Autumn Budget 2025 Announced: What’s new, and what does it mean?
- David Manklow
- 24 hours ago
- 4 min read
Reeves Unveils Record Tax Rises and Major Welfare Reforms in High-Stakes Fiscal Plan
Chancellor Rachel Reeves has delivered the 2025 Autumn Budget, outlining a sweeping package of tax increases, welfare reforms and long-term fiscal measures aimed at rebuilding public services, reducing borrowing and stabilising the UK’s public finances.
The Budget arrives amid weak productivity, persistent cost-of-living pressures, and an unprecedented OBR leak earlier in the day. Despite challenging economic conditions, the Chancellor pledged that this plan “will not return Britain to austerity”, instead pushing significant tax changes onto wealth, assets, pensions and higher-value properties.
Key Announcements at a Glance
£26bn in new tax rises across wealth, property, savings, pensions and investment income.
Fiscal headroom increases to £22bn, giving Treasury more space to absorb shocks.
Two-child benefit cap scrapped, at a cost of c. £3bn annually by the end of the decade.
ISA allowances cut for under-65s from £20,000 → £12,000 from April 2027.
Salary-sacrifice pension tax relief capped at £2,000 per year.
New 3p-per-mile tax on electric vehicles from late 2028.
Council-tax surcharge on homes over £2m from 2028.
Tax on dividends, savings & property income rises by 2 percentage points.
Gambling, vaping & tobacco duties all increased.
These measures push the UK’s tax burden to a projected 38.3% of GDP by 2030–31 — the highest level in modern British history.
Tax Changes: Where the Money Comes From
1. Income Tax & NI Threshold Freeze (until April 2031)
Thresholds will remain frozen for another six years, meaning as wages rise, more workers drift into higher tax bands, a phenomenon known as “fiscal drag”.
Expected to raise £8.3bn annually by the end of the decade.
2. Salary-Sacrifice Pension Cap
A major structural change: only £2,000 per year of salary-sacrifice pension contributions will remain exempt from National Insurance.
Forecast to raise £4.7bn per year.
Industry experts warn this could discourage pension saving.
3. Higher Taxes on Dividends, Savings & Property Income
Tax on these forms of income will increase by 2 percentage points, affecting investors, landlords and wealthier households.
Expected yield: £2.1bn.
4. Council-Tax Surcharge for High-Value Homes:
Properties valued above £2 million will face an additional surcharge from April 2028.
Raising approximately £400m per year.
5. Cash ISA Allowance Cut (Under-65s):
From April 2027, the annual tax-free allowance for Cash ISAs will fall from £20,000 → £12,000.
Over-65s retain the £20,000 limit.
Treasury officials say this “redirects saving into more productive assets”, but consumer groups warn it will hit cautious savers hardest.
6. Green & lifestyle taxes:
New 3p-per-mile EV tax from 2028/29 (~£1.1bn raised).
Remote gambling duty rises, generating >£1bn extra.
Vaping & tobacco duties increased sharply.
Major Social Policy Change: Two-Child Benefit Cap Scrapped
One of the most significant political moves in the Budget: Reeves formally abolished the controversial two-child benefit cap, originally introduced in 2017.
Cost: £3bn per year by 2029/30.
The government argues it removes a “punitive, poverty-entrenching” policy.
Critics say it may undermine fiscal discipline.
Economic Outlook & Fiscal Health
Growth & Inflation
Growth forecast averages 1.5% per year over the medium term, modest and unchanged from OBR trend expectations.
Inflation expected to remain higher than previously forecast, increasing pressure on households already squeezed by the threshold freeze.
Public Debt
Debt expected to peak at 83.7% of GDP in 2028–29 before starting to fall.
Dependent on growth, avoiding shocks, and the government sticking to its new tax regime.
Fiscal Headroom
Treasury headroom rises to £22bn, up from £9.9bn earlier this year, giving the Chancellor a political and economic buffer.
Impact on Households: Who Wins and Who Pays?
Likely to Pay More
Middle-income earners caught by frozen income tax thresholds.
Savers under 65 (ISA cut).
Higher earners using salary-sacrifice pensions.
Investors and landlords (dividends/property income tax rise).
Owners of £2m+ homes.
Frequent EV drivers (new mileage tax).
Likely to Benefit
Families with more than two children as the benefit cap ends.
Lower-income households via uprated benefits and targeted support.
Public service users, if investment commitments deliver on NHS and welfare improvements.
Political and Public Reaction
Supporters say the Budget is a long-overdue rebalancing of the tax base, with wealth and assets contributing more than wages.
Critics call it a “stealth tax Budget”, with the threshold freeze functioning as a multi-year, multi-billion pound squeeze on ordinary earners.
Economists warn of behavioural risks:
reduced pension saving
reduced cash saving
potential slowdown in high-value housing transactions
uncertain response to new EV taxes
How Approved Finance Group Can Help Business Owners Navigate the Budget Changes
The 2025 Autumn Budget brings higher taxes, tighter allowances and rising operating costs, all of which may impact cash flow and investment opportunities for business owners.
Approved Finance Group can help businesses stay resilient through:
Cash-flow finance & working capital to manage higher tax and compliance costs.
Asset finance and refinancing to support investment when savings and dividends are taxed more heavily.
Vehicle and fleet finance to offset the impact of the new 3p-per-mile EV tax.
Invoice finance & business loans to free up capital and reduce reliance on personal funds, especially important with ISA and pension changes affecting directors.
Strategic funding guidance to help businesses plan ahead amid ongoing economic uncertainty.
Whatever the Budget means for your business, Approved Finance Group can provide fast, flexible finance tailored to your needs.
Conclusion: A High-Tax, High-Investment Strategy
This Budget confirms a fundamental shift in UK economic policy: higher taxes across a wide base, more welfare support, more public service investment, and a focus on long-term financial stability.
But success depends on whether:
Revenue-raising policies deliver what the Treasury forecast,
Inflation eases,
Productivity improves, and
Investment translates into real improvements in services like the NHS.
The political risks are large, but so are the fiscal and economic pressures driving the change.
