Budget 2025: What It Means For Your Wallet, Your Business ... and Your EV! - In Plain English
Setting the scene: the "no surprises" Budget that still surprised
If 2024 was the year of soft launches and early leaks (looking at you, GTA 6), 2025 is the year the UK Budget tried the same approach. The Office for Budget Responsibility (OBR) report dropped early, social media went wild, and by the time the Chancellor stood up, Budget 2025 already felt like the final episode of a series we’d all been doom-scrolling for months.
For taxpaying humans and business owners though, what matters isn’t the Westminster drama - it’s how much you’ll be paying, saving, or squeezing into an ISA from April onwards. Below, we break down the Budget’s key announcements in a friendly, practical way, with links to our tools and calculators so you can plug in your own numbers instead of guessing.
Spoiler: many of the "predictions" we made earlier in the year were either bang on or very close. If only we’d put the same forecasting skill into picking AI tokens in 2025…
Big picture: growth (sort of), inflation (cooling) and debt (still chunky)
The government is leaning hard into three storylines:
- Growth: The OBR now expects the UK economy to grow by around 1.5% in 2025 and 1.4% in 2026, before settling at 1.5% a year. Not exactly Avengers-level blockbuster growth, but better than feared.
- Inflation: CPI inflation is forecast to fall back to the 2% target by 2027. Budget measures themselves are expected to shave around 0.4 percentage points off inflation next year by cutting some of the costs baked into energy and transport.
- Debt and borrowing: Borrowing is set to fall each year, with a bigger "buffer" built into the fiscal rules so the Chancellor has some shock-absorber room if the economy misbehaves.
Underneath those headlines, however, a lot of the hard graft comes from tax rises that don’t look like tax rises at first glance - frozen thresholds and tighter reliefs in particular. That’s where your payslip, your portfolio, and your business may start to feel it.
1. Tax thresholds frozen - more people drift into higher rates
One of the most important - and least flashy - announcements is the extension of tax threshold freezes for a further three years. The point at which you start paying higher rates of tax will stay put, even as wages (hopefully) rise.
This is classic "fiscal drag": your real tax burden rises, not because the headline rates went up, but because more of your income gets pulled into higher bands. The OBR reckons this will raise about £8 billion.
We flagged this risk months ago in our earlier coverage and analysis of where the Chancellor might "break promises" without formally raising tax rates. If you want a refresher, see:
If your earnings are creeping up thanks to pay rises that just about keep pace with inflation, don’t be surprised if your effective tax rate quietly follows.
2. A 2p tax rise on property, savings and dividends
Here’s one of the clearest "you will notice this" moves in Budget 2025: taxes on property income, savings interest and dividends are rising by 2 percentage points.
The logic from the Treasury is that employees pay National Insurance on their income from work, while asset income doesn’t face an equivalent charge. So this is billed as a "fairness" measure and part of making the tax system fit for the 21st century.
The key impacts:
- Higher tax bills for landlords, investors and savers with significant income from these sources.
- Existing allowances still help to protect those with low or modest investment income.
- Portfolio planning just became more important - especially for owner-managers who blend salary and dividends.
We’ve built a dedicated calculator so you can see this in pounds and pence for your own situation:
If your investment strategy was inspired by YouTube "fire in your 40s" content, now’s a very good time to plug your numbers in and see how much extra you’re feeding HMRC instead of your ISA.
3. Salary sacrifice pensions capped - high earners in the crosshairs
From April 2029, there will be a cap on National Insurance relief for salary sacrifice pension contributions. The first £2,000 of pension contributions per person, per year via salary sacrifice will still benefit from NIC relief. Anything above that will attract NICs.
Key points:
- The government is targeting the disproportionate benefit this planning method gives to higher earners.
- It was on course to cost £8 billion a year by 2030-31 without reform.
- The cap is designed so that around 74% of basic rate taxpayers using salary sacrifice are unaffected.
