The 2025 Budget

Overall, the 2025 Budget is a tax-raising and wealth-redistributing budget, the sort that a Labour government might be expected to give.  There are new mechanisms to tax the wealthy and some help given to those in need. 

Since 2008 when taxpayers funded global bank bailouts the tax burden has been steadily increasing.  The UK has faced its own additional economic challenges as Brexit generated uncertainty that has held back economic growth. 

As a result, the overall tax burden on the country is now higher than at any point since the 1970s. 

Neutral For 

Most people are not particularly affected in the short term. 

Duties on fuel remains frozen until September 2026, after which a 5p temporary cut will be increased in stages. 

Income tax, VAT and National Insurance will not change for most people, although see comments about the tax allowance below. 

Bad For 

Some employers and pension savers earning £40,000 or more, as they are now expected to pay national insurance on salary sacrifice contributions over £2,000 per year.  Salary sacrifice is a popular way of saving for your pension, and this will hit some high earners hard from 2029 when it is introduced. 

People who make their living from investments and savings will see capital gains, dividend and savings tax increases phased in over the next two years. This continues the trend of moving non-salary income to the same level faced by employees. 

Gamblers – duty on online gambling is doubling to 40%. 

Drinkers – duty on alcohol is rising in line with inflation. 

Electric vehicle drivers don’t currently pay any vehicle excise duty, but they will start to now, and in 2028 a new per-mile charge will be levied on EVs at the rate of 3p per mile. For a driver doing £10,000 miles a year, it will cost £300. 

Everyone will be affected from 2028 because the tax allowance is not going to rise until 2031 at the earliest.  The tax allowance has been held back for some time, the last time it rose by more than a thousand was back in the 2013-2014 tax year. 

ISA cash savers under 65 years of age, who see a reduction of £8,00 in their cash allowance in 2027, although they can make up the difference by investing in stocks and shares. 

People with houses worth more than £2,000,000 will be taxed more by their local councils from 2028. 

People working abroad who will no longer be able to build up their state pension entitlement in the UK by paying the voluntary and low-cost Class 2 contributions. 

Good For 

Low-income families with more than 2 children 

Some farming families who see their inheritance tax allowance increased in certain cases. 

If you have any concerns or questions about how the 2025 Budget will affect you, do get in touch with us.