8 big changes announced in the Autumn Budget 2025
Chancellor Rachel Reeves has delivered her Autumn Budget statement to Parliament, announcing major changes for everything from pensions and the minimum wage to new restrictions on ISAs.
While Reeves did not announce any changes to basic income tax or NI rates for working people, her budget includes a number of major announcements that affect pensions, tax-free savings, and those on lower wages.
Changes also include the introduction of a ‘mansion tax’ on homes valued at over £2 million and increased taxes on income from properties.
Below are eight of the biggest changes introduced in Rachel Reeves’s Autumn Budget:
Income tax thresholds frozen
National Insurance (NI) and income tax thresholds will be frozen for an additional three years beyond 2028.
This means that as wage inflation grows, more people will be dragged into higher bands over time as thresholds do not increase alongside inflation.
This phenomenon, called fiscal drag, has been branded a ‘stealth tax’ by some, as it will result in people paying more tax on their income even if it does not grow beyond inflation.
Minimum wage increased
Reeves announced that the government will raise the main minimum wage rate by 4.1% to £12.71 an hour from next April to keep up with average pay.
The main minimum wage rate for those aged between 18 and 20 will increase by 8.5% to £10.85 per hour as the government moves close to establishing one rate that applies to all adults in the UK.
Minimum wage for workers aged 16 to 17 will also be raised to £8 per hour.
Two-child benefit cap scrapped
From April, the government will scrap the two-child benefit cap for households on universal or child tax credit.
This means that households will now be able to receive benefit payments for their third or subsequent child instead of benefits being capped at two children per household.
The removal of the two-child benefit cap is projected to cost the Treasury an estimated £3 billion by 2039.
Cash ISA allowance limited to £12,000
Reeves announced that the ISA system will be reformed from April 2027 to effectively impose a limit on the tax-free allowance that can be invested in a cash ISA.
An ISA is a type of savings account that lets you save or invest your money without paying income tax or capital gains tax on any returns.
The new system will designate £8,000 of the £20,000 total tax free allowance exclusively for investment, meaning that there will effectively be a £12,000 limit on the tax-free allowance for cash ISAs.
The full tax-free allowance will remain at £20,000, and the cash ISA limit will not apply to those over 65 years old, allowing them to retain the full cash allowance of £20,000.
Pension payments rise higher than inflation
From April, basic and new state pension payments will increase by up to 4.8%, which is higher than the current rate of inflation.
This increase is in line with the UK’s ‘triple lock’ on pensions, which requires that pension payments increase in line with inflation, average earnings growth, or 2.5%, whichver is higher.
The Chancellor also said she would introduce a £2,000 cap for salary-sacrifice pension contributions from 2029, with contributions above this figure taxed in the sam way as other employee contributions.
Mansion tax on homes over £2 million
The government has gone ahead with its rumoured ‘mansion tax’ – a council tax surcharge that will apply to homes worth more than £2 million in England.
From April 2028, people who will live homes valued at more than £2 million will be required to pay a surcharge based on their property’s value.
It is expected that this surcharge will be levied on around 100,000 homes.
Frozen fuel duties and new electric vehicle tax
Fuel duty will be frozen for five months after April, after which it will be subject to a staged increase from September 2026.
Reeves also announced that the government would introduce a new tax for electric and plug-in hybrid vehicles from 2028.
This levy would be based on the mileage of these vehicles, ensuring they also pay for use of public road infrastructure.
Sugar tax on drinks extended
Reeves announced that the soft drinks levy will be extended, requiring people to pay more for certain drinks with added sugar.
This tax will now also apply to milk-based products from 2028, including pre-packaged milkshakes and coffees that are high in sugar.
Alcohol duties will also be up-rated by inflation, and the government will increase tax on online and physical gambling.
