Budget 2025: How Reeves Just Raised Your Tax Bill Without Touching the Rates
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UK Chancellor Rachel Reeves yesterday delivered her Autumn Budget 2025 – a Budget framed as “fiscally responsible,” but in practice designed to raise tens of billions in additional revenue while avoiding headline tax rises. The headline announcements may appear modest, but the underlying measures shift the UK further towards a high-tax, high-expenditure economy.
For UK taxpayers, and especially British expats with UK assets, the Budget confirms what ProACT has been warning for months:
Inflation, frozen thresholds, and targeted surcharges are now the main tools used to quietly expand the tax net.
Below is a breakdown of the key changes - along with ProACT Sam’s analysis, drawn from his live Budget commentary.
The Core Measure: Fiscal Drag Locked in Until 2030–31
Watch ProACT' Sam’s live reaction & analysis.
The Confirmed Stealth Tax Raid
Reeves has formally extended the freeze on:
The Personal Allowance
The Higher-Rate threshold
The Additional-Rate threshold
This freeze will now run until 2030–31.
Why this matters
By holding these thresholds static while wages rise with inflation, the government increases tax revenue without raising tax rates. This Budget confirms:
Over 100,000 more people will be dragged into the 40% band within three years.
By 2030–31, millions more will pay higher-rate tax simply because the bands never moved.
As Sam highlighted during his live broadcast:
In the 1990s, only about 7% of workers paid higher-rate tax.
By 2024, that number had doubled to 14%.
This Budget accelerates that trend.
The government openly defines “working people” as those earning under £45–46,000, and quietly classes everyone above that as “wealthy.” Those are the people – including many expats with UK income - who will shoulder the bill.
National Insurance Cuts That Give With One Hand…
NI Cut for Employees and Self-Employed
The Chancellor confirmed reductions in:
Class 1 NI (employees)
Class 4 NI (self-employed)
This offers small increases in take-home pay, but Sam’s analysis is blunt:
With frozen thresholds, the NI cut is largely eaten up by fiscal drag.
It looks like a giveaway, but most workers will see little real benefit.
For expats, employee NI only matters if you’re still on a UK payroll. Most expats should not be paying UK NI at all.
…And Takes With the Other: Pensions and Salary Sacrifice Clampdown
25% Tax-Free Lump Sum (TFLS) Saved – For Now
A major rumour was that Labour would cap or reduce the 25% tax-free pension lump sum.
Reeves confirmed no cut - a relief to SIPP and private pension holders.
This means:
You can still take 25% tax-free
You can still reinvest it into ISAs, or hold it as tax-free cash
Existing retirement strategies remain viable
But the real change is the Salary Sacrifice Cap
The Budget introduces a new restriction:
A cap on the amount of salary that can be sacrificed into pensions while receiving NI exemptions
This hits:
High earners
Executives
Contractors running personal service companies
Anyone using pension contributions to manage tax exposure
As Sam noted:
This is one of the easiest hidden revenue-raisers for the Treasury, and it hits people who’ve planned responsibly.
State Pension: Triple Lock Up – But Expats Lose the Best Deal
Triple Lock honoured: +4.1% from April 2025
The full new State Pension rises to just over £12,000.
However, the OBR report hints strongly at:
Accelerating the State Pension Age increase to 68
A wider structural overhaul
This lays the groundwork for future cuts.
The Expat Game-Changer: Abolition of Voluntary Class 2 NI
This is the single most significant expat measure in the entire Budget.
What the Budget does
Reeves confirmed the government will abolish voluntary Class 2 NI for expats.
Why this is huge
Class 2 NI is:
Voluntary
Dirt-cheap (~£3.50 a week)
The easiest way for expats to build qualifying years toward the full UK State Pension (worth £12k/yr)
Without Class 2, expats will be forced into:
Class 3 NI at £17.75/week, or
No ability to contribute at all
Sam’s analysis:
Expats should consider paying all arrears and locking in future Class 2 years before abolition takes effect.
Once it’s gone, the cost of securing the State Pension could rise five-fold overnight.
