The 2025 Budget: What It Means for Your Wallet and Your Business

It has been over 1 week since the 2025 UK Budget landed, and we have now had a chance to digest it. So, we are here to give you a clear, jargon-free breakdown of what it actually means for your business, your household, and your finances, without making you scroll through endless government PDFs (they are pretty boring). Some of it is good news, some of it requires a bit of planning, and some of it just makes you go, “Really, that’s actually happening?”

Here’s the key stuff you need to know.

Business Impacts

If you run a small business in retail, hospitality, or leisure, there is a rare bit of good news: business rates for many shops, pubs, and restaurants are getting a permanent cut from April 2026. That’s real cash staying in your business.

You may have also heard whispers about changes to capital allowances. Well, from April 2026, written-down allowances are reducing from 18% to 14% per year. This affects any assets you don't claim the full cost of in the first year, and basically means you can claim back the cost of assets a bit slower. If you're planning to upgrade machinery or tech, timing these investments strategically will help to maximise tax relief. Green investments like electric company cars or EV chargers will continue to benefit from full allowances until 2027.

Next up: wages. The National Living Wage will increase by 4.1% to £12.71 per hour from April 2026, for anyone over the age of 21. But remember, the real cost to employers will be higher than this once you add in National Insurance, pension contributions, holiday pay, and overtime. As a result, many businesses may need to rethink budgets, pricing, or change operations to protect profits. This may also lead to businesses putting a pause on hiring.

Then, a nice win for SMEs: the 5% apprenticeship co-investment cost has been scrapped for apprentices under 25, meaning the government will now fully fund training. Combined with the existing National Insurance exemption for apprentices under 25 earning below £50,270, apprenticeships have suddenly become a more cost-effective way to build skills and strengthen your talent pipeline.

Lastly, for businesses, HMRC is cracking down on non-compliance. Contractors operating under the Construction Industry Scheme (CIS) face stricter penalties from April 2026, particularly regarding payments connected to fraud. So, it's important to make sure your payroll and CIS submissions are up to date.

Cost-of-Living Measures

First up: energy bills. From April 2026, six million households should see a saving of £150 off their energy bills, funded through adjustments to green energy schemes that energy suppliers have to pay for. In addition, £1.5 billion is allocated to support households in fuel poverty. For many families, this relief will offset some of the financial strain from rising global energy prices. Although, before we all get too comfortable, Ofgem has since announced upgrades to the electricity and gas grids, which are estimated to add £108 to energy bills by 2031. One step forward, one step… sideways.

Some everyday wins:

• Rail fares in England frozen for a year from March 2026, the first freeze in 30 years. Some commuters could save around £300 a year (finally, a train-related announcement that doesn’t involve strikes!)

• Bus fares capped until March 2027.

• Prescriptions stay at £9.90, saving households around £12m.

• Fuel duty cut extended for five months, with rises delayed until early 2027.

The National Living Wage rise we mentioned earlier will also help millions of low-paid workers. A full-time employee could see around £900 extra a year before tax.

Pensioners are getting a 4.8% State Pension rise in April, thanks to the triple lock, which has been committed to for the rest of this parliament. However, this does mean that from 2027, some people will be earning more than the tax threshold with their state pension. It has been announced, though, that state pensioners with no other income will not be required to pay tax, which I'm sure will be a sigh of relief for many.

Welfare and Skills

The big one here is the new £820m Youth Guarantee scheme, which aims to give 18–21-year-olds who have been out of work or education for more than 18 months a real route back into paid employment. Young people on Universal Credit who meet the criteria will be offered a six-month paid work placement, alongside access to apprenticeships, training or further education, helping them build experience, confidence and employable skills.

Universal Credit is also increasing, with a 6% rise in the Standard Allowance from April 2026. This gives low-income households a bit more breathing room with essentials like rent, food and bills. By raising the Standard Allowance, the government intends to make work more financially rewarding, reducing the “cliff edge” where people can lose benefits as they earn more.

Meanwhile, reforms to the Motability scheme will unfortunately increase costs for disabled people who rely on it. Insurance on Motability leases will now be taxed, and VAT will be added to advance payments for higher-value cars For many, Motability vehicles are essential for travel, independence and daily life, and a charity has warned that even small cost increases could significantly affect users’ ability to stay mobile. Limiting these tax reliefs on high-value leases is expected to save over £1 billion over five years.

On a more positive note, the government is scrapping the two-child benefit cap from next April. This will provide essential support for larger families and is expected to lift around 450,000 children out of poverty by 2029–30, offering greater stability and reducing hardship for some of the most vulnerable families. While the policy will cost an estimated £3bn a year, ministers argue that supporting children, rather than limiting benefits, is a fairer way to address the strain on the welfare system and improve long-term outcomes for young people.

Personal Taxes

Here comes the less fun part.

Income tax and NI thresholds will remain frozen for an additional three years, so won't change until 2031. The impact of this is that more people will gradually be pulled into higher tax bands as their wages rise, reducing their 'real' take-home pay over time- otherwise known as fiscal drag.

From April 2027, those under 65 will also face a new limit on cash ISAs, with only £12,000 of the current £20,000 annual allowance allowed to be held in cash, meaning anyone wanting to save more money tax-free will need to use investment ISAs instead.

Additionally, the government is increasing taxes payable by individuals on tax returns: dividend tax rates will rise by 2% from this April, and all tax rates on savings income will increase by 2% from April 2027. Together, these changes mean workers, savers and small investors are likely to see higher tax bills and lower net returns in the coming years. Business owners and investors will need to re-evaluate their strategies for income extraction and savings, balancing salary, dividends, and tax-efficient investments.

Homeowners in England with properties valued at over £2 million will face a significant rise in council tax, with a new surcharge of £2,500 to £7,500 a year following the revaluation of homes in bands F, G and H. While the measure targets wealthier property owners, the increase could still place pressure on those whose incomes haven’t risen in line with property values, particularly retirees or long-term homeowners living in high-value areas.

Other measures announced in the Budget include a cap on pension salary-sacrifice contributions at £2,000 from 2029. This change will affect those who use salary sacrifice to boost their pensions, and will potentially reduce the amount they can shelter their income from tax, and may prompt a rethink of long-term retirement planning.

Lastly, The government is also introducing a new Electric Vehicle Excise Duty, which will charge EV drivers a per-mile fee, roughly half the cost of fuel duty paid by comparable petrol or diesel vehicles.

Together, these changes highlight the importance of careful financial planning, especially for high-income households and business owners, who may need to adjust strategies for retirement saving, vehicle use, and overall household budgets to manage the additional costs and maintain long-term financial security.

What do we think of the 2025 Budget?

The 2025 Budget presents a mixed picture. Businesses benefit from targeted reliefs and investment incentives, particularly in retail, hospitality, and green technology. Households gain immediate support through energy bill relief, wage increases, and welfare reforms, easing some cost-of-living pressures. However, individuals and investors face higher taxes on dividends, property, and savings, while compliance and planning requirements for businesses are increasing.

From an accountant’s point of view, this Budget basically says:

Plan ahead, be strategic, and don’t leave tax planning to the last minute (again).

Businesses should think carefully about investments and compliance.

Individuals and business owners should revisit income strategies, pensions, ISAs, and general cashflow planning.

With the right prep, you can make the most of the good bits, and soften the blow of everything else the government has kindly sprinkled in.