UK Budget 2025: What’s New and What It Means for You
The UK Autumn Budget 2025 landed today, Wednesday 26 November, and it made more noise than usual after the Office for Budget Responsibility mistakenly published key sections ahead of the official speech. Once the Chancellor stepped up, the full picture became clear. The government is promising stability, long-term reform, and targeted support, while critics argue the plans still leave major gaps for families and workers.
Here’s the full breakdown of everything confirmed so far: the headline changes, the economic forecasts, the political reaction, and what it all means for you.
Rachel Reeves Main Message
Reeves framed the Budget as a turning point, saying the government was focused on “fairness, stability, and long-term recovery.” She acknowledged that people were “still struggling with rising costs” and stressed that the plans were designed to “give working families the confidence they deserve.”
She also admitted not everyone would welcome every measure, noting that the Budget should be viewed as a “full package”, not a “pick-and-choose exercise”. Her message to MPs was clear: the country needs unity, not internal division.
Tax Threshold Freeze Extended
• The income tax and National Insurance threshold freeze will now run until 2031.
• This means as wages rise, more people move into higher tax bands — effectively raising taxes without increasing headline rates.
Minimum Wage Jumps Again in 2026
From April 2026:
• Workers aged 21+ will earn £12.71 per hour
• Workers aged 18–20 will earn £10.85 per hour
• The government plans to move toward one standard adult rate.
Savings and Pensions
• Salary Sacrifice Change
From April 2029, employer NI will apply to sacrificed pension contributions over £2,000 per year.
• ISA Rule Change
From April 2027, at least £8,000 of the £20,000 ISA allowance must go into UK-focused assets.
Two-Child Benefit Cap Scrapped
• Starting April 2026, the two-child limit on Universal Credit and Child Tax Credits will be removed.
• The OBR estimates around 450,000 children will be lifted out of poverty, making this one of the most significant welfare changes in a decade.
Capital Tax Gain Relief Reduced
Capital gains tax (CGT) relief available on qualifying disposals of shares to employee ownership trusts (EOTs) has been reduced from 100% to 50%.
UK Listing Relief: Stamp Duty Reserve Tax Exemption
Companies newly listed on a UK-regulated market will benefit from a three-year exemption from Stamp Duty Reserve Tax (SDRT) on the transfer of their shares and other securities.
Households Tax Relief: What’s Changing
• Energy Bills Coming Down:
From April 2026, average UK household energy bills will be cut by £150 per year. The savings will mainly appear on electricity bills, benefiting all households, including those on fixed tariffs.
• Inheritance Tax:
Couples can now fully transfer their inheritance tax relief allowance between spouses
• Key Price Freezes:
Train fares and prescription charges will be frozen for one year.
• Welfare Overhaul:
The government is modernizing welfare assessments and introducing more support for people with long-term sickness.
These changes are designed to provide immediate financial relief for households while also making the benefits system fairer and more supportive for those in need.
Dividend Tax Rates Going Up
From 6 April 2026, the UK government is increasing the rates of income tax on dividend income by two percentage points.
The new rates will be:
• Basic rate: 10.75% (up from 8.75%)
• Higher rate: 35.75% (up from 33.75%)
• Additional rate: Remains unchanged at 39.35%
The dividend allowance of £500 will stay the same, but the higher rates mean more tax will be payable on dividend income above this threshold.
Mansion Tax Arrives in 2028
Homes worth more than £2 million will face a new annual charge:
• £2m – £2.5m: £2,500
• £2.5m – £5m: higher tiers
• £5m+: £7,500
Stamp Duty stays the same, with the surcharge taking centre stage.
EV Mileage Tax and Fuel Duty Freeze
• Fuel duty stays frozen until April 2026.
But from 2028/29, a new mileage tax begins:
• EVs: 3p per mile
• Hybrids: 1.5p per mile
Taxi Fares to be Introduced
Full 20% VAT will hit private hire fares such as Uber and Bolt.
Health and Everyday Costs
• Sugar Tax Tightened
From January 2028, the levy will cover sweetened milk drinks, plant-based substitutes, and similar products. The sugar threshold drops to 4.5g per 100 ml.
• Tobacco and Vaping Duties
Both continue rising with RPI.
How these changes affect households, workers, and businesses
Ultimately, the 2025 Budget reflects a government walking a tightrope between stability and fairness.
For many, the cost of living remains a daily struggle, and while there are targeted wins, like lifting the two-child benefit cap and cutting energy bills.
These are offset by the continued freeze on tax thresholds and new levies on savings and investments. Middle earners, in particular, may feel the squeeze as they’re pulled into higher tax brackets, while wealthier households see more responsibility placed on their shoulders through new property and asset taxes.
What To Expect: Future policy shifts and long-term impacts
Looking ahead, expect further reforms as the government aims for long-term stability and growth. Businesses may benefit from investment incentives and rate reductions, but will also face higher taxes on larger properties. Families and individuals should prepare for evolving tax and welfare policies, with an emphasis on fairness and support for those most in need. Overall, the Budget sets a course for a more balanced, sustainable economy, but ongoing monitoring will be key as these policies unfold over the coming years.
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