The 2025 Autumn Budget was a highly anticipated one (especially for tax nerds like us). After months of speculation about what would and wouldn’t be announced, especially around potential tax changes, the budget was launched with all the usual fanfare.
There was a lot to digest, including freezing thresholds for income tax, National Insurance contributions, and student loan repayments, new duties for electric vehicles and vapes, and even the launch of a so-called “milkshake tax”.
So what do sole traders need to know about the new budget measures? Great question. Here we go!
- Tax changes (individuals)
- General cost of living measures
- Business measures
- Tax changes (general)
- Hnry is for sole traders
Tax changes (individuals)
Income tax and National Insurance thresholds are frozen until 2031
You may remember that Rishi Sunak’s government froze income tax thresholds until April 2028. Chancellor Rachel Reeves has now opted to extend that freeze all the way to April 2031, this time including National Insurance thresholds as well.
This isn’t technically a direct tax raise, but it could still mean you pay proportionally more tax over time due to something called fiscal drag. Basically, as your income grows over the next few years, you may qualify for a higher tax bracket, and therefore higher taxes – even if inflation means your spending power hasn’t increased by much.
As a reminder, these are the current income tax thresholds, now set to remain in place until April 2031:
England, Northern Ireland, and Wales
| Band | Taxable Income | Tax Rate % |
|---|---|---|
| Personal Allowance | £0 - £12,570 | 0% |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £125,140 | 40% |
| Additional Rate | over £125,140 | 45% |
Property, savings, and dividends tax rates will be raised
Tax rates for income from property, savings, and dividends are all set to rise over the next two years.
If you’re a landlord, the income you earn from your rentals will now be taxed at 22% at the property basic rate, 42% at the property higher rate, and 47% at the property additional rate.
💡 Property income rates in Scotland may differ due to devolution.
Interest on savings is getting the same treatment: 22% at the basic rate, 42% at the higher rate, and 47% at the additional rate. These increases for property and savings income will go into effect 6 April 2027.
💡 The personal allowance for savings interest will remain the same: £1,000 for basic rate earners, £500 for higher rate earners, and £0 for additional rate earners.
For dividends income, only the ordinary rate and the upper rate will rise, to 10.75% and 35.75% respectively. The dividend additional and trust rates will remain the same, at 39.35% for both. These changes will take effect 6 April 2026.
Property income
| Previous rate | New rate | Date of change | |
|---|---|---|---|
| Basic rate | 20% | 22% | 6 April 2027 |
| Higher rate | 40% | 42% | 6 April 2027 |
| Additional rate | 45% | 47% | 6 April 2027 |
Savings income
| Previous rate | New rate | Date of change | |
|---|---|---|---|
| Basic rate | 20% | 22% | 6 April 2027 |
| Higher rate | 40% | 42% | 6 April 2027 |
| Additional rate | 45% | 47% | 6 April 2027 |
Dividends income
| Previous rate | New rate | Date of change | |
|---|---|---|---|
| Ordinary rate | 8.75% | 10.75% | 6 April 2026 |
| Upper rate | 33.75% | 35.75% | 6 April 2026 |
| Additional rate | 39.35% | N/A | |
| Trust rate | 39.35% | N/A |
Plan 2 student loan thresholds frozen
The repayment threshold for plan 2 student loans will be raised to £29,385 a year in April 2026, at which point it will be frozen until April 2030.
This means that borrowers will need to repay 9% of all eligible income over that threshold until the settings are changed at some point in the future.
Like with the income tax changes, this means that as you earn more, the student loan repayment threshold won’t increase with inflation, meaning your repayments will take up proportionally more of your income.
Cash ISAs to be restricted
The Cash ISA allowance is expected to be lowered from the current £20,000 to £12,000, starting 6 April 2027. This change will only apply to those under the age of 65 if and when the changes go live.
The allowance will remain unchanged for stocks and shares ISAs, meaning you would be able to contribute £12,000 to a Cash ISA and carry the remaining allowance of £8,000 to a stocks and shares ISA if you so choose.
New pension salary sacrifice cap
The 2025 Budget proposes a cap of £2,000 from April 2029 on salary-sacrificed pension contributions that are exempt from National Insurance.
If the measure goes through, you’ll still be eligible for tax relief as per regular employee contributions, but you and your employer will be liable for National Insurance contributions on income beyond the £2,000 cap.
General cost of living measures
Two-child limit for Universal Credit scrapped
As of April 2026, the two-child limit for Universal Credit will be scrapped. Families will now be able to receive support for all eligible children.
