As autumn’s chill settles over London, the government unveiled its economic road‑map for the year ahead, the Autumn Budget 2025. Presented on 26 November by Rachel Reeves, this Budget comes at a challenging moment: the economy is stagnating, inflation and living costs remain high, and households and businesses alike are feeling the squeeze.
In her speech, the Chancellor framed the Budget as “a plan for fair taxes, strong public services and a stable economy.” But behind that pledge lie frozen personal‑tax thresholds, pension‑scheme reforms, and a raft of new levies on property, savings and vehicles. The government seeks to raise an estimated £26 billion in extra revenue.
The Budget seeks to walk a difficult tightrope, balancing fiscal consolidation and long‑term economic stability with social support and fairness. The real test, however, will be in how these measures play out for ordinary people, businesses, and Britain’s fragile economic recovery.
Here are some highlights.
Group | Wins | Loses |
Low-income households & families with children | • Two-child benefit cap scrapped, boosting support for larger families. • Minimum wage increase and some cost-of-living protections. | — |
State-pension–only pensioners | • No extra income-tax burden if pension is main/sole income. | — |
Middle-income workers | — | • Frozen income-tax thresholds drag more earners into higher bands (“fiscal drag”). |
Savers & small investors | — | • Higher tax on savings/dividends. • Cash ISA allowance cut (under-65s). |
Landlords & property owners | — | • New annual levy on homes worth over £2m (“mansion tax”). • Higher taxes on property income. |
Wealthy individuals / high earners | — | • Asset-based taxes increased. • Trust and non-dom reforms continue to raise overall tax burden. |
The great budget panic that wasn’t
Rachel Reeves has faced accusations of misleading the public over the state of the UK’s finances to justify £26 billion in tax rises in her Autumn Budget.
Warnings had suggested the chancellor confronted a £20 billion shortfall, and in a striking speech on 4 November, she indicated higher taxes were likely, blaming factors such as Donald Trump’s tariff war and an expected downgrade from the Budget watchdog for the “hard choices” she would have to make.
However, it has since emerged that Reeves’s remarks came days after the Office for Budget Responsibility (OBR) had informed her that the economic outlook had improved substantially, leaving her with a £4.2 billion surplus rather than a deficit.
Tory leader Kemi Badenoch called for Reeves to be sacked, accusing her of “lying to the public to justify record tax hikes” and “bribing Labour MPs to save her own skin.” Downing Street, however, denied any misleading conduct.
Paul Johnson, former head of the Institute for Fiscal Studies, said Reeves’s 4 November press conference “probably was misleading,” noting her statements seemed intended to reinforce independent forecasts, such as those from the National Institute of Economic and Social Research, that predicted a multi-billion-pound fiscal black hole. Johnson added that the speech “confirmed a narrative of a fiscal gap needing significant tax rises when no such hole existed.”
The controversy follows a new OBR letter to the Commons Treasury Committee, revealing the watchdog informed Reeves on 17 September that the funding gap was just £2.5 billion and by October, it had disappeared entirely.
The buttering of the banks
While the Budget may have delivered pain for millions, but one group emerged distinctly cushioned: the banks. After weeks of speculation that a tough new bank tax was imminent, Reeves chose not to impose a single additional levy on the sector. It was a striking climbdown, especially given that Treasury officials had privately warned banks a tax was “on a knife edge”.
The relief was immediate. UK bank shares rose between 2.3% and 3.8% on early reports they’d been spared, even as ordinary taxpayers were hit with £26 billion in rises, most of it from freezing income-tax thresholds. That fiscal drag alone will push 1.7 million more people into higher tax brackets, raising £8 billion from households while banks, whose profits reached a record £45.9 billion in 2024, escape unscathed.
Campaigners argue this is a political choice, not economic necessity. But one thing is clear, in a Budget full of losers, Britain’s banks were not just protected, they were pampered.
Londoners at a disadvantage
Analysis suggests that by the end of this parliament, the average wage in more than half of London’s boroughs will fall into the 40% income tax bracket.
In 2021, Kensington and Chelsea was the only area where the average wage reached the higher-rate threshold. This year, 13 areas across the UK now fall into that bracket, nine of them in London.
If wages grow in line with Office for Budget Responsibility (OBR) forecasts and the higher-rate threshold remains at £50,270, 43 council areas nationwide will be in the 40% tax bracket by the end of this parliament. Twenty of these would be in Greater London.
Aside from Warwick, Rugby, and Solihull, all affected areas are in London or the South East, according to analysis by financial planner Nous and The Times.
Non-doms not impressed
Advisers to wealthy individuals have criticised a Budget measure capping the inheritance tax (IHT) payable by former non-doms as “too little, too late.”
In her Autumn Budget, Chancellor Rachel Reeves introduced a limit on the unlimited IHT charge she imposed last year, one of the key reasons cited by wealthy individuals for leaving the UK. Currently, the charge is 6% every 10 years on certain assets held in worldwide trusts. Under the new rules, trusts established before last year’s Budget will be capped at £5 million.
The Office for Budget Responsibility (OBR) said the new measures, taken together, leave estimated revenue from non-dom reforms “broadly unchanged” and cautioned that projections are “highly uncertain and contingent on the behaviour of a small number of wealthy individuals.”
The exact number of non-doms who left the UK following the 2024 Autumn Budget is disputed. While HM Revenue & Customs payroll data suggested no increase beyond the official prediction of 25%, advisers to the wealthiest reported significant departures.
Despite these changes, current and former non-doms’ tax contributions in the UK rose 1.8% to £12.5 billion in 2023–24.
Reeves gets a mild thumbs-up
Britain’s economy is set to grow slightly faster than previously expected next year, the OECD said on Tuesday, crediting Rachel Reeves’ recent budget for supporting consumer spending, even as global uncertainty continues to weigh on inflation.
The Paris-based organisation now forecasts UK growth of 1.2% in 2026, up from its earlier estimate of 1%, with GDP expected to rise 1.3% in 2027. In its latest global outlook, the OECD warned that fiscal consolidation must be “carefully timed and well-calibrated,” balancing tax rises and spending cuts amid significant risks to both growth and inflation.
Reeves welcomed the brighter forecasts of stronger growth and easing inflation, insisting her budget would reduce debt and borrowing while easing living costs for households and lowering costs for businesses.
The OECD expects the UK’s deficit to remain high but gradually shrink, from 5.9% of GDP in 2025 to 5.1% in 2027, as total revenues climb to around 40% of economic output.
