The Chancellor's 2025 Budget announced last week (26 November) leans heavily on raising revenue from wealthier households, landlords and investors.

Instead of increasing headline income tax rates, the government has opted for a mix of freezes, new charges and higher taxes on unearned income.

It's a complex budget, but here is a friendly breakdown from Leamington-based financial services firm Simpson Financial Services (SFS).

The economy: a mixed outlook

The Office for Budget Responsibility (OBR) has upgraded growth for 2025 to 1.5 percent, but downgraded expectations for the years that follow. Inflation is expected to settle back towards the two percent target by 2027 and interest rate expectations have nudged slightly higher. Debt to GDP is still projected to rise, which is one of the main concerns for the bond market.

Overall, it's a picture of modest progress combined with some stubborn long-term challenges.

Taxes: more pressure on asset rich individuals

This budget puts most of the weight on people who own property or receive significant investment income.

Key points include:

• A new property-based charge described as a 'mansion tax', set at £2,500 per year for properties over £2 million and rising to £7,500 for properties over £5 million from 2028.
• Income tax on unearned income will rise by 2 percentage points. Dividend taxes will increase in 2026 and tax on savings and rental income will increase in 2027.
• Income tax thresholds and national insurance thresholds are frozen until 2031, pulling more people into higher tax bands.
• Capital gains tax is unchanged, but some reliefs for employee ownership structures are reduced.
• A few helpful changes were announced for investors in early-stage companies, including higher EIS and VCT investment limits, although VCT income tax relief will fall from 30% to 20 percent.
• The national living wage and national minimum wage will rise in April.

These measures make this a particularly important budget for homeowners, landlords and anyone relying on dividends, savings income or rental income.

Markets: calm on the surface

The immediate market reaction has been fairly muted. Gilt yields have moved slightly lower and there has been no dramatic shift in other asset classes. The bigger question is how the UK can boost long-term growth and productivity, since without that every budget becomes a short-term sticking plaster.

What this means for you

If you receive income from investments, own property or have built a significant level of assets outside tax efficient wrappers, this budget could influence your financial planning over the next few years. Even if the changes do not affect you immediately, the combination of frozen allowances and rising taxes means more households will be touched over time.

Let's talk about your personal position

Budgets can feel abstract until you see how the changes apply to your own finances. Whether you're unsure about the impact on your tax bill, thinking about retirement planning or wondering whether your investments are structured efficiently, Simpson Financial Services can help you understand your options clearly.

If you would like to talk through what this budget means for you, your family or your business, get in touch with SFS here.

The team at Simpson Finances Services are always here to help you make confident and well-informed financial decisions.

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