From inheritance tax, through to carers, smokers, and pint-drinkers, Big Issue has been through the detail to tell you exactly what it’ll mean for your bank balance.
Minimum wage is going up
The big news from Reeves’s budget is an increase in the minimum wage. For over-21s, the National Living Wage is increasing from £11.44 to £12.21 an hour from April. It already rose from £10.42 this year, and 2025’s hike will be a smaller percentage increase than the two previous years. For a 40-hour week, that’s going from an annual salary of £23,795 to £25,396.
Elsewhere, 18-20-year-olds are getting a rise from £8.60 to £10, while apprentices are going from £6.40 to £7.55. That’s because Labour wants to get the minimum wage to the same level for all adults – by bigger increases for 18-20-year-olds.
Carers will be able to work more
Carers can now earn over £10,000 a year before their carer’s allowance gets cut off, as Reeves has increased the weekly earnings limit to 16 hours at the National Living Wage. At the dispatch box, Reeves said it was the greatest increase in carers’ allowance since it was introduced in the 1970s.
‘Fiscal drag’ means income tax will stealthily rise
Reeves made much of her decision to not extend the freeze on income tax thresholds. “Extending the threshold freeze would hurt working people,” she said, announcing no extension of the freeze beyond 2028. From 2028/29, personal tax thresholds will be uprated in line with inflation.
But, as it relates to the next five years, Reeves has decided to keep the thresholds the same. To recap, one common feature of recent budgets is a “stealth tax” rise from keeping income tax thresholds the same. Because of inflation, more people will start paying income tax, and annual wage rises will push workers into higher tax brackets. The measure raises tens of billions for the government. It has been frozen since April 2022, and under the Conservatives the freeze was set to extend until 2028. Reeves has gone along with the status quo for the next three years.
Petrol taxes won’t rise
“There will be no higher taxes at the petrol pumps next year” Reeves said. Rather than increase fuel duty by 7p per litre, it will remain frozen next year – continuing a Conservative budget tradition.
Bus prices will increase from £2 to £3 for many
The increase in capped bus fares from £2 to £3 has been slammed, coming alongside the freeze in fuel duty for drivers. The cap doesn’t apply to all routes, and was due to expire in December. Now it’ll be extended to December 2025, but made 50% higher.
What you pay will depend on where you live. Greater Manchester mayor Andy Burnham has committed to keeping the £2 cap.
Pints will be 1p cheaper
Promising “a penny off the pint in the pub”, Reeves announced a 1.7% cut to draft duty. With the average pint in the UK costing £4.79, it’ll take a few pints to feel the benefit.
Second homes and becoming a landlord will cost more
Reeves was expected to end the freeze on stamp duty thresholds, a move which could have cost the average first-time buyer in London £6,000 and prompted outrage. This didn’t materialise.
But second homes will get more expensive, with Reeves announcing an increase on the higher rate of stamp duty for second homes and buy-to-let properties from 3% to 5%.
“This means that the playing field has been levelled between first-time buyers and prospective landlords,” said Liz Emerson, CEO of the Intergenerational Foundation.
Employer National Insurance contribution increases could be passed on to workers
One of Reeves’ biggest budget money-makers was an increase in National Insurance contributions paid by employers. Successful businesses, she argued, depend on healthy schools. Yet a “substantial amount” of this will be passed on through wages, the OBR found. Paul Johnson, director of the Institute for Fiscal Studies, estimated “probably three quarters or so of the increase will flow through to lower pay”.
Mortgage rates are not expected to fall as fast or as far as previously thought
Reeves’s budget has seen the OBR predict interest rates will fall – but at a slower rate than previously expected.
Bank rates – which heavily influence mortgage interest rates – are expected to drop to 3.5% from 2027. This is 0.5% higher than in March’s forecast.
Wages are set to rise faster than previously thought, but disposable income will stagnate
Earnings growth will fall from 4.7% this year to 3.5% in 2025, the OBR has forecast. This is higher than March’s forecast, the OBR said, and will then sit at an average of 2.25%.
However, disposable income will grow by just 0.5% over the next five years.
Inheritance tax is being tweaked
Reeves is extending the freeze on the £325,000 income tax threshold until 2030, and changing some exemptions to the tax.
An increase in inheritance tax is deeply unpopular – 56% oppose it, while just 29% support it – and often branded a “death tax”. But very few ever pay inheritance tax. Spouses and civil partners are exempt, and only 4% of families are subjected to it, given the threshold is £325,000.
Reeves announced two changes: bringing inherited pensions into inheritance tax from April 2027, and bringing more business and agricultural assets – think farms – into the regime.
Tobacco duty will make smoking and vaping more expensive
Smoking is going to get more expensive. Duty on hand-rolling tobacco will increase by 10%, the government will introduce a flat tax on vaping liquid from October 2026, and the “escalator” on tobacco duty is back, meaning it will increase by inflation plus 2%. There will also be a one-off increase in tobacco duty.
Flying is getting taxed slightly more
Air passenger duty is increasing, a rise which Reeves says will add no more than £2 to the price of a short-haul economy flight. For the private jet travellers among you, a tax increase of 50% will add £450 to the likely cost.
Universal credit deductions will be capped
Reeves will reduce the amount of benefits which can be taken each month for automatic debt repayments, from 25% to 15% of standard allowance. This means 1.2m of the poorest households will keep more of their benefits, Reeves said, adding it will lift children out of poverty, with an average gain of £420 a year.
Research shows most universal credit claimants are in debt.
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