A never-to-be-forgotten budget? What’s changed and who will it affect?
After weeks of pre-Budget leaks, to-ing and fro-ing between Treasury sources and the press, expectations swung from bold reform to cautious fiscal tightening and back again.
Then came the calamitous blunder that stunned Westminster – the OBR published the entire Budget almost an hour before the Chancellor stood up to deliver it. By the time Rachel Reeves rose to speak, most of the country already knew what was coming, but the detail still landed with force.
A comprehensive budget overview
Here at Liondaris, we may not operate on the same scale as His Majesty’s government – but we do feel that, overall, we’re more ‘on top things’ … which is why we’ve prepared this comprehensive overview of the budget and have listed the different ways it could affect you and your business.
The Chancellor has set out a tax-raising Budget that aims to fund higher public spending while cutting borrowing over time. It leans heavily on frozen thresholds and new taxes on wealth, property, savings and drivers of electric cars.
There’s plenty to get through, so to keep things easy, here’s a list of the key measures, each with a link to a detailed exploration of who will be affected and how.
1. Government freezes income tax and National Insurance thresholds to 2030–31
Income tax and National Insurance thresholds in England, Wales and Northern Ireland will stay at current cash levels until April 2031. That includes the personal allowance and the higher and additional rate thresholds.
Who will this affect – and how?
· If your pay rises over the next few years, more of your income will drift into tax or into higher bands. You may pay tax for the first time or move into the 40% band even if rates do not change.
· Middle earners will feel this most, because pay awards and promotions will draw a bigger slice of income into higher bands.
· Employers will need to budget for higher overall tax on their wage bills and may see pressure for bigger pay rises to offset the drag.
· People on lower incomes will still keep the personal allowance, but inflation will chip away at how far that tax-free amount stretches.
2. New council tax surcharge on high value homes
A new “high value council tax surcharge” – quickly dubbed a mansion tax – will apply to homes worth over £2 million, with a higher tier for homes worth over £5 million. The Budget document gives examples of an extra £2,500 a year for homes over £2 million and £7,500 over £5 million.
Who will this affect – and how?
· If you own a high value home, you should expect a notable jump in your council tax bill once the surcharge starts.
· Owners of expensive property in London and the South East will feel this most, especially in areas that currently charge relatively low council tax on very high value homes.
· Landlords with high value rental property will likely pass some or all of the extra cost on through higher rents.
· First-time buyers and typical home owners will not pay this surcharge unless they buy in the £2 million plus bracket.
3. Higher tax on property, savings and dividend income
The Budget raises tax on property income, savings interest and dividends. The government argues that this brings these income types closer to earnings, which already face both income tax and National Insurance.
Headline points include
· Dividend tax rates rise by 2 percentage points
· Tax on savings and property income rises
· Existing allowances stay in place to shield people with modest amounts of such income
Who will this affect – and how?
· If you own buy-to-let property, you will likely see a higher tax bill on rental profits. This may prompt some landlords to raise rents or to leave the market.
· If you draw dividends from your own company, you will pay more once you pass the dividend allowance. This hits many company directors and contractor-limited companies.
· If you live on investment income in retirement, you will need to review your portfolio and check whether an ISA or pension wrapper gives you better shelter.
· If you only earn small amounts of savings interest or dividends, the allowances will still protect you in many cases, though you need to keep an eye on your totals.
4. Cash ISA allowance cut for under-65s
From April 2027, the annual allowance for cash ISAs falls from £20,000 to £12,000 for adults under 65. The overall ISA allowance for stocks and shares remains £20,000. Over 65s keep the £20,000 cash ISA allowance.
Who will this affect – and how?
· If you are under 65 and prefer cash ISAs, you will only shelter £12,000 a year from tax in cash. You will need to decide whether to move extra savings into stock and shares ISAs or keep them outside wrappers.
· Over 65 savers keep today’s £20,000 cash ISA allowance, so many older savers who rely on cash will not see change.
· Wealthier households who use the full £20,000 allowance each year will feel the squeeze most. You may need more careful tax planning across couples.
· If you only save smaller amounts, this change may not bite in practice, though you still need to track interest against your personal savings allowance.
5. New cap on salary sacrifice pension tax break
From April 2029, the tax and National Insurance break from pension salary sacrifice will be capped at £2,000 of employer National Insurance per worker per year. Above that, the perk stops.
Who will this affect – and how?
· Higher earners who use large salary sacrifice schemes will lose part of the current saving. You may need to revisit how you fund your pension.
· Employers who run generous sacrifice schemes will lose some of the NIC saving and may renegotiate how they share benefits between the firm and staff.
· Typical workers who sacrifice modest sums into pensions will often sit under the cap, so the headline impact may be smaller for you.
· If you are self-employed with no PAYE salary sacrifice, this change will not affect you directly.
6. Two-child benefit cap scrapped
The government will scrap the two-child limit on child-related welfare from April, widely reported as April 2026. This removes the rule that restricts extra support to the first two children in most new claims.
Who will this affect – and how?
· If you have more than two children and claim Universal Credit or Child Tax Credit, you will see higher support once the change starts. Many families will move out of deep poverty.
· Prospective parents on low incomes will no longer face the same financial penalty when they have a third or later child.
· Local councils and charities that work with families in hardship may see some pressure ease, though wider cost-of-living issues remain.
· Higher earners who do not claim these benefits will not see a direct impact, but this reform adds to overall welfare spending that the wider tax rises help to fund.
