The Chancellor’s 2025 Budget marks a strategic recalibration rather than a radical overhaul of the UK tax system. While much public speculation focused on sweeping reforms to wealth taxation, capital gains, and property levies, the final Budget confirms a more measured approach.
For private clients, property investors, trustees, and internationally mobile families, the significance of this Budget lies as much in what has not changed as in the targeted measures that will reshape UK Tax planning over the next five years. Frozen thresholds, new property-related charges, and tighter cross-border rules will collectively increase the effective tax burden for many without headline rate rises.
This briefing provides a clear, structured overview of the core Budget 2025 themes, explains who is affected, and highlights where early planning may be essential.
What the 2025 Budget Did Not Change – Summary
The Budget confirmed that several widely trailed measures will not proceed. There is:
- no wealth tax
- no exit or expatriation tax
- no amendments to SDLT
- no changes to Capital Gains Tax rates
- no across-the-board income tax increases
- no reforms to lifetime gifting rules for Inheritance Tax
Why this matters
The absence of these changes provides short-term certainty for high-net-worth individuals and internationally connected families. In particular, the decision not to introduce an exit tax or amend Capital Gains Tax rates preserves the UK’s competitiveness for entrepreneurs and investors considering relocation or asset restructuring.
However, stability in rates should not be mistaken for a neutral tax position. The continued freezing of thresholds and targeted base-broadening measures will still increase tax exposure in real terms.
Property Measures – Headline Points
A “mansion tax” style council tax surcharge for UK residential property valued above £2 million Annual charges from April 2028, broadly:
- £2m–£2.5m: £2,500
- £3.5m–£5m: £5,000
- £5m+: £7,500
A further 2% tax on rental income, increasing the basic, higher, and additional-rate tax on relevant UK rental profits
Practical implications for property owners
These measures represent a shift toward ongoing holding costs rather than transaction-based taxation. Owners of high-value residential property, including overseas investors, will need to factor in recurring council tax surcharges that are not linked to usage or income generation.
The additional 2% charge on rental income will disproportionately affect leveraged landlords and higher-rate taxpayers, particularly in London and the South East where yields are already compressed.
Forward-looking strategies may include:
Reviewing ownership structures
Assessing the balance between capital growth and net rental yield
Considering the interaction with existing mortgage interest restrictions
Personal Tax and Income Changes
Dividend income tax rates rising by 2 percentage points from April 2026, resulting in:
- 10.75% (basic rate)
- 35.75% (higher rate)
- 39.35% (additional rate unchanged)
A corresponding 2% increase on savings income tax
Income tax thresholds frozen until April 2031, continuing the upward fiscal drag into higher and additional-rate bands
Who is most affected
Business owners, family company shareholders, and individuals relying on portfolio income will feel the impact of higher dividend and savings taxation. When combined with frozen income tax thresholds, modest nominal income growth may push taxpayers into higher bands without any real increase in purchasing power.
This reinforces the importance of:
- Reviewing dividend extraction strategies
- Coordinating personal and corporate tax planning
- Considering longer-term investment wrappers where appropriate
Inheritance Tax Developments
The £325,000 nil-rate band frozen until April 2031
The £175,000 residence nil-rate band also frozen to April 2031
Any unused share of the 100% Business Property Relief or Agricultural Property Relief becoming transferable between spouses or civil partners
Planning considerations
The continued freezing of Inheritance Tax allowances will significantly increase the proportion of estates exposed to IHT, particularly where property values continue to rise.
The extension of transferability for unused Business Property Relief and Agricultural Property Relief introduces welcome flexibility for family succession planning. This change may benefit business-owning families where relief was previously lost on first death.
Early estate planning, regular will reviews, and careful use of reliefs remain essential, especially for estates with illiquid assets.
International Individuals and Cross-Border Wealth
- Excluded-property trusts created by long-term UK residents subject to ten-year anniversary charges and exit charges from April 2025; trusts predating the 2024 Budget benefit from a £5 million IHT cap
- UK agricultural land held through non-UK structures treated as UK-situated property for IHT from April 2026
- Temporary non-resident rules tightened – the exemption for post-departure trading profits removed from April 2026
- Revised non-resident CGT provisions for Protected Cell Companies from 26 November 2025, assessing property-rich status at cell level
- A forthcoming simplification of offshore anti-avoidance rules affecting trusts and corporate holding vehicles, with draft legislation due
Why this is a significant shift
These changes reflect a clear policy direction toward greater alignment between economic connection and UK tax exposure. Long-term UK residents using offshore structures will face increased scrutiny and potential IHT charges, even where assets are held outside the UK.
International families, trustees, and non-domiciled individuals should urgently review:
- Existing trust structures
- UK property exposure through offshore entities
- Exit planning and temporary non-residence assumptions
Early restructuring may be critical before implementation dates take effect.
Strategic Takeaways from Budget 2025
- The UK is favouring threshold freezes and targeted charges over headline rate increases
- Property ownership and investment face higher recurring costs
- International structures are increasingly brought within the UK tax net
- Long-term planning horizons are now essential, not optional
While the Budget avoids dramatic reform, its cumulative effect will materially increase tax exposure for many private clients over the coming decade.
Next Steps and Professional Advice
If you require further detail on any of these UK Budget 2025 tax changes, or bespoke advice on UK tax planning, inheritance tax exposure, cross-border structuring, UK property investment or HMRC compliance, please get in touch.
We are happy to discuss your position privately and provide professional UK tax advice tailored to your circumstances.
