As the country counts down to Rachel Reeves’ Budget 2025, millions of workers, families, pensioners and homeowners are bracing for a fresh round of financial changes.
After weeks of enterprise, leaks and political back- and- forth, the Chancellor will eventually set out her plans to repair the nation’s finances while trying not to push homes deeper into the cost- of- living squeeze.
The Budget will cover nearly everyone in some way, whether you’re in work, on benefits, enjoy a home, drive an electric vehicle, take the train, have children or manage a medical condition.
1. Income Tax Threshold Freeze Likely to Continue
There was talk earlier this week that Reeves might go for a headline-grabbing income tax rise, something no Chancellor has done in more than 50 years. After seeing updated figures from the Office for Budget Responsibility, the idea seems to have been dropped.
Instead, she is expected to keep the income tax thresholds frozen, and the same goes for National Insurance thresholds.
This “stealth tax”, known as fiscal drag, means that as wages rise, more people get pushed into paying higher tax. It’s forecast to bring in around £8.3 billion a year by 2029/30.
2. Rail Fare Freeze for 2025
Good news for commuters, rail fares will be frozen again. Regular trippers on more precious routes could save over £300 a time, offering some relief for those bombarded by rising living costs.
3. NHS Prescription Charges Frozen
The cost of a tradition in England will stay at £9.90. This will be particularly helpful for people with long-term health conditions who rely on regular medication.
4. Possible 3p-Per-Mile Tax for Electric Vehicles
As petrol and diesel earnings fall, the Government is exploring a 3p-per-afar road duty for EVs. This would be one of the biggest shifts in how drivers are tested, aligning EV motorists more nearly with traditional vehicle drivers.
5. Bigger Subsidy for EV Buyers
While the potential new EV tax may raise eyebrows, Reeves is also preparing to boost support. She is expected to add £1.3 billion to the EV grant scheme, which could take up to £3,750 off the price of a new electric car.
Another £200 million is set aside for expanding the UK’s charging infrastructure.
6. New Tax on £2m+ Homes (“Mansion Tax” Debate)
A new levy on high-value homes looks increasingly likely. Properties in council duty bands F, G and H may be revalued, with an added cargo on homes worth over£ 2 million. Around 100,000 homes could be affected.
7. Salary Sacrifice Pension Cap
The Chancellor may place tighter controls on pension savings through salary sacrifice schemes. A proposed cap of £2,000 a year could reduce the ability of workers to use the scheme to stay in a lower tax band, affecting both pension growth and take-home pay for some.
8. Two-Child Benefit Cap Expected to Be Scrapped
One of the most significant social policy changes could be the end of the two-child benefit cap. Pressure from charities, contenders and MPs has been mounting, and Reeves is extensively anticipated to remove the limit.
Cost estimates vary:
- £3.5 billion a year by 2029/30 (Resolution Foundation)
- Around £3 billion (other organisations)
If scrapped, it would be a major change for households struggling with rising costs.
9. Tougher Crackdown on Benefits Fraud
To raise extra revenue, the Government is set to expand the targeted case review system to reduce incorrect or fraudulent Universal Credit payments, following Reeves’ fraud crackdown that aims to save billions by 2031.
What does this mean for UK Households?
The Budget 2025 is shaping up to be a mix of cost-saving measures and new charges, a blend of relief for some and extra pressure for others.
From levies and pensions to transport and benefits, Reeves’ plans will touch nearly every corner of everyday life.
Whether you’re trying to stay round during the cost-of-living crisis, planning for withdrawal, or considering switching to an electric vehicle, these offers will probably impact your financial outlook in the months and years ahead.
