LegalizeFinance Act 2025
Part 1 — Income tax, capital gains tax and corporate taxes
Income tax charge, rates etc
Income tax charge for tax year 2025-26
1
Income tax is charged for the tax year 2025-26.
Main rates of income tax for tax year 2025-26
2
For the tax year 2025-26 the main rates of income tax are as follows—
- (a) the basic rate is 20%,
- (b) the higher rate is 40%, and
- (c) the additional rate is 45%.
Default and savings rates of income tax for tax year 2025-26
3
- (1) For the tax year 2025-26 the default rates of income tax are as follows—
- (a) the default basic rate is 20%,
- (b) the default higher rate is 40%, and
- (c) the default additional rate is 45%.
- (2) For the tax year 2025-26 the savings rates of income tax are as follows—
- (a) the savings basic rate is 20%,
- (b) the savings higher rate is 40%, and
- (c) the savings additional rate is 45%.
Freezing starting rate limit for savings for tax year 2025-26
4
- (1) For the tax year 2025-26 the amount specified in section 12(3) of ITA 2007 (the starting rate limit for savings) is “£5,000”.
- (2) Accordingly, section 21 of that Act (indexation) does not apply in relation to the starting rate limit for savings for the tax year 2025-26.
Income tax provisions relating to cars
Appropriate percentage for cars: tax year 2028-29
5
- (1) Chapter 6 of Part 3 of ITEPA 2003 (taxable benefits: cars, vans etc) is amended as follows.
- (2) In section 139 (cars with a CO₂ emissions figure: the appropriate percentage), in subsection (1), for the table (as substituted by section 11(7) of FA 2023) substitute—
| Car | Appropriate percentage |
|---|---|
| Car with CO₂ emissions figure of 0 | 7% |
| Car with CO₂ emissions figure of 1–50 | 18% |
| Car with CO₂ emissions figure of 51–54 | 19% |
| Car with CO₂ emissions figure of 55–59 | 20% |
| Car with CO₂ emissions figure of 60–64 | 21% |
| Car with CO₂ emissions figure of 65–74 | 22% |
.
- (3) In subsection (3) of section 139 (as amended by section 11(3) of FA 2023)—
- (a) in paragraph (a), for “21%” substitute “22%”, and
- (b) in paragraph (b), for “37%” substitute “38%”.
- (4) In section 140 (cars without a CO₂ emissions figure: the appropriate percentage), in subsection (2), for the table substitute—
| Cylinder capacity of car in cubic centimetres | Appropriate percentage |
|---|---|
| 1,400 or less | 25% |
| More than 1,4000 but not more than 2,000 | 36% |
| More than 2,000 | 38% |
.
- (5) In subsection (3) of section 140—
- (a) in paragraph (a), for “2%” substitute “7%”, and
- (b) in paragraph (b), for “37%” substitute “38%”.
- (6) In section 141 (diesel cars: the appropriate percentage), in subsection (2), in Step 3, for “37%” substitute “38%”.
- (7) In section 142 (cars first registered before 1 January 1998: the appropriate percentage), in subsection (2), for the table substitute—
| Cylinder capacity of car in cubic centimetres | Appropriate percentage |
|---|---|
| 1,400 or less | 25% |
| More than 1,4000 but not more than 2,000 | 36% |
| More than 2,000 | 38% |
.
- (8) In subsection (3) of section 142, for “37%” substitute “38%”.
- (10) In consequence of the amendments made by this section, in section 139, omit—
- (a) in subsection (2), paragraph (b) together with the “and” before it, and
- (b) subsections (5) to (5B).
- (11) The amendments made by subsection (10) have effect for the for the tax year 2028-29 and subsequent tax years.
Appropriate percentage for cars: subsequent tax years
6
- (1) Chapter 6 of Part 3 of ITEPA 2003 (taxable benefits: cars, vans etc), as amended by section 5, is amended as follows.
- (2) In section 139 of ITEPA 2003, in subsection (1), for the table substitute—
| Car | Appropriate percentage |
|---|---|
| Car with CO₂ emissions figure of 0 | 9% |
| Car with CO₂ emissions figure of 1–50 | 19% |
| Car with CO₂ emissions figure of 51–54 | 20% |
| Car with CO₂ emissions figure of 55–59 | 21% |
| Car with CO₂ emissions figure of 60–64 | 22% |
| Car with CO₂ emissions figure of 65–74 | 23% |
.
