10 major Budget announcements that will affect every household with changes to taxes, wages and benefits
by Catherine Addison-Swan, Harry Taylor, PA · ChronicleLiveThe Labour Government delivered its first Budget today (Wednesday, October 30), confirming a series of significant changes to the nation's finances that will affect virtually every household in the UK.
Among the measures announced by Chancellor Rachel Reeves were £40 billion a year in extra taxes, a pay rise for minimum wage workers, and major funding in the NHS and schools, as she increased Government borrowing and spending in a vow to "rebuild Britain". The Chancellor said the measures were necessary to address the "black hole" in the public finances left by the Tories, but reiterated the Government's promise to "protect working people".
From an overhaul of HMRC and DWP in a bid to crack down on fraud in the benefits system to changes to the price of a pint, the delivery of the Budget will have an impact on almost everyone in the country. Here are 10 of the biggest announcements that you should know about, including changes to wages, benefits and pensions.
Taxes
The Chancellor has raised taxes by £40 billion, telling the Commons: "Any chancellor standing here today would face this reality, and any responsible chancellor would take action." However, the Government vowed that national insurance, VAT or income tax will not increase for working people.
The freeze on income tax and national insurance thresholds will not be extended beyond 2027/28, with Reeves saying it would "hurt working people" to keep thresholds frozen. This decision spares additional workers from facing higher rates of taxation as their wages grow, an effect known as "fiscal drag" where more earnings become taxable without an actual increase in tax rates.
Among the other tax measures confirmed in the Budget are a 1.2 percentage point increase for employers' national insurance contributions to 15% in April 2025. In addition, the threshold for paying them will fall from £9,100 per year to £5,000.
The headline rates of capital gains tax will increase, with the lower rate rising from 10% to 18% and the higher rate from 20% to 24%. Reeves also confirmed changes to inheritance tax, including bringing pension pots within the tax from April 2027 and reforms to agricultural and business property reliefs, raising a total of £2 billion a year.
Wages
The Chancellor confirmed that the National Living Wage will increase next April, rising by 6.7% from £11.44 to £12.21 per hour. This boost will be worth an extra £1,400 a year for an eligible full-time worker, in what the Government has described as "a significant step towards delivering the manifesto commitment to make sure the minimum wage is a genuine living wage".
In addition, workers aged 18 to 20 will see their hourly wage increase by a record 16.3% in April 2025, from £8.60 to £10, marking the latest step in moving towards a single minimum wage rate for all adult UK workers. Currently, all workers over the age of 21 are entitled to the National Living Wage, but there is a lower rate for younger employees.
Pensions and benefits
The Chancellor reiterated the Government's commitment to the pension triple lock, telling the Commons that both the basic and new state pension will rise by 4.1% in 2025-26.
However, as previously mentioned, it was confirmed that pensions will soon be affected by inheritance tax, with pension savings set to be considered part of the "estate" of a deceased person and liable for the tax from April 2027. Currently, inheritors of pensions do not pay tax if the original holder dies before the age of 75.
When it comes to benefits, the weekly earnings limit for Carer's Allowance will rise to the equivalent of 16 hours a week at the national living wage - the largest increase since the allowance was introduced.
Meanwhile, the Government hopes to raise £6.5 billion by giving HMRC new technology and hiring extra staff to crack down on £6.5 billion in unpaid taxes. The Chancellor went on to say she will reduce fraud in the welfare system by hiring new members of the Department for Work and Pensions counter-fraud teams, saving £4.3 billion a year by 2029.
Housing
The Government will invest more than £5 billion in housebuilding. It will also give £1 billion of funding to remove dangerous cladding next year.
Meanwhile, the stamp duty land tax surcharge for second homes will increase by two percentage points from 3% to 5%, and will come into effect from Thursday, the Chancellor announced.
NHS
Reeves announced a £22.6 billion increase in the day-to-day health budget, as well as a £3.1 billion increase in the capital budget. The Chancellor called this the "largest real-terms growth in day-to-day NHS spending outside of Covid since 2010".
Schools
The Chancellor has announced £1.4 billion to rebuild more than 500 schools as part of a 19% real-terms increase in the Department for Education's capital budget, along with £2.1 billion for school maintenance.
The core schools budget will rise by £2.3 billion next year, with an extra £1 billion funding increase to special educational needs provision. Investment in breakfast clubs will also be tripled, Reeves confirmed.
Public transport
HS2 will be brought to Euston Station in London, the Chancellor confirmed, saying she said she would commit "the funding required" to begin tunnelling work. Rail links will also be upgraded between York, Leeds, Huddersfield and Manchester.
Driving
One of the biggest surprises in the Budget was the confirmation that fuel duty will be frozen next year, despite speculation that it would rise by as much as 7p per litre. Reeves admitted the move was a "substantial commitment" for her party, costing the Treasury more than £3 billion, but insisted that raising taxes on fuel would be "the wrong choice for working people".
Smoking and vaping
The Chancellor announced that tax on hand-rolling tobacco will increase by 10%, while a flat rate levy will be imposed on all vaping liquids from October 2026 of £2.20 per 10ml of liquid. It's hoped that the measures will help to "discourage non-smokers and young people from taking up vaping".
Alcohol
Draught duty on alcoholic drinks will fall by 1.7%, meaning "a penny off a pint in the pub", Reeves said. However, the price of wine and spirits is set to rise as alcohol duty rates on non-draught products will increase in line with RPI from February next year.
The latest hikes to duty on wine and spirits follow increases in August last year that were the largest in almost 50 years, adding 20% to excise duty on more than 85% of all wines on the UK market and more than 10% to duty paid on full strength spirits. This duty is generally passed on to consumers by manufacturers.
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