Chancellor Rachel Reeves has unveiled a transformative autumn budget that will reshape the financial landscape for millions across the United Kingdom. Delivered against a backdrop of economic uncertainty, the budget introduces sweeping changes to both the tax system and benefits payments that will directly impact household incomes from April 2026.
Tax Changes: The Personal Allowance Freeze and National Insurance Cuts
The centrepiece of the budget involves significant alterations to how Britons are taxed. The personal allowance will remain frozen at £12,570 until 2028, a measure that will gradually pull more people into paying income tax as wages increase. This stealth tax rise contrasts with more visible cuts to National Insurance contributions.
Employees will see their main National Insurance rate drop from 8% to 6%, while self-employed workers will benefit from a reduction from 6% to 4%. These changes follow previous cuts implemented in the spring budget, representing a substantial decrease in the tax burden for many workers. However, the frozen thresholds mean some higher earners may still find themselves paying more overall.
Benefits Overhaul and Support Measures
The budget delivers mixed news for those relying on the benefits system. Universal Credit and other working-age benefits will increase by 3% next April, slightly below the current inflation rate but providing some relief to struggling households. This uplift follows the usual September inflation figure that determines annual benefit changes.
Pensioners receive more generous treatment, with the state pension rising by the triple lock guarantee. This ensures pension payments increase by the highest of three measures: average earnings growth, inflation, or 2.5%. The exact percentage increase will be confirmed later this year based on the most recent economic data.
Broader Economic Impact and Political Response
Beyond immediate tax and benefit changes, the budget includes several measures affecting businesses and public services. The Chancellor confirmed additional funding for the NHS and social care, though some analysts question whether this meets the scale of demand. Business groups have welcomed the National Insurance cuts but expressed concern about the cumulative impact of frozen thresholds.
Opposition parties have criticised what they describe as "stealth taxes" through threshold freezes, while the government maintains its approach balances necessary revenue raising with targeted relief for workers. The Institute for Fiscal Studies has noted that the combined effect of these measures will create both winners and losers across different income groups and regions.
As households digest the implications, financial advisors recommend reviewing personal budgets and considering how the changes might affect disposable income. With the measures not taking full effect until the 2026-27 tax year, there remains time for adjustment, though the direction of travel for UK fiscal policy is now clearly established.