We anticipated some form of clampdown here, and we’ve already built a tool so you or your clients can test different contribution levels and see where the new NI cost bites:
If your retirement plan involved maxing your pension via salary sacrifice and retiring on a beach with better Wi‑Fi than most UK trains, it’s time to revisit the spreadsheets.
4. Electric vehicles: welcome to per‑mile road charging
It’s official: the long-rumoured EV road charging is here. All vehicles cause wear and tear on the roads, and fuel duty receipts are falling as drivers switch to electric, so the Chancellor has introduced a modest per‑mile levy on EVs and plug‑in hybrids:
- Fully electric vehicles: 3p per mile
- Plug-in hybrids: 1.5p per mile
The idea is to future‑proof motoring taxes as petrol and diesel gradually phase out. If you’re wondering whether your cheap-to-run EV just turned into a not‑so‑cheap one, we’ve got you:
You can compare your total annual cost of running an EV under the new per‑mile levy with what you’d pay in fuel duty on a comparable petrol or diesel car. For some drivers, EVs will still win hands down. For high‑mileage drivers, the calculation just got much more nuanced.
5. Property taxes and the new "Mansion" Council Tax surcharge
Property owners are feeling the heat from multiple directions in this Budget:
- 2p rise on tax rates for property income (covered above) - directly hitting landlords’ profits.
- High Value Council Tax Surcharge on homes worth over £2 million, effectively a "mansion tax" style top‑up.
The Chancellor’s argument is that it’s unfair that an average Band D home can pay more council tax than a £10 million property in Westminster. So, homes worth over £2 million will now face an additional annual charge, with the Sky summary indicating surcharges from around £2,500 up to £7,500 a year for the highest‑value properties.
Taken together with the higher tax on rental income, the direction of travel for property is clear: wealth stored in bricks and mortar is being nudged to pay more into the system.
For landlords and property investors, our Budget 2025 2p tax rise calculator is the quickest way to see how much of your rental return is now effectively being redirected to HMRC.
6. ISAs, savings and investing: cash squeezed, shares nudged
In a move that will annoy many risk‑averse savers, the cash ISA annual allowance is being cut to £12,000 for most people, down from £20,000, with the remaining allowance effectively pushed towards stocks and shares ISAs. Over‑65s can keep the full £20,000 into cash.
Combined with the 2p tax rise on savings income, you can see the pattern:
- Less room to shelter large cash balances tax‑free.
- Higher tax on interest that falls outside of allowances.
- A gentle shove towards risk assets like equities and funds via stocks and shares ISAs.
If your inner personality is more "put it in Premium Bonds and forget about it" than "day‑trade AI ETFs on your phone", you may need to revisit how you spread cash, investments and pensions to stay tax‑efficient under the new rules.
7. Gambling, gig economy and online platforms: targeted tax rises
The government is also going after sectors that have grown quickly in the 2010s and 2020s:
- Online gambling: Remote gaming duty jumps from 21% to 40%, and online betting tax rises from 15% to 25%. Bingo tax, however, is scrapped - so your nan’s Thursday night is officially tax‑favoured.
- Ride‑hailing apps: Platforms like Uber and Bolt will no longer benefit from a VAT loophole intended for tour operators. Expect ride prices to reflect the higher tax take over time.
- Online retail imports: The low‑value customs duty relief is being scrapped. This targets cheap cross‑border shopping sites and levels the field slightly for UK high street and domestic online retailers.
For businesses in these sectors, margins are likely to be squeezed unless higher costs can be passed on. For consumers, expect a slow but steady drift up in prices rather than overnight shock.
8. Welfare reform and scrapping the two‑child limit
On welfare, Budget 2025 tries to balance two big political goals: reducing the overall welfare bill while tackling child poverty.
On the support side:
- The controversial two‑child limit in Universal Credit will be scrapped from April 2026, lifting an estimated 450,000 children out of poverty over the Parliament.