- (3) In subsection (3) of that section—
- (a) in paragraph (a), for “22%” substitute “23%”, and
- (b) in paragraph (b), for “38%” substitute “39%”.
- (4) In section 140 (cars without a CO₂ emissions figure: the appropriate percentage), in subsection (2), for the table substitute—
| Cylinder capacity of car in cubic centimetres | Appropriate percentage |
|---|---|
| 1,400 or less | 26% |
| More than 1,4000 but not more than 2,000 | 37% |
| More than 2,000 | 39% |
.
- (5) In subsection (3) of section 140—
- (a) in paragraph (a), for “7%” substitute “9%”, and
- (b) in paragraph (b), for “38%” substitute “39%”.
- (6) In section 141 (diesel cars: the appropriate percentage), in subsection (2), in Step 3, for “38%” substitute “39%”.
- (7) In section 142 (cars first registered before 1 January 1998: the appropriate percentage), in subsection (2), for the table substitute—
| Cylinder capacity of car in cubic centimetres | Appropriate percentage |
|---|---|
| 1,400 or less | 26% |
| More than 1,4000 but not more than 2,000 | 37% |
| More than 2,000 | 39% |
.
- (8) In subsection (3) of section 142, for “38%” substitute “39%”.
- (9) The amendments made by this section have effect for the tax year 2029-30 and subsequent tax years.
Capital gains tax rates and reliefs
Main rates of CGT for gains other than carried interest gains
7
- (1) In section 1H of TCGA 1992 (the main rates of CGT)—
- (a) omit subsection (1A) (which sets out the rates for residential property gains accruing to individuals),
- (b) in subsection (3) (which sets out the rates for gains accruing to individuals that are not residential property gains or carried interest gains)—
- (i) for “10%” substitute “18%”, and
- (ii) for “20%” substitute “24%”,
- (c) omit subsection (4A) (which sets out the rates for residential property gains accruing to personal representatives),
- (d) in subsection (6) (which sets out the rates for gains accruing to personal representatives that are not residential property gains or carried interest gains), for “20%” substitute “24%”,
- (e) omit subsection (7) (which sets out the rates for residential property gains accruing to trustees), and
- (f) in subsection (8) (which sets out the rates for gains accruing to trustees that are not residential property gains or carried interest gains)—
- (i) omit “Other”, and
- (ii) for “20%” substitute “24%”.
- (2) Schedule 1 contains amendments in consequence of the provision made by this section.
- (3) The amendments made by this section and that Schedule have effect in relation to disposals made on or after 30 October 2024.
Business asset disposal relief: increase in rate
8
- (1) In section 169N of TCGA 1992 (business asset disposal relief), in subsection (3) (which specifies the rate of CGT for the relief), for “10%” substitute “14%”.
- (2) In consequence of the amendment made by subsection (1), in section 1H(1)(a) of TCGA 1992 (which refers to the rate for business asset disposal relief), for “10%” substitute “14%”.
- (3) The amendments made by subsections (1) and (2) have effect in relation to disposals made on or after 6 April 2025.
- (4) In section 169N(3) of TCGA 1992 (as amended by subsection (1)), for “14%” substitute “18%”.
- (5) In consequence of the amendment made by subsection (4), in section 1H(1)(a) of TCGA 1992 (as amended by subsection (2)), for “14%” substitute “18%”.
- (6) The amendments made by subsections (4) and (5) have effect in relation to disposals made on or after 6 April 2026.
Investors’ relief: increase in rate
9
- (1) In section 169VC(2) of TCGA 1992 (which specifies the rate of CGT for the relief), for “10%” substitute “14%”.
- (2) In consequence of the amendment made by subsection (1), in section 1H(1)(b) of TCGA 1992 (which refers to the rate for investors’ relief), for “10%” substitute “14%”.
- (3) In consequence of the amendments made by subsection (1) and section 8(1), in section 1I of TCGA 1992 (income taxed at higher rates or gains exceeding unused basic rate band), in subsection (4)(a) (which refers to the rate for business asset disposal relief and investors’ relief), for “10%” substitute “14%”.
