This year’s Budget almost became a winter affair, landing on 26 November after months of speculation. The Chancellor’s first Budget in October 2024 aimed to plug a £22 billion gap with revenue-saving measures. Her second Budget, just four weeks before Christmas, followed two major summer U-turns on winter fuel payments and disability benefit reform, creating a need for around £6 billion in additional revenue.
After nearly three months of rumours and policy leaks, the 70-minute statement delivered few surprises. Key measures included:
- Income Tax Freeze: A three-year extension on frozen income tax bands and personal allowances. The IFS warns that by 2029/30, nearly one in four taxpayers could face a 40% marginal rate.
- Pension Contributions: From 2029/30, salary sacrifice for pensions will be capped at £2,000. Excess amounts will attract employer NICs (15%) and employee NICs (up to 8%).
- ISA Changes: From April 2027, the cash ISA limit for under-65s drops to £12,000. Other ISA limits remain unchanged, while a new first-time buyer ISA is under consultation.
- Universal Credit Reform: The two-child limit will be abolished, reducing child poverty by an estimated 450,000 children by 2029/30.
- Dividend Tax: From April 2026, rates rise by two percentage points to 10.75% (basic) and 35.75% (higher). Additional rate remains at 39.35%.
- Savings & Property Income: A two-point tax increase across all bands from 2027/28.
- EV Road Charge: A 3p per mile charge for electric vehicles from April 2028.
Overall, the Budget avoided headline-grabbing moves, instead balancing spending needs with borrowing and higher taxes.
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12th December 2025