7. National Living Wage and minimum wage rises
The National Living Wage for adults rises to £12.71 an hour, with younger age bands also rising, for example £10.85 for younger workers.
Who will this affect – and how?
· If you earn the minimum wage, you will see more in your pay packet. That will help offset part of the impact from frozen tax thresholds and high prices.
· Employers in retail, care, hospitality and other low-pay sectors will see higher wage bills. You may need to review prices, staffing and productivity.
· Households that rely on low-paid work will gain most. This may reduce pressure on some in-work benefits.
8. Energy bill cuts through levy changes
The Budget removes certain levies from energy bills and reshapes green schemes, which the Treasury says will cut the typical household’s bill by around £150 a year from April 2026, with some poorer homes saving up to £300.
Who will this affect – and how?
· If you pay domestic gas or electricity bills, you should see a fall in unit costs once these changes feed through.
· Low-income households and those on prepay meters may gain most in cash terms from targeted support.
· If you work in energy efficiency or renewables, you will need to follow how government replaces the old schemes with new funding pots.
9. New mileage tax on electric and plug-in hybrid vehicles
From April 2028, drivers of pure electric vehicles will pay a new road duty of 3p per mile. Plug-in hybrids will pay 1.5p per mile. Fuel duty stays frozen for now.
Who will this affect – and how?
· If you own or plan to buy an electric car, you need to factor in a running cost that links to mileage rather than fuel. High-mileage drivers will feel this most.
· Company car drivers and fleets who moved to EVs for tax reasons will need fresh cost comparisons against efficient petrol or diesel models.
· The policy narrows the tax gap between EVs and petrol or diesel vehicles, though EVs still avoid fuel duty and tailpipe emissions.
· If you live in rural areas and drive many miles, this duty will add up and may shape how you plan future vehicle purchases.
10. Higher gambling taxes and end of bingo duty
The Budget raises taxes on online gambling to raise over £1 billion a year. Remote gaming duty rises from 21% to 40% and online betting duty from 15% to 25%. Bingo duty disappears from April.
Who will this affect – and how?
· Online betting firms and casinos will face much higher tax bills. They may respond with worse odds, fewer offers or higher charges.
· Regular online gamblers may see less generous promotions and lower payouts over time.
· Bingo halls gain from the scrapping of bingo duty, which may help keep some venues open and protect jobs in this niche part of the leisure sector.
11. Changes to pensions, inheritance tax and business reliefs
The Budget tightens several reliefs that mainly help wealthier households and business owners.
Key points include
· Pension pots will fall within inheritance tax from April 2027, with detailed rules still to follow
· Agricultural Property Relief and Business Property Relief for inheritance tax will be capped, with 100% relief limited to £1 million from April 2026
· The main rate of corporation tax stays capped at 25% for the rest of the parliament
Who will this affect – and how?
· If you rely on pensions as a way to pass wealth free of inheritance tax, you will need to revisit your estate plan once the new rules appear.
· Farming families and owners of private trading firms will see less generous inheritance tax relief on high value estates. You may need more tailored advice on succession.
· Typical households whose estates sit well below the inheritance thresholds will not feel much direct impact.
· Companies already paying the main 25% corporation tax rate gain some certainty that it will not rise during this parliament, which helps long-term planning.
12. Extra spending on NHS, infrastructure and regional growth
Alongside tax rises, the Budget confirms large capital investment in transport, energy and regional projects – over £120 billion – plus continued extra money for the NHS and schools.
Who will this affect – and how?
· Patients should see gradual improvement in NHS waiting times as extra funding for staff and capacity flows through, though this will take time.
· If you live in city regions that secure transport deals, you may benefit from better local rail, bus or tram links over the next decade.
· Businesses in sectors like construction, engineering, clean energy and advanced manufacturing may see more contracts and investment opportunities.
· The wider economy gains from improved infrastructure and productivity, which the OBR expects to lift potential output modestly over time.
13. State pension and student finance changes
The Budget confirms a 4.8% rise in the State Pension and freezes the income threshold at which many graduates start to repay student loans.
Who will this affect – and how?
· Pensioners will see incomes rise in cash terms, though many will still feel pressure from higher living costs and frozen tax thresholds.
· Graduates who already repay loans will not see a threshold rise, so a bigger share of pay growth may go straight into repayments.
· Young workers with student loans will need to factor repayments into budgeting for rent, bills and saving.
What this Budget adds up to
Taken together, this Budget raises roughly £26 billion a year by 2029–30, mostly from higher taxes on wealth, property, savings and electric vehicle drivers, plus the slow squeeze from frozen tax thresholds. That money helps fund higher welfare spending, especially the removal of the two-child cap, and extra investment in public services and infrastructure.
If you want to work out what this means for you
· Check your likely income path over the next five years
· Map out your property, savings, pensions and any company or rental income
· Review your estate plan if you expect to cross inheritance tax thresholds
· Allow for new motoring and energy costs when you set your household budget
You will see the impact most clearly not in one big hit, but in a steady drift of higher effective tax and shifting support over the rest of the decade.
For clear, expert support…
… talk to us.
If you want clear, personal guidance on how these measures affect your income, investments, property or business planning, reach out to the experts at Liondaris. You’ll get straightforward advice that helps you cut through the noise and make wise decisions for the year ahead.
Contact Liondaris today and let’s help lighten the pain and uncertainty of this year’s budget.
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