Understanding Current Corporation Tax Rates and Marginal Relief in the UK

Getting Ready for Rachel Reeves' Autumn Budget 2025

Date: 25 November 2025

Ahead of tomorrow's UK Budget, here's what taxpayers, landlords and small businesses should be thinking about.

Tomorrow (Wednesday 26 November 2025), Chancellor Rachel Reeves will stand at the despatch box to deliver her second Autumn Budget. For millions of UK taxpayers, business owners and property investors, it's shaping up to be one of the most significant fiscal events in recent years.

This article explains what the Budget is, summarises the economic pressures facing the Chancellor, highlights the areas where tax changes are most widely expected or rumoured, and gives practical steps you can take now to prepare.

Important: Nothing in this article is confirmed policy. All information about potential changes is based on pre-Budget speculation, media reports and expert commentary. Official measures will only be known after the Chancellor's speech tomorrow at approximately 12:30pm.

What Is the Autumn Budget and Why Does It Matter?

The Autumn Budget is the UK Government's main annual fiscal event. It sets out the Chancellor's plans for taxation, public spending and economic policy for the year ahead.

The Budget matters because it directly affects your take-home pay, the tax you pay on savings and investments, the cost of running a business, and the tax bills you face when selling property or passing on wealth. Changes announced tomorrow could reshape financial planning decisions for years to come.

The Office for Budget Responsibility (OBR) publishes economic forecasts alongside the Budget, which give us insight into expected growth, inflation, employment and public finances. These forecasts help explain why the Chancellor makes certain decisions.

The Economic Backdrop in Late 2025

To understand why tax rises are widely anticipated, it helps to know the economic context Rachel Reeves faces:

Weak Economic Growth

UK GDP growth slowed to just 0.1% in the three months to September 2025. While the economy showed stronger momentum earlier in the year, growth has stalled. Unemployment has risen to 5%, the highest level since 2021. The UK's economic performance has lagged behind most other G7 nations in the post-pandemic era.

Persistent Inflation

Inflation has eased from its 2022 peak but remains stubbornly above the Bank of England's 2% target. Consumer prices rose 3.6% in the year to October 2025 (down from 3.8% in September). Core inflation stands at 3.4%. Services inflation, which the Bank watches closely, sits at 4.5%.

High Interest Rates

The Bank of England's base rate currently stands at 4%, down from a peak of 5.25% but still elevated by historical standards. While rate cuts are possible in December, higher borrowing costs continue to impact mortgages, business loans and government debt interest payments.

Challenging Public Finances

The Chancellor faces an estimated fiscal gap of between £20 billion and £30 billion. Government borrowing costs have risen significantly, with more being spent on debt interest than at any time in recent decades. The Treasury has committed to "fiscal rules" requiring day-to-day spending to be matched by tax revenues and debt to fall as a share of GDP by 2029/30.

The Chancellor's Dilemma: Rachel Reeves promised during the election campaign not to raise Income Tax, National Insurance or VAT. With these major revenue sources constrained, she must look elsewhere to balance the books. This explains why attention has focused on property taxes, wealth taxes, capital gains, inheritance tax and business reliefs.

Key Areas Where Changes Are Expected or Rumoured

Based on extensive media reporting, think-tank proposals and expert commentary, here are the main areas where Budget measures are most widely anticipated. Remember: none of this is confirmed.

1. Income Tax and National Insurance (Fiscal Drag)

What's expected: Rather than raising rates, the Chancellor is expected to extend the freeze on Income Tax thresholds beyond the current end date of April 2028. The Personal Allowance (£12,570) and higher-rate threshold (£50,270) have been frozen since 2022.

What this means: As wages rise with inflation, more people are dragged into higher tax bands without any rate change. This "stealth tax" has already pushed over 8 million people into higher or additional-rate tax. An extension to 2030 would continue this trend.

Other possibilities: National Insurance could be extended to new categories of income, such as rental income for landlords or pension income for retirees, though these remain speculative.

