Chancellor Rachel Reeves stated that this budget is projected to raise taxes by £40bn, with plans to address compliance through hiring 5,000 extra compliance officers and upgrading HMRC’s IT systems to help close the tax gap. The freeze on income tax and National Insurance thresholds will not be extended, with personal tax thresholds set to be updated in line with inflation from 2028-29.
As the government prepares to implement these changes, individuals and businesses alike will need to adjust to the new fiscal landscape that emerges in 2025.
Here are the key highlights:
Transportation
- Single Bus Fare Cap: The cap on single bus fares will rise to £3 on 1st January 2025, with most fares not exceeding this amount throughout 2025. Fares currently below £3 will only be allowed to increase by inflation.
Education
- VAT on Private School Fees: Beginning 1 January 2025, a 20% VAT charge will be applied to private school fees, extending to all education, training, and boarding services provided by private institutions.
Taxation and National Insurance
- Windfall Tax: The energy industry windfall tax on profits from oil and gas firms will increase and be extended from 1 November.
- Income Tax & National Insurance: No increase in basic, higher, or additional rates of Income Tax, National Insurance, or VAT. However, employers’ National Insurance contributions will rise by 1.2% to 15% starting April 2025, with the secondary threshold decreasing from £9,100 to £5,000.
- Capital Gains Tax: The lower rate of Capital Gains Tax will rise from 10% to 18%, while the higher rate will increase from 20% to 24%. Non-domicile status will be removed from the tax system from 6 April 2025.
- Inheritance Tax: The inheritance tax threshold freeze extended until 2030
- Stamp Duty on Second Homes: Increased by 2% to 5% effective 31 October.
Wages and Benefits
- National Minimum Wage Increase: From April 2025, the national minimum wage will increase by 6.7% as follows:
- Apprentices & Under 18s: From £6.40 to £7.55
- Ages 18-20: From £8.60 to £10
- Ages 21 and Over: From £11.44 to £12.21
- Carers Allowance: Carers can now earn over £10,000 per year while retaining their allowance, which will increase from £81.90 per week to the equivalent of 16 hours at the National Living Wage.
Pension and Social Support
- State Pension Increase: In 2025-26, the State Pension will increase by up to £470 in line with the Triple Lock.
- Support for Scandal Victims: £11.8bn pledged to compensate victims of the blood scandal and £1.8bn for Post Office scandal victims.
Additional Funding and Investments
- NHS Funding: A £22.6bn increase to the NHS budget and £3.1bn in capital NHS spending aimed at delivering two million extra appointments.
- Education Investment: An additional £6.7bn for the Department for Education, including over £1.4bn to rebuild 500 schools in greatest need.
- Affordable Housing: £5bn allocated for affordable housing, with local authorities permitted to retain all receipts from the sale of council houses.
- Support for Devolved Governments: Funding allocations include £3.4bn for the Scottish Government, £1.7bn for the Welsh Government, and £1.5bn for Northern Ireland.
Environmental Initiatives
- Green Hydrogen Projects: Funding provided for 11 new green hydrogen projects across Great Britain.