- (4) The amendments made by subsections (1) to (3) have effect in relation to disposals made on or after 6 April 2025.
- (5) In section 169VC(2) of TCGA 1992 (as amended by subsection (1)), for “14%” substitute “18%”.
- (6) In consequence of the amendment made by subsection (5), in section 1H(1)(b) of TCGA 1992 (as amended by subsection (2)), for “14%” substitute “18%”.
- (7) In consequence of the amendments made by subsection (5) and section 8(4), in section 1I(4)(a) of TCGA 1992 (as amended by subsection (3)), for “14%” substitute “18%”.
- (8) The amendments made by subsections (5) to (7) have effect in relation to disposals made on or after 6 April 2026.
Investors’ relief: reduction in amount qualifying for relief
10
- (1) In—
- (a) section 169VK(1) and (2) of TCGA 1992 (which specify the amount of gains qualifying for the relief in the case of disposals by individuals), and
- (b) section 169VL(2) and (3) of that Act (which specify the amount of gains qualifying for the relief in the case of disposals by trustees),
for “£10 million” substitute “£1 million”.
- (2) The amendments made by this section have effect in relation to disposals made on or after 30 October 2024.
Sections 7 to 10: transitional provision
11
Schedule 2 contains transitional provision in connection with the provision made by sections 7 to 10.
Rate of CGT for carried interest gains
12
- (1) In section 1H of TCGA 1992 (which sets out the main rates of CGT)—
- (a) omit subsection (2) (which provides for rates of 18% or 28% on carried interest gains accruing to individuals),
- (b) in subsection (3), for “Other chargeable gains” substitute “Chargeable gains other than carried interest gains (see subsections (4B) and (9) to (11))”,
- (c) before subsection (5) insert—
(4B) Chargeable gains accruing in a tax year to an individual that are carried interest gains are charged to capital gains tax at a rate of 32%.
, and
- (d) in subsection (5) (which provides for the rate of CGT on carried interest gains accruing to personal representatives of a deceased individual), for “28%” substitute “32%”.
- (2) In section 1I of that Act (income taxed at higher rates or gains exceeding unused basic rate band), as amended by paragraph 2 of Schedule 1—
- (a) before subsection (1) insert—
(A1) This section applies for the purpose of determining the rate of capital gains tax that applies to gains accruing to an individual in a tax year that are not carried interest gains and, in the following provisions of this section, references to gains (or amounts chargeable to capital gains tax) do not include carried interest gains.
,
- (b) in subsection (1), for the words from “charged—” to the end substitute “charged at the rate of 24%.”,
- (c) in subsection (2), in the words after paragraph (b), for the words from “is charged at” to the end substitute “is charged at the rate of 24%.”,
- (d) in subsection (5), for the words from “are then charged—” to the end substitute “are then charged at the rate of 24%.”,
- (e) in subsection (7), for the words from “as then remains” to the end substitute “as then remains to gains other than entrepreneur or investor gains.”, and
- (f) in subsection (9), for the words from “charged—” to the end substitute “charged at the rate of 24%.”
- (3) The amendments made by this section have effect in relation to carried interest arising on or after 6 April 2025.
Corporation tax charge and rates
Charge and main rate for financial year 2026
13
- (1) Corporation tax is charged for the financial year 2026.
- (2) The main rate of corporation tax for that year is 25%.
Standard small profits rate and fraction for financial year 2026
14
For the purposes of Part 3A of CTA 2010, for the financial year 2026—
- (a) the standard small profits rate is 19%, and
- (b) the standard marginal relief fraction is 3/200ths.
Oil and gas
Increase in rate of energy (oil and gas) profits levy
15
- (1) In section 1 of the Energy (Oil and Gas) Profits Levy Act 2022 (charge to tax), in subsection (1), for “35%” substitute “38%”.
- (2) The amendment made by subsection (1) has effect for accounting periods beginning on or after 1 November 2024.
- (3) In the case of an accounting period (a “straddling period”) beginning before 1 November 2024 and ending on or after that date—
- (a) the Energy (Oil and Gas) Profits Levy Act 2022 is to apply as if so much of the straddling period as falls before that date, and so much of the straddling period as falls on or after that date, were separate accounting periods, and
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