Rachel Reeves’ 2025 Budget: What It Really Means for Normal People & Small Businesses

Rothstone Accountants Breakdown – Honest, Simple, Straight to the Point

 

The Chancellor has delivered her 2025 Budget, and let’s be honest — it’s one of the biggest shake-ups we’ve seen in years.
There’s no hiding it: taxes are going up, savings allowances are being trimmed, and the government is shifting more of the burden onto wealth, property, and passive income.

But what does this actually mean for you — the business owner, the saver, the landlord, the everyday taxpayer?

Let’s break it down in a clean, human way.

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1. Tax on Work vs Tax on Wealth – Big Shift Coming

For years, income from rent, dividends, and savings has been taxed lower than wages.

This Budget starts to close that gap.

What’s going up?

• Tax on savings interest

• Tax on dividends

• Tax on rental income

• A new tax on properties over £2 million

• Personal tax thresholds frozen for longer (a “stealth tax”)

Why does this matter?

Because even if your income stays the same, you’ll pay more tax automatically as inflation pushes you into higher brackets.

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2. Savings Will Be Hit Hard

For many families, ISAs were the easiest way to save tax-free.

Now:

• ISA allowances for under-65s are being reduced

• Tax on savings interest is increasing

If you save money in the bank — this affects you directly.

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3. Landlords & Property Owners, Brace Yourselves

Landlords are going to feel this Budget.

What’s changing:

• Higher tax on rental profits

• Lower relief on certain costs

• High-value homes (£2m+) facing a new “mansion-style” tax

For some landlords, the numbers may no longer stack up.
Portfolio restructuring is going to become essential — not optional.

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4. Salary Sacrifice Pension Schemes May Lose Their Shine

If you use salary sacrifice for pensions (or benefits like EVs, private healthcare etc.)

Expect:

• New limits

• Possible reductions in tax advantages

• Higher administrative charges

Many people will need to rethink pension strategy going forward.

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5. The Government’s Goal

You may be wondering: Why are they doing this?

The aim is to:

• Raise £26 billion

• Create fiscal headroom

• Support welfare changes (e.g., removing the two-child cap)

• Make taxation “fairer” between workers and asset-holders

• Stabilise long-term UK finances

Whether you agree or not — this is the direction of travel.

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6. What This Means for You: Real-Life Examples

Below are three scenario modelling tables showing how tax bills change before vs after the 2025 Budget.

These are realistic examples based on average income levels for our clients.

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📘 Scenario Modelling 1 – Small Business Owner (Director of LTD Company)

Assumptions

• Salary: £12,570

• Dividends: £40,000

• Savings interest: £1,500

Category	Before Budget 2025	After Budget 2025	Change
Income Tax	£0 (salary)	£0	No change
Dividend Tax	£2,587	£3,460	+£873
Savings Tax	£0	£150	+£150
National Insurance	£0	£0	No change
Total Tax	£2,587	£3,610	+£1,023 per year

Impact:
Owners who rely on dividends will pay noticeably more.
Rothstone’s recommendation: update your dividend strategy + consider alternative tax-efficient structures.

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📗 Scenario Modelling 2 – Landlord with One Rental Property

Assumptions

• Rental profit: £18,000

• Income from job: £32,000

Category	Before	After	Change
Rental Income Tax	£3,600	£4,140	+£540
Personal Tax Bracket	20%	20% but threshold frozen	More creeping into higher income
Mortgage Relief	No change	No change	—
Total Tax	£3,600	£4,140	+£540 per year

Impact:
Small landlords will feel the squeeze.
Rothstone’s recommendation: review portfolio viability + restructure ownership (LTD vs personal).

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📙 Scenario Modelling 3 – Saver / Higher-Earner

Assumptions

• Salary: £58,000

• Savings: £100,000 generating £3,500 interest

• Dividends: £5,000

Category	Before	After	Change
Savings Tax	£680	£1,050	+£370
Dividend Tax	£337	£675	+£338
Income Tax	£8,432	£8,432 (but future freeze impact)	—
Total Tax	£9,449	£10,157	+£708 per year

Impact:
Savers and investors lose the most due to reduced allowances and higher tax.
Rothstone’s recommendation: shift wealth to tax-efficient alternatives (pensions, certain investments).

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⭐ How Rothstone Accountants Can Help You Navigate This

This Budget is complex — and the changes touch everyone differently.
At Rothstone, we specialise in making this simple.

Here’s what we can do for you:

✔ 1. Personalised Tax Planning

We calculate exactly how the new rules affect your tax bill and create a tailored plan to reduce the impact.

✔ 2. Dividend & Salary Strategy for Directors

We restructure how you pay yourself to legally minimise tax — especially important as dividend taxes rise.

✔ 3. Landlord & Property Portfolio Review

We analyse:

• Should you sell?

• Transfer to a company?

• Restructure mortgages?

• Update your tax strategy?

✔ 4. Savings & Investment Efficiency Planning

We help you re-optimise your savings so you’re not losing money unnecessarily.

✔ 5. Pension & Salary Sacrifice Advice

If salary sacrifice becomes less attractive, we show you the best alternatives.

✔ 6. Full Financial Forecasting

We create a complete forecast showing:

• Expected tax

• Expected take-home pay

• Best/worst-case scenarios

• 5-year financial projection

Perfect for planning ahead.

✔ 7. Ongoing Support

Tax is changing more in the next 3 years than the last 10.
We stay ahead — so you don’t fall behind.

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Final Thought

This Budget signals a new era in UK taxation.
For many people, it will quietly increase their tax bill year after year — unless they plan ahead.

You don’t need to navigate this alone.

Rothstone Accountants is here to protect you, guide you, and help you make smarter decisions in a changing landscape.