Rail fares frozen
Rail fares in England are to be frozen for the first time in 30 years. From 2026, regulated fares – including season tickets and standard return tickets – will stay at their current level until March 2027.
Reductions to energy bills
The government plans to scrap the ECO levy – a scheme requiring energy suppliers to fund home-insulation and energy-efficiency upgrades – as part of its budget package.
This is expected to lower the so-called “green levy” on household energy bills, potentially reducing annual costs for the average dual-fuel home by around £150, depending on energy prices and other charges.
NHS prescriptions will not increase
If you need medication on an ongoing basis, good news! Your NHS prescriptions will remain at £9.90 per item.
Business measures
New 40% First Year Allowance
The government has announced a new 40% First Year Allowance for most main-rate expenditure after 1 January 2026.
This applies to both companies and unincorporated businesses (like sole traders!), making it easier to set up shop.
Customs duties to apply to all parcels
If you buy supplies for your business from overseas, this may be a change that affects you.
Previously, small parcels worth less than £135 were exempt from import duties. A proposed change would make all imported parcels subject to customs duties, no matter the value.
Consultation on this change is currently open, and it’s proposed that it goes into effect by March 2029 latest.
Apprenticeship training free for under 25s
Training for apprentices will be fully funded for small to medium enterprises from a potential 2026 start date.
Previously, you’d generally need to cover 5% of the funding for apprentices if they were above the age of 22. When this change goes live, the 5% co-payment would be scrapped for all apprentices below the age of 25.
Tax changes (general)
New property council tax surcharge
A new High Value Council Tax Surcharge (HVCTS) has been announced for owners of all residential property in England worth £2,000,000 or more in 2026. Although the valuation is applicable for 2026, this surcharge will go into effect April 2028.
Homeowners, not occupiers, will be liable to pay the surcharge, the amount of which will depend on the value of the property as of 2026.
| Property value | HVCTS rate |
|---|---|
| £2 million - £2.5 million | £2,500 |
| £2.5 million - £3.5 million | £3,500 |
| £3.5 million - £5 million | £5,000 |
| £5 million+ | £7,500 |
Changes for the gambling industry
There are three big changes here.
Firstly, the rate of Remote Gaming Duty faces a sharp increase on 1 April 2026, from 21% to 40%.
Secondly, a new 25% rate of General Betting Duty will apply for general bets made remotely (e.g. online), starting 1 April 2027. This rate will not apply to UK horseracing.
Finally, Bingo Duty will be abolished from 1 April 2026.
New electric vehicle duty
Electric car drivers will need to pay a road charge of 3p per mile, starting April 2028.
At the same time, plug-in hybrid drivers will also be liable for 1.5p per mile.
Rates will rise each year with inflation.
Fuel duty remains frozen – for now
Fuel duty will remain frozen until September 2026, at which point the freeze may be reversed in stages.
If so, it’ll be the first raise for fuel duty in 16 years, since it was first frozen in 2010.
Tobacco and alcohol duties to increase
All alcohol duty rates are set to rise with inflation from 1 February 2026, while tobacco duty rates will increase by the inflation rate plus an additional 2% from 26 November 2025.
Tobacco duties will rise again on 1 October 2026 by the inflation rate + 2%, plus an additional £2.20 per 100 cigarettes and £2.20 per 50g on all other tobacco products.
An additional new Vaping Products Duty was announced, to go into effect 1 October 2026. This will be a flat rate of £2.20 per 10 ml of vaping liquid, regardless of nicotine content.
“Milkshake tax” implemented
Technically, this isn’t a new tax – instead, the currently existing “sugar tax” will be extended to cover milk-based drinks, including bottled milkshakes and coffee. It won’t apply to drinks made and served in cafes, restaurants, and bars.
Hnry is for sole traders
Hnry is an award-winning app and tax service designed to help sole traders with their financial admin. For just 1% +VAT of your self-employed income, capped at £600 +VAT a year, Hnry will calculate and pay all your taxes, levies and whatnot for you, including:
- Income tax
- VAT
- National Insurance Contributions
- Student loan repayments
- Private pension contributions (optional)
We also complete and file your Self Assessment for you, including claiming any tax relief you might be entitled to. It’s all part of the service!
More importantly, we free up thousands of hours for sole traders to focus more on what they do best – their jobs. Hnry is on a mission to make self-employment simple, affordable, and accessible for anyone.
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