2. Property and Wealth Taxes

Council Tax and Property Levies: Reports suggest the government is considering introducing a "mansion tax" on high-value properties in council tax bands F, G and H (affecting approximately 2.4 million homes). Another proposal involves replacing stamp duty with an annual property tax on homes valued over £500,000, though this would represent a major structural reform.

Stamp Duty: While residential stamp duty might be reformed, the additional 3% surcharge paid by landlords and second-home buyers is expected to remain.

What this means for you: If you own higher-value property, particularly in London and the South East, watch for announcements about new property taxes or additional council tax bands.

3. Capital Gains Tax (CGT)

Background: CGT rates were already increased in the October 2024 Budget (from 10% to 18% for basic-rate taxpayers, and from 20% to 24% for higher-rate taxpayers on most assets).

What's possible: Further rate increases could bring CGT closer to Income Tax rates (though many economists warn this would be counterproductive). More concerning speculation includes:

• Removing the CGT uplift on death (meaning inherited assets could trigger CGT bills based on gains during the deceased's lifetime)
• Introducing CGT on primary residences above a certain value (e.g., £1.5 million) – currently, gains on your main home are exempt
• Further restrictions to Private Residence Relief
• Reducing Business Asset Disposal Relief (formerly Entrepreneurs' Relief)

What this means for you: Anyone planning to sell investments, second properties or business assets should pay close attention. CGT planning may become more important.

4. Inheritance Tax (IHT)

Background: The nil-rate band (£325,000) has been frozen since 2009. Pensions will become subject to IHT from April 2027 following last year's Budget.

What's widely rumoured:

• Introducing a lifetime cap on tax-free gifts (possibly around £100,000)
• Tightening or removing taper relief on gifts made 3-7 years before death
• Extending the seven-year rule to ten years
• Further restrictions to the residence nil-rate band (£175,000)
• Continued freezing of IHT thresholds until 2030

What this means for you: Estate planning and gifting strategies may need review. However, don't rush into hasty decisions based on speculation alone – you might need that capital later in life.

5. Landlords and Rental Property

What's possible: The most significant rumour affecting landlords is the potential extension of National Insurance to rental income. Currently, rental income is subject to Income Tax but not NI contributions. If Class 1 or Class 4 NI were extended to landlords, it could add 8-14% to their tax bills.

What this means for landlords: Combined with previous restrictions on mortgage interest relief and higher CGT rates, this would further reduce returns from buy-to-let. Some landlords may face difficult decisions about whether to continue in the sector.

6. Savings and ISAs

What's rumoured: The Financial Times reported that the cash ISA limit could be cut from £20,000 to £12,000, with the aim of encouraging more investment in stocks and shares ISAs to boost UK markets. This proposal was reportedly shelved over the summer but could resurface.

What this means for savers: If implemented, those relying on cash ISAs for safe, accessible savings would have less tax-free capacity. The overall £20,000 ISA allowance might remain, but with restrictions on how much can be held in cash.

7. Business and Investment Reliefs

What might change:

• Capital allowances and investment incentives (though cuts here would contradict growth ambitions)
• R&D tax credits (already reformed in recent years)
• Changes to how partnerships and LLPs are taxed (affecting professionals like lawyers, accountants and consultants)

What's less likely: Major increases to Corporation Tax, as this would break manifesto commitments and damage business confidence.

8. Green and Electric Vehicle Measures

What's expected: The EV purchase grant is likely to be extended for another year, with an additional £1.3 billion allocated. The government has already announced increases to the National Living Wage and National Minimum Wage from April 2026.

Future considerations: As EV adoption grows, the government faces a long-term challenge replacing lost fuel duty revenue. Future road pricing or EV taxation may eventually be necessary, but probably not in this Budget.

