The November Budget 2025 has arrived. The unexpected and accidental early publication caused a buzz in Westminster and gave the public an early look at the government’s plans. The 2025 Budget introduces major tax changes, new support measures and several important reforms that will affect households and businesses across the UK.
Inflation and the Economic Outlook
The OBR expects inflation to reach 3.5% in 2025 and fall to 2.5% in 2026. It also forecasts inflation to return to the 2% target in 2027. Alongside these forecasts, the OBR predicts weaker productivity growth. This places continued pressure on long-term economic performance.
GDP should grow by around 1.5% in 2025, which marks a modest rebound. Growth then remains steady but slightly lower than earlier forecasts in later years. The softer outlook reduces expected tax revenues and the government says it will respond through targeted tax increases and investment plans.
Tax Threshold Freezes
The government will freeze Income Tax thresholds until 2031. As wages rise, more people will move into higher tax bands. The OBR predicts that 780,000 more people will pay Income Tax in 2029/30 compared to the March 2025 forecast.
Employers’ National Insurance thresholds will also remain frozen for an additional three years from 2028. This measure aims to raise revenue but also increases pressure on employers as wages rise.
Together, these freezes will push the UK’s overall tax burden to record levels. The OBR expects taxes to reach around 38% of GDP by 2030/31.
Homeworking Expense Relief Removal
The 2025 Budget confirms that from 6th April 2026, the government will remove tax relief on unreimbursed homeworking expenses. This relief has existed for more than a decade and saw widespread use during the pandemic.
Employees who work from home at their employer’s request currently claim either actual costs with evidence or a flat £6 per week without receipts.
This option will no longer exist, although employers may still reimburse staff for these costs tax-free. However, the government notes that this change could place pressure on businesses to cover these expenses.
Pension and Savings Changes
From 2029, pension contributions through salary sacrifice will face new restrictions. The first £2,000 per year will remain exempt from National Insurance. Any salary sacrifice pension contributions above this amount will incur National Insurance, bringing them inline with ordinary employee contributions.
Savings rules are also changing. The overall £20,000 ISA (Individual Savings Account) Allowance remains in place. However, from April 2027, those aged under 65 can place a maximum of £12,000 into Cash ISAs each year. The remaining £8,000 of the allowance is only usable for Investment ISAs. Savers aged 65 and over will retain the full £20,000 Cash ISA option.
The government says these reforms support long-term investment and encourage more money to flow into investment markets.
Property and Wealth Measures
The government will introduce a new surcharge on high-value homes. Properties worth over £2 million will pay a yearly charge of £2,500, while those worth more than £5 million will pay £7,500. Fewer than 1% of UK homes will pay this charge. The government expects the measure to raise over £400 million a year by 2031.
Tax rates on dividends, savings income and property income will increase by two percentage points. This changes will take effect from 2026 and 2027, depending on the income type.
Energy and Cost-of-Living Support
The government will scrap the ECO energy scheme from April 2026. ministers say this will reduce energy bills for the majority of households. Removing the scheme should cut around £150 from the average household’s energy bill.
Green levies on gas and electricity will also fall, costing the government around £2.3 billion while reducing household bills further. The exact reduction will vary between households.
Fuel Duty will remain frozen until September 2026. The 5p cut to fuel duty will also continue for another year.
Electric Vehicle Tax
From April 2028, electric vehicle drivers will pay a new mileage-based tax. Battery electric cars will pay 3p per mile, and plug-in hybrids will pay 1.5p per mile. The rate will also increase annually with inflation. Revenue will support investment in roads and electric vehicle charging infrastructure.
Gambling Tax Reform
Th government will overhaul gambling taxes:
- Remote Gaming Duty will rise from 21% to 40% from April 2026
- Online Betting Duty will increase from 15% to 25% from April 2027
- Bingo Duty will end entirely from April 2026
Together, these measures should raise over £1 billion per year by 2030/31.
Support for Families and Young People
The government will remove the Two-Child Benefit Cap from April 2026. The OBR estimates that this will support around 560,000 families, with each family gaining an average of £5,310 per year by 2029/30.
Support for young people will expand through free apprenticeship training for small and medium-sized employers and a new Youth Guarantee. This guarantee, funded at £820 million over three years, will provide skills training and structured work opportunities for young people.
Public Services and Local Funding
Schools will receive £5 million to improve secondary school libraries. Councils will also receive new funding to upgrade playgrounds, supporting safer and more accessible community spaces.
Local and regional leaders will gain increased financial autonomy, with £13 billion in flexible funding allocated across seven mayoral regions.
Wider Fiscal Plans
The chancellor says the government remains committed to reducing borrowing and gradually lowering the national debt. According to the OBR, the current Budget balance is forecast to move into a £3.9 billion surplus in 2028/29. The government also reports recovering £400 million from pandemic-related contracts, which it says demonstrates a renewed focus on financial accountability.
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This article is for general informational purposes only and does not constitute legal or financial advice. While we aim to keep our content up to date and accurate, UK tax laws and regulations are subject to change. Please speak to an accountant or tax professional for advice tailored to your individual circumstances. Pi Accountancy accepts no responsibility for any issues arising from reliance on the information provided.