The 2025 UK Budget delivered one of the most wide-ranging sets of changes in recent years, affecting everything from wages and pensions to tax thresholds, savings rules and electric vehicle incentives. Whether you’re a worker, saver, parent or employer, these updates will shape your financial picture over the coming years.
National Minimum Wage Increases
Millions of workers will see a pay rise as the National Living Wage (for over-21s) increases by 4.1% from April 2026. Younger workers see even larger uplifts:
- 21+ (National Living Wage): rising to £12.71 per hour
- 18–20: up to £10.85 per hour
- 16–17 and apprentices: up to £8.00 per hour
These increases aim to boost real incomes, particularly for younger earners, though some businesses warn of added cost pressures.
Cash ISA Limits
The overall ISA allowance remains £20,000 annually, but from April 2027, reforms cap cash ISAs at £12,000 for under-65s, requiring the remaining £8,000 to be invested (e.g., in stocks and shares). Over-65s retain the full £20,000 cash allowance. This aims to boost UK investment but has sparked saver concerns over reduced tax-free cash options; existing ISA balances are unaffected.
State Pension Increase
Under the triple lock, the full new State Pension rises 4.8% (highest of earnings growth, inflation, or 2.5%) from April 2026 to £241.30 per week. The basic State Pension increases to £183.45 per week. This exceeds inflation, supporting 13 million pensioners, with exemptions from small tax assessments for those solely on State Pension.
Child Benefit Cap
In a major welfare reform, the government is scrapping the two-child limit for Universal Credit and Child Tax Credit.
This is expected to benefit around half a million families, delivering an average of over £5,000 extra per year. Supporters call it a vital step toward reducing child poverty, while critics question the fiscal sustainability.
Class 2 National Insurance
No direct changes to Class 2 NI rates. However, access is abolished for UK self-employed living abroad, aligning with broader NI reforms. Thresholds remain frozen, with voluntary Class 2 at £3.45/week for low earners. Overall NI thresholds are extended frozen to 2030-31.
Plan 2 Student Loans
From 2027-28, repayment and interest thresholds for Plan 2 student loans will be frozen for three years.
In practical terms, as wages rise but thresholds stay still, many graduates will:
- Pay more
- Pay sooner
- Pay for longer
This is a notable “stealth tax” on graduates.
Tax Thresholds
Personal allowance and higher-rate threshold remain frozen at £12,570 and £50,270 until 2030-31 (extended three years beyond 2028), alongside NI thresholds. This "fiscal drag" pulls 920,000 more into higher bands, raising £8bn/year by 2029-30 and reducing average household incomes by £1,250.
Salary Sacrifice Cap
From April 2029, salary sacrifice pension contributions are capped at £2,000/year NI-free; excess faces employee and employer NI, raising £4.7bn. This treats over-cap contributions like standard pensions, potentially reducing incentives.
Electric Vehicles
A pay-per-mile road tax starts April 2028 at 3p/mile for EVs and 1.5p/mile for plug-in hybrids (on top of VED), raising £1.9bn/year by 2030-31 to offset fuel duty losses
This Budget gives with one hand (minimum wage, pensioners, poorer families) and takes with the other (frozen thresholds, ISA caps, future EV taxes, salary sacrifice limits). Middle earners and savers feel the squeeze most in the medium term, while low earners and pensioners are clear winners.
