How the Budget Will Impact You and Your Finances

The Budget announcements by Chancellor Rachel Reeves,included a range of changes to tax, pensions, pay, and more—many of which may directly impact you and your financial plans.

Here’s a summary of some key points and how they may affect you:

1. Wage Increases for Low Earners
Minimum wages across the UK will rise in April, with the National Living Wage increasing from £11.44 to £12.21 per hour for those aged 21 and over. This move will also see a rise in the National Minimum Wage for younger workers, as well as apprentices.

2. Impacts on Job Prospects
Employers face increased National Insurance (NI) contributions, which could potentially affect job openings and wage increases as they manage these additional costs.

3. Inheritance Tax (IHT) Changes
IHT rules will be tightened starting April 2026, with assets over £1m, including some pensions inherited from April 2027, being more closely scrutinised. This could bring additional estates into the IHT net.

4. Capital Gains Tax (CGT) Rate Adjustments
The CGT rate for basic rate taxpayers will rise from 10% to 18%, while higher rate taxpayers will see an increase from 20% to 24%. This change aligns with the current property CGT rates.

5. Tax on Tobacco, Vaping, and Alcohol
New taxes on tobacco and vaping, along with increases on non-draught alcohol, will see costs rise in line with inflation.

6. Stamp Duty on Second Homes and Buy-to-Let Properties
Stamp duty on second homes will increase from 3% to 5%, potentially impacting property investments and rents in the rental market.

7. Changes to Private School Fees
VAT at 20% will now apply to private school fees beginning January 2025. This could affect budgets for parents with privately-educated children, depending on each school’s response to these new fees.

8. State Pension and Benefits
The state pension is set to rise by 4.1%, aligning with average earnings, which will increase weekly benefits. Meanwhile, benefits will increase by 1.7% in April, providing some additional support for working-age recipients.

9. Income Tax Thresholds Remain Frozen
Income tax thresholds are frozen until 2028, meaning any pay increases could push individuals into a higher tax bracket. For those below the income tax threshold, VAT on goods and services remains unchanged.

If you have questions about how these changes may affect you personally or would like to discuss potential adjustments to your financial plan, we are here to help. Use our free, online financial healthcheck to give you a snapshot of your financial wellbeing or get in touch and one of our advisers will be happy to assist you.