The Budget 2025 – what does it mean for you?

Tax and Income

• There will be no rise in the rate of income tax or National Insurance, but income tax thresholds will be frozen until 2031 so if you receive a pay rise, you may fall into a higher tax band than you would have done if income tax thresholds had increased in line with inflation. Increases in some benefits and in the minimum wage may mean some people will start paying income tax if their income rises above £12,570pa.
• Basic and higher rate income tax on property income, savings income and dividend income will increase by 2 percentage points.
• Those with salary sacrifice pension schemes (where the employee sacrifices part of their salary for an increased pension contribution from their employer) will now be charged National Insurance on any contributions above a £2000 per year limit. Around a third of private sector workers and 10% of public sector workers have a salary sacrifice pension scheme so it is worth checking if this applies to you. This change will come into effect from April 2029.
• The minimum wage will increase to £12.71 per hour for over 21s, £10.85 per hour for 18-20 year olds and to £8 per hour for those under 19 or over 19 and in the first year of an apprenticeship.

Benefits

• Rate of basic and state pension will rise by 4.8% – this is higher than the rate of inflation.
• The 2 child benefit cap will be scrapped after April 2026 for those children born after 6^th April 2017.
• All the main disability benefits including carer’s allowance will rise by 3.8% from April 2026.

Savings and investments

• The Cash ISA Tax free annual limit will be reduced from £20k to £12k for those under 65. Those over 65 will retain the £20k allowance.
• Those under 65 can save a further £8k per year tax free if this is invested in stocks and shares (or a stocks and shares ISA).
• The Help to Save scheme for those on Universal Credit will be extended and expanded from 2027.

Transport

• Fuel duty is frozen until April 2026 but will then rise in stages from September 2026. Currently the tax on fuel is 52.95p per litre.
• A new road tax will come into force for electric cars – from 2028 onwards, they will be charged 3p per mile in addition to other road taxes.
• Regulated rail fares to be frozen next year for the first time since 1996.
• Premium cars will be excluded from the Motorbility scheme.

Other notable measures

• The gambling industry will face higher taxes.
• New taxes on sugary prepackaged milkshakes and lattes will be introduced in 2028.
• Cost of an NHS prescription frozen at £9.90
• Those who live in a house valued between £2 million and £2.5 million will pay an annual tax of £2500 rising to those who live in houses worth more than £5 million who will pay an annual tax of £7500.