UK Budget Breakdown (2025)
- media2112
- Nov 27
- 2 min read
The Chancellor of the Exchequer, Rachel Reeves, has recently announced the UK’s budget, outlining significant changes that will impact individuals and households across the country. Here is a breakdown of the key policies and how they might affect your finances.
What's included in this article:
Cash ISA Allowance Changes
For individuals aged below 65, the amount you can put into your Cash ISA will drop from £20,000 to £12,000 starting in April 2027.
It is important to note, however, that there will be no changes to the total yearly ISA allowance, which will remain £20,000. This means you can still save or invest the full £20,000 across different types of ISAs (such as Stocks & Shares ISAs, Lifetime ISAs, etc.), but the cash component will be capped for those under 65.
National Living Wage Increase
The National Living Wage for workers aged 21 and over will increase to £12.21 per hour from April 2026. This aims to provide a boost to the incomes of low-paid workers across the UK.
Lifting the Two-Child Benefits Cap
From April 2026, the 2-child benefit cap will be scrapped which means families will be able to receive universal credit or tax credit for all children, regardless of family size.
This is estimated to help lift around 450,000 children out of poverty by 2029-2030.
Energy Bills Relief
Households may experience lower energy costs as the government plans to remove some “green levies”.
These are charges previously set by the government to help fund social and environmental initiatives.
The removal of these specific charges should ease the financial pressure of rising energy prices.
Free income tax thresholds Frozen
The amount of personal allowance—the sum an individual can earn before paying income tax—will remain frozen at £12,570 until April 2031. All other income tax and National Insurance thresholds are also subject to this freeze until the same date.
This policy has a significant implication: as average wages increase with inflation over the next few years, more people will gradually be pulled into higher tax brackets. This is often referred to as a "fiscal drag," effectively increasing individuals' overall tax bills over time as their earnings rise.
New “Mansion Tax”
For those fortunate enough to own high-value properties, a new "mansion tax" will be introduced in April 2028. This tax will be applied to residential properties valued at £2 million or more, based on their market value in 2026. This measure aims to generate revenue from the UK's most expensive properties.
And that’s all the major updates in the UK budget. We hope you found this breakdown useful.
For more information about the changes, you can visit the official government website: https://www.gov.uk/government/collections/budget-2025