The 2025 Budget was delivered by The Chancellor, Rachel Reeves, on 26 November. The day had a tumultuous start due to the OBR’s accidental leak of the documents online hours before The Chancellor made her speech.
The Government plans to raise revenue, manage public spending and respond to ongoing cost pressures facing households. The Budget includes a mix of tax changes, welfare reforms and targeted support aimed at reshaping how working families, pensioners and homeowners manage rising living costs. While some measures increase the tax burden, others are designed to ease everyday pressures and support those on lower incomes.
Income tax and National Insurance thresholds will remain frozen for a further three years from 2028, extending the freeze introduced by the previous Government. Keeping thresholds static means more people will move into higher tax bands as earnings rise. The Chancellor acknowledged that this will affect working people, but stated that the overall tax package ensures that those with higher wealth contribute more.
Headline rates of income tax, VAT and National Insurance stay unchanged, honouring the pledge not to raise core taxes on workers. However, the basic and higher rates of tax on property, dividends and savings income will rise by two percentage points.
From April 2028, households with properties worth over £2 million will face a new high-value council tax surcharge, starting at £2,500 and rising to £7,500 for properties above £5m. From April 2029, pension salary sacrifice will be capped at £2,000 per year. Amounts above this will attract NI, raising an estimated £4.7 billion.
The cash ISA limit will decrease to £12,000 from April 2027, and a consultation on a simpler ISA for first-time buyers is expected to follow in 2026. The ECO home-insulation scheme will be scrapped, with the Government stating that household energy bills will fall by £150 next year.
The two-child limit for Universal Credit and tax credits will be abolished, costing £3bn by 2029/30. The National Living Wage will rise to £12.71, with 18–20 year-olds increasing to £10.85.
Fuel duty remains frozen until September 2026, after which it will increase in line with inflation. A new per-mile tax on electric vehicles will take effect in 2028 to support road maintenance funding.
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