Chancellor Rachel Reeves has unveiled a Budget that spells significant financial changes for millions across the UK, after details were prematurely released by the Office for Budget Responsibility.
The leak revealed a package of tax rises totalling £26billion a year, with the Chancellor acknowledging that ordinary people will have to contribute a little more. Families are now assessing the full impact of these measures on their household finances.
Who Benefits from the Budget?
State pensioners emerge as clear winners, with the state pension set to increase by 4.8% from April 2026. This rise, well above the current inflation rate of 3.8%, will see the full new state pension grow from £230.25 to £241.30 per week. The government has also confirmed that those receiving only the basic or new state pension won't be subject to tax through Simple Assessment.
People on benefits receive substantial support through the abolition of the two-child benefit cap from April 2026. Most benefit payments will increase in line with September's inflation rate, while the Universal Credit standard allowance sees an even larger boost - rising from £92 to £98 weekly for single persons over 25.
Low-paid workers will benefit from significant minimum wage increases starting next April. The rate for workers aged 21 and over jumps by 4.1% to £12.71 per hour, while younger workers see even larger percentage increases.
Rail commuters can breathe easier with the announcement that rail fares will remain frozen until 2027, providing relief after this year's 4.6% increase.
Drivers of petrol and diesel cars get temporary reprieve as the 5p per litre fuel duty cut extends until August 2026, though this relief will gradually be reversed thereafter.
Who Faces Financial Challenges?
Taxpayers confront a difficult landscape with the confirmation that tax thresholds will remain frozen for an additional three years until April 2031. The personal allowance stays at £12,570, meaning more workers will be pulled into higher tax brackets as wages increase.
Savers face a double blow with the annual cash ISA limit reducing from £20,000 to £12,000 for under-65s from April 2027. Simultaneously, tax rates on savings interest will increase by two percentage points across all tax bands.
People with expensive homes will be hit with a new surcharge from April 2028. Properties valued between £2million and £2.5million will incur a £2,500 annual charge, rising to £7,500 for homes above £5million.
First-time buyers found little comfort in the Budget, with no immediate changes to stamp duty. The government will merely consult on potentially reforming or replacing the Lifetime ISA, leaving many aspiring homeowners in limbo.
Smokers and drinkers will pay more as tobacco duty increases by RPI inflation plus two percentage points, while alcohol duty rises in line with RPI from February next year.
Landlords face increased property income tax rates from April 2027, with experts warning these costs will likely be passed on to tenants through higher rents.
Electric vehicle owners will encounter new costs with a 3p per mile tax introduced from April 2028, while plug-in hybrid drivers will pay 1.5p per mile.
Budget's Lasting Impact
The 2025 Budget represents a significant reshaping of the UK's fiscal landscape, creating clear divisions between those who stand to benefit and those who will bear the brunt of new financial pressures. With the early leak allowing for unprecedented public scrutiny, the measures announced by Rachel Reeves are set to influence household budgets for years to come.