Practical Preparation Steps

Basic Housekeeping (Everyone)

• Update your records: Ensure your tax affairs are up-to-date. Know your current tax position, allowances used, and any tax deadlines ahead.
• Review projections: Estimate your income, gains and potential tax bills for 2025/26.
• Check cash flow: Make sure you have adequate reserves to meet any unexpected tax charges.
• Don't panic: Wait for confirmed measures before making major financial decisions.

If You're an Employee or Higher-Rate Taxpayer

• Watch for threshold freezes that could push you into higher tax bands
• Review salary sacrifice arrangements (pensions, childcare vouchers, cycle-to-work)
• Check whether you've used your £20,000 ISA allowance for 2025/26
• Consider pension contributions before any potential changes to reliefs

If You're Self-Employed or a Company Director

• Review profit extraction strategy (salary/dividends balance)
• Consider timing of dividend payments if rates might change
• Ensure business expenses and capital allowances are properly claimed
• Stay alert to any changes affecting partnerships or LLPs
• Check your Making Tax Digital compliance (MTD for Income Tax starts April 2026)

If You're a Landlord or Property Investor

• Model the impact if NI were extended to rental income
• Review whether your portfolio still makes financial sense under current (and potential future) tax rules
• Consider timing of property sales if CGT changes are coming
• If planning disposals, understand your current CGT position and available reliefs
• Keep detailed records of all property-related expenses

If You Own or Run a Small/Medium Business

• Review capital investment plans – capital allowances may change
• Check R&D tax credit eligibility if you're claiming
• Consider timing of business disposals if Business Asset Disposal Relief might be restricted
• Evaluate business structure – is a company, partnership or sole trader status still optimal?
• Prepare for ongoing employer NI increases from April 2025 (already announced in 2024 Budget)

Estate Planning Considerations

• Review your will and ensure it's up-to-date
• Consider lifetime gifting, but don't rush based on speculation
• Understand the seven-year rule for IHT on gifts
• Review any trusts and their tax treatment
• Consider life insurance to cover potential IHT liabilities

Questions to Ask Your Accountant After the Budget

Once the measures are confirmed tomorrow, here are key questions to discuss with your professional adviser:

1. How do the confirmed changes affect my personal tax position? Get specific calculations based on your circumstances.
2. Should I adjust my income or profit extraction strategy? The balance between salary, dividends and pensions may need reviewing.
3. Do I need to revise my tax planning for this year and next? Some changes may allow time to act before they take effect.
4. How are the changes likely to affect my business? Consider operational costs, investment decisions and cash flow.
5. Should I reconsider the timing of major financial decisions? Property sales, business disposals or large gifts may need replanning.
6. Do I need to update my estate planning? IHT changes may require will or trust amendments.
7. Are there any transitional rules or windows of opportunity? Some changes include grace periods or grandfathering provisions.
8. What new compliance obligations do I have? Tax changes often come with new reporting requirements.

Need Professional Advice?

Tax planning is not one-size-fits-all. Your optimal strategy depends on your unique circumstances, goals and risk tolerance.

Once the Budget measures are confirmed tomorrow, we recommend speaking with a qualified accountant or tax adviser to review your position and explore your options.

Don't make major financial decisions based on speculation alone. Professional advice, tailored to the actual confirmed measures, will help you navigate the changes effectively and compliantly.

Final Thoughts

Tomorrow's Budget takes place against a backdrop of economic challenge and fiscal constraint. Tax rises and rule changes are widely anticipated, but the exact shape they'll take remains to be seen.

The key is to stay informed, remain calm, and avoid knee-jerk reactions to speculation. Once Rachel Reeves sits down after her speech and the official documents are published, the picture will become much clearer.

Whatever tomorrow brings, good financial planning, accurate record-keeping and professional advice will remain your best tools for navigating the UK tax system effectively.

Disclaimer: This article provides general information only and does not constitute financial or tax advice. Tax rules are complex and your optimal course of action depends on your individual circumstances. Always consult a qualified professional adviser before making significant financial decisions.

Article published: 25 November 2025 | Autumn Budget 2025: Pre-Budget Guide