- The government continues to push a Youth Guarantee, pledging a place in education, training, or tailored support for 16-24 year‑olds, plus a shift from long‑term benefits to paid work offers for young adults after 18 months.
On the control side:
- Universal Credit is being rebalanced so it no longer "pays more" to be off sick than to work, with an emphasis on keeping people in or close to the labour market.
- More action on fraud and error in benefits and tax, with increased use of face‑to‑face health assessments.
- Reforms to Motability tax breaks and a clampdown on cheap access to the UK State Pension from abroad.
Overall, the message is: more generous support for children and targeted groups, funded in no small part by cracking down on perceived abuses and tightening reliefs elsewhere.
9. Cost of living: bills, wages, and pensions
Amid all the tax rises, there are also measures designed to ease everyday costs:
- Energy bills: Average household bills are expected to fall by around £150 a year from April, thanks to the government taking some green levies off bills and onto general taxation, plus extending and expanding the Warm Home Discount for the poorest households.
- Rail fares: Regulated rail fares will be frozen for a year - the first such freeze in around 30 years. Frequent commuters on the most expensive routes could save over £300 a year.
- Prescriptions: Prescription charges are frozen for a year at £9.90 per item.
- Fuel duty: The 5p cut is extended until August 2026, with a slow return to 2022 levels by March 2027. A planned inflationary rise in 2026‑27 is cancelled.
- National Living Wage: Increases to £12.71 per hour for those 21 and over in April 2026, with younger workers also seeing substantial rises. Learn more about the minimum wage in our guide.
- State Pension: The Triple Lock stays, with the State Pension set for a 4.8% increase in April 2026 - up to an extra £575 a year for those on the new State Pension.
These moves don’t completely cancel the effect of frozen thresholds and higher taxes, but they do soften the blow for commuters, pensioners, and lower‑income households - especially once inflation continues to drift down.
10. Business and investment: some wins among the rises
It’s not all sticks - there are some carrots for businesses and investors too:
- Employee Ownership Trust (EOT) CGT relief is cut from 100% to 50%, recognising that the cost of the relief has ballooned well beyond the original projections. Still attractive, just not a magic "no‑CGT" button anymore.
- New UK Listing Relief from Stamp Duty Reserve Tax to encourage more companies to list in London, including a three‑year stamp duty holiday for new LSE listings.
- Business rates relief extended and made more generous for around 750,000 retail, hospitality and leisure properties, funded by higher rates on larger, more expensive premises and warehouses used by big online retailers.
- Significant public investment in infrastructure - including the Lower Thames Crossing, NHS capital, and devolution deals for city regions - all pitched as part of a modern industrial strategy and productivity push.
If your business model involves a physical high‑street presence, this Budget is relatively kind. If your model involves online gambling or large fulfilment warehouses, less so.
Bonus for the detail‑hunters: capital allowances, eVED and the fine print on “mansion tax”
If you’re the sort of person who reads the HMRC policy papers for fun (no judgement, you’re among friends here), Budget 2025 also comes with some important technical changes that didn’t make the main speech but will definitely matter to finance directors, accountants and tax advisers.
Capital allowances: new 40% first‑year allowance and lower writing‑down rate
First up, a big structural tweak to how businesses get tax relief on capital spending. From 1 January 2026, the government is introducing a new 40% first‑year allowance (FYA) for qualifying expenditure, and at the same time it is reducing the main‑rate writing‑down allowance from 18% to 14% on a reducing‑balance basis:
- For Corporation Tax payers, the new 14% main rate applies to expenditure from 1 April 2026.
- For Income Tax payers (sole traders, partnerships), it applies from 6 April 2026.
In simple terms, you’ll be able to write off 40% of the qualifying cost up‑front in year one via the new FYA, but your annual writing‑down rate on the remaining balance slows to 14%. The government’s thinking is that this still encourages investment with a decent front‑loaded relief, but makes the overall system cheaper over the longer term.
