider how to time this in the near future.
- Landlords will see a new set of property-specific income tax rates apply from April 2027, 22% for ordinary rate taxpayers, 42% for higher-rate, and 47% for additional-rate. This equates to a 2% tax rise on rental profits for many landlords.
- Tax on savings income will rise by 2% across the board from April 2027, although the Personal Savings Allowance remains untouched.
- There’s a new charge on EV and hybrid cars, 3p per mile for electric vehicles and 1.5p per mile for plug-in hybrids, is planned for April 2026 following consultation. The Treasury estimates around £240 a year in additional cost for a typical driver. Other vehicle types aren’t included for now.
- From April 2029, pension salary-sacrifices will be capped at £2,000 per year. Contributions above that level will still receive tax relief but will incur both employee and employer NICs.
- From April 2028, residential properties worth £2m+ will incur a new annual levy of £2,500, rising to £7,500 for properties valued above £5m based on updated valuations.
Additional measures
Other measures which are also worth highlighting include:
- National Living Wage will rise from April 2026 changing to £12.71 an hour, a 50p increase for those aged 21 and over and £10.85 an hour for those between 18-21 meaning a 85p rise. Under 18s & apprentices will also have a 45p raise to £8 an hour.
- The Sugar Tax will be expanded to include milk-based drinks.
- Prescription charges and regulated rail fares will be frozen for 2026.
- ISA rules will shift towards encouraging investment rather than cash-only saving from April 2027.
- The Remote Gaming Duty will increase.
- Additional funding will be directed at HMRC’s digital systems and debt collection.
- Student loan repayment thresholds will remain unchanged.
- Voluntary Class 2 NICs for non-residents will be abolished, removing a low-cost method of building UK State Pension entitlement.
- The 5p Fuel Duty freeze will continue until September 2026.
- The State Pension Triple Lock delivers a £575 rise for full-rate recipients in April 2026.
- Households are expected to receive £150 off annual energy bills from April next year.
- The two-child benefit cap will be removed from next April.
- Capital Allowances will shift, with reduced writing-down allowances but a new 40% first-year allowance for main-rate assets (excluding cars).
As always we’re reviewing the full guidance and will share any updates on how these changes may affect contractors. Keep an eye on our blog for any more news that may affect you.
Related article: What agencies and umbrellas need to know about the April 2026 draft legislation
The Government’s draft legislation has been a hot topic in recent weeks. The consultation period has now closed, and HMRC published further guidance on umbrella company tax legislation.
This shows that policymakers are listening to stakeholders and remain committed to reform. Final legislation is expected before the end of the year.