This alone justifies a ProACT free review for any expat who still needs contribution years.
Property, Dividends, Interest – The Expat “Fixed Income Trap”
If you live abroad, the UK can’t tax your worldwide income.
But it can tax any fixed UK income.
This includes:
Property rental income
UK-situated investment gains
Government service pensions
Some UK employer salary
Gains on UK companies or UK assets
What the Budget implies for expats
While not headline announcements, the direction of travel is obvious:
1. Property rental income is in the crosshairs
Frozen bands + rising rents = more expats pushed into basic and higher-rate tax.
Sam warned of a future 2% surcharge on rental income – a “wealth income” tax – likely coming in a future Budget.
2. Dividends will rise
A 2% increase is widely expected (and aligns with the livestream commentary).
But crucially:
Dividends are taxed where you live
Cyprus, for example, charges 0%
Meaning: Move your tax residence, and your dividend tax rate may drop to zero overnight.
3. Interest income could face similar surcharges
The UK has already cut savings allowances to near zero.
The next step, which Sam highlighted, is just adding 2% to the headline rate on top.
Capital Gains: The Big Hit Was Last Year
The Halloween 2024 Budget raised CGT on many gains from:
10% → 18% (an 80% increase)
Higher rate gains also rose (especially on property)
This year, CGT stayed stable - but Sam highlighted:
Every new tax starts small.
CGT was once a minor tax. Now it catches almost every investor.
Combined with frozen allowances and reduced ISAs, the UK is becoming increasingly hostile for people with assets.
Property Market: Mansion Tax, Stamp Duty Pressure, and a Squeeze on Younger Buyers
Mansion Tax – from 2028
Properties over £2 million will face a recurring annual charge.
In London, £2m is often a terraced house – not a mansion.
This is:
A precursor to broader wealth taxes
A stealth version of capital gains via annual charges
Likely to widen over time
Stamp Duty: No relief incoming
Stamp Duty is now a £11.6bn revenue engine compared to £675m in 1979.
ProACT expects:
No reductions
Potentially new surcharges
Ongoing pressure on landlords and second-home owners
ISAs Cut From £20,000 to £8,000 for Cash Savers
A small line item, but a major behavioural nudge:
ISA cash component capped at £8,000
More allowance pushed into “productive investment”
The government wants money inside the UK system, where it can be taxed sooner or later.
For expats, this is irrelevant – because ISAs are not tax-free outside the UK anyway.
What All of This Means for Expats - ProACT Sam Says
If you live abroad and have UK assets, you are now firmly on HMRC’s radar because:
You don’t receive UK benefits
You don’t vote in marginals
But your UK income is easy to track and tax
The key groups most affected:
Expats with UK rental property - facing rising tax, frozen allowances, potential surcharges
Expats with UK pensions - especially those relying on salary sacrifice arrangements - and those needing State Pension qualifying years
Expats with UK investment gains - facing higher CGT and reduced personal allowances
ProACT’s Action Plan for Expats
1. Secure Class 2 NI before abolition
This is the biggest expat opportunity - and the biggest risk.
2. Review all UK-sourced income
Identify what is:
“Fixed” in the UK
Movable
Convertible through restructuring
Read: What is moveable and immovable income?
3. Use double-tax treaties strategically
Especially for:
Dividends (0% in Cyprus)
Interest (0% in Cyprus)
Private pensions (5% flat rate in Cyprus)
Consider pension drawdown strategies
You may be able to:
Access tax-free lump sums
Draw pension income at 0–5% abroad
Remove wealth from future UK inheritance tax exposure
Reassess UK property holdings
Given:
Frozen bands
Stamp duty
Potential surcharges
Mansion tax
Rising CGT pressure
many expats need a fresh long-term plan.
Don’t Wait for Westminster
The Autumn Budget 2025 confirms a long-term trajectory:
Higher taxes
More stealth taxes
Frozen allowances
Reduced incentives
And expats increasingly caught in the crossfire
The UK tax landscape is changing faster than most people realise. Waiting until the law changes is always too late.
ProACT Partnership - tax, wills, residency, pensions, property, and expat structuring experts.
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