For businesses used to modelling on an 18% main pool, this matters. Your timing of tax relief shifts, and in some cases the net present value of relief will change. That’s particularly relevant for capital‑intensive sectors or where you’re comparing leasing vs owning, or juggling different types of plant and machinery within your capital programme.
Electric Vehicle Excise Duty (eVED): the per‑mile charge goes to consultation
We touched earlier on the new per‑mile charge for electric and plug‑in hybrid vehicles, but the small print is that the government is planning to deliver this via a new system called Electric Vehicle Excise Duty (eVED).
Key points from the consultation:
- eVED is designed as a mileage‑based duty for fully electric and plug‑in hybrid cars.
- It is due to come into effect from April 2028, not immediately.
- The government is currently consulting on how it will be implemented – how mileage is reported or tracked, interactions with existing Vehicle Excise Duty, compliance, and privacy concerns.
So the Budget gives us the direction of travel (EVs will be paying a road‑use tax, much like fossil‑fuel cars pay via fuel duty), while the eVED consultation is about the mechanics. Think of it as the difference between announcing "we’re definitely getting a new season" and working out the scripts and casting later.
High Value Council Tax Surcharge: the “mansion tax” in its final form
Finally, a bit more precision on what’s been dubbed the “mansion tax”. The official name is the High Value Council Tax Surcharge (HVCTS), and the detail is set out in a dedicated government factsheet.
From April 2028:
- Owners of residential property in England worth over £2 million will pay a new, recurring annual surcharge on top of their standard council tax bill.
- Local authorities will collect this surcharge on behalf of central government, and will be compensated for the admin costs.
- The measure is expected to raise around £0.4 billion in 2029–30.
Crucially, this isn’t a full revaluation of council tax bands for everyone. It’s a targeted extra layer for the very top end of the housing market. If you own, advise on, or develop high‑value residential properties, you now need to factor in a permanent extra running cost from 2028 that sits alongside the wider tightening of tax on property income and wealth.
11. How our tools can help you model the impact
Budgets are increasingly about complex trade‑offs: thresholds frozen here, allowances cut there, reliefs capped somewhere else. Rather than guessing how it all nets out for you, we recommend using our calculators and previous Budget guides:
- 2p tax rise on property, savings and dividends calculator - work out the extra tax on your rental, savings and dividend income.
- EV road charging calculator - compare EV per‑mile levies to your old petrol or diesel costs.
- Salary sacrifice pension cap calculator - see how the £2,000 cap affects your NI savings from 2029.
- National Insurance deductions on unearned income calculator - useful context as the system continues to shift towards taxing different income types more evenly.
- And for context on how many of these measures were telegraphed in advance:
Final thoughts: a Budget for the streaming era of tax
Budget 2025 feels very 2025: less about one big, dramatic tax rise, more about a steady stream of "subscription‑style" changes. A freeze here, a 2p rise there, a cap on a relief you’d only just got comfortable using, and a few quietly introduced levies on digital‑age sectors.
For individuals, the winners are lower‑income households, children in larger families from 2026, pensioners, and many employees on the National Living Wage. The losers are those with significant income from assets, higher earners who make heavy use of salary sacrifice, wealthier homeowners, online‑facing sectors, and (depending on mileage) some EV drivers.
For businesses, Budget 2025 is a reminder that the tax system is being reshaped for a world of remote work, online platforms, and decarbonising transport. The more your business sits on the "old" side of that line - fossil fuel reliance, low‑productivity models, heavy dependence on tax‑advantaged structures - the louder this Budget is telling you to evolve.
We’ll continue to update our tools, guides and calculators as the detail turns into legislation. In the meantime, fire up the calculators above, run a few "what if" scenarios, and make sure the biggest plot twist of Budget 2025 isn’t waiting for you in your next tax bill.