posted 2nd December 2025
What is the Autumn Budget 2025 — and why does it matter?
On 26 November 2025, the UK government unveiled the Autumn Budget 2025, introduced by Rachel Reeves, Chancellor of the Exchequer.
House of Commons Library
The government frames it as a Budget aimed at “fair taxes, strong public services, and a stable economy” — seeking to reduce government borrowing, boost investment, and support households in the face of economic headwinds.
House of Commons Library
But the Budget also represents one of the largest tax-raising programmes in recent memory: combined, the tax and revenue measures are expected to raise around £26–26.6 billion by 2029/30–2030/31.
Yahoo Finance UK
With those headline numbers, the Autumn Budget 2025 will have wide-reaching effects — some aimed at easing living pressures, others that may tighten wallets for many households.
Key measures that affect ordinary people
💷 Tax and income changes
Income tax and National Insurance (NIC) thresholds frozen until April 2031 — meaning the thresholds at which people start paying tax or higher tax rates stay where they are, even as wages rise. Over time, this “fiscal drag” means more people will pay tax or pay higher rates.
A new levy on pension salary-sacrifice schemes: from April 2029, only the first £2,000 of pension contributions via salary sacrifice will remain exempt from NICs. Contributions beyond that will face NICs — increasing the cost of saving for retirement for many using such schemes.
Higher taxes on savings, dividends and property income starting in 2026: e.g., dividend tax to rise by 2 percentage points.
🏡 Housing, property & wealth-related changes
Introduction of a “High Value Council Tax surcharge” from April 2028 for homes valued over £2 million — effectively a “mansion tax.”
For landlords and property investors, increased taxation on “property income” may reduce yield and eof buy-to-let investments.
HSBC UK
🏥 Benefits, public services, and cost-of-living relief
The Budget abolishes the two-child benefit cap — a longstanding limit on family benefits — which is likely to benefit many families.
MoneyWeek
Benefits such as Universal Credit will rise (benefits increases already announced) — helping households on lower incomes.
MoneySavingExpert.com
On public services: there is a significant investment push, including expanded resources for health (e.g. more for the NHS), infrastructure and welfare — addressing waiting lists, public service quality, and investment in growth.
GOV.UK
🔋 Cost-of-living relief measures
Perhaps the most visible change for many: a planned £150 cut in average household energy bills from April 2026 — achieved by changing how “green levies” are funded (shifting costs from energy bills to general taxation).
MoneyWeek
The government will also freeze certain costs such as rail fares, fuel duty, and prescription fees (for now) to help ease pressure on everyday spending.
GOV.UK
Who wins — and who might struggle
👍 Likely beneficiaries
Low- to middle-income households, especially families with children, stand to gain from increased benefit support and the scrapping of the two-child limit.
People on fixed or modest incomes, especially those sensitive to energy costs, may welcome the energy-bill reduction and frozen rail fares — given ongoing high cost-of-living pressures.
Recipients of public services — thanks to increased funding, there is potential for improved access (healthcare, infrastructure, social services).
⚠️ Who might feel the squeeze
Middle-income earners may see less benefit: the freeze in tax thresholds means more of their income becomes taxable even without a raise; over time losses from pension-saving incentives may hurt retirement planning.
Savers, investors, and landlords may be hit by higher taxes on savings, dividends, property income — reducing returns and long-term yield.
Owners of high-value properties — the new surcharge will affect them directly, and some may argue it depresses high-end housing demand or investment in buy-to-lets.
Effectively, while the Budget offers relief for some, it also shifts the burden onto a broader base — especially via “fiscal drag” and altered tax treatment of savings and property income.
What this means for you — and what to watch out for
For everyday households — whether you have a steady wage, rent, mortgage, or rely partly on benefits — this Budget likely feels like a mixed bag: some breathing room (energy bills, benefits, public services) but a long-term tightening of income and savings.
If you’re saving for retirement via a salary-sacrifice pension scheme, it may be worth re-evaluating how those contributions are structured.
If you own, rent or invest in property, the new tax rules and surcharges might influence future decisions — perhaps less buy-to-let investment, or shifting attitudes around property as an investment.
And if you’re on a low or moderate income, keeping an eye on benefit changes and cost-of-living measures will be important — but also on inflation and how wage growth matches tax changes over time.
The bigger picture: why the government did this
The government argues the Budget is about balancing tricky trade-offs: plugging a gap in public finances (without triggering a full austerity), raising revenue to invest in public services, and attempting to ease cost-of-living pressures in key areas.
House of Commons Library
With weak productivity growth and high national debt — economic headwinds that are still present — this Budget seems designed to buy “fiscal space” for public investment, while using a range of smaller, widespread tax measures rather than a few big headline tax hikes.
The Guardian
But critics warn that the cumulative effect may be to squeeze household finances, particularly for the “squeezed middle,” while creating uncertainties for savers and property investors.