We’re all waiting for Chancellor Rachel Reeves to leave Downing Street with the iconic red box, before she goes to the House of Commons to deliver her budget at 12:30 this afternoon.
People up and down the country are on the edge of their seats waiting to see how Rachel Reeves 2025 budget this afternoon will affect their wallets. The economy is in a steep place at the moment, the cost of living is affecting more and more people, so the pressure is really on the government, as they face big decisions on tax changes, support for families and funds for important services. This leads to the main point, what are we expecting in today’s budget.
What do we already know?
One of the things we already know is that the chancellor will increase the national debt minimum wage from £12.21 to £12.71 an hour, from April for people aged over 21. The national minimum wage will also increase for 18-20 year olds by 8.5% to £10.85 and also for 16 year olds the wage will increase by 6% to £8 an hour, which narrows the gap between them and older people in the governments aim to “raise the floor” on wage for all workers. Rachel Reeves has also confirmed that young people will have an employment guarantee, young people who have been out of work for 18 months will be guaranteed paid placements.
The government is also expected to continue its freeze on income tax through 2029 and 2030, rather than them lean into an increase alongside wages and general inflation. This means that as inflation pushes up wages, more of a person’s income becomes taxable, with no change to headline tax rates. Over time, many workers and pensioners could be pushed into higher tax bands or pay tax for the first time.
There is also a risk to savers and pensioners, for retirees and careful savers, frozen income-tax thresholds could blunt the benefit of rising state pensions, even as the triple-lock boosts payments for many. At the same time, potential limits on savings allowances or changes to pension tax relief risk hitting those who rely on interest or pension income to make ends meet. Critics say this creates a “quiet tax rise” for people who spent years being financially cautious, only to find the rules shifting beneath their long-term plans.
The government is generally facing a big shortfall of around £20 billion, because growth is weak and inflation is high. That means tough decisions ahead: they need more money, but don’t want to make life even harder for people. So the plan is a mix of some tax rises and a few small benefits, but it also means many households will have to decide what’s more important: saving money or keeping standard of living.
Electric vehicles
Electric vehicle owners are bracing for higher costs as the Budget reshapes how EV drivers are taxed. From April 2025, EV’s will no longer be exempt from road tax, meaning many drivers could pay around £195 a year, a surprise for those who switched to electric partly to save money long-term. There is also discussion around a possible pay-per-mile charge, which could add hundreds more annually for regular drivers. For many families, it turns what felt like an eco-friendly financial win into another monthly cost to absorb.
Benefit caps
The two-child benefit cap might also have changes made by the chancellor this afternoon, it has long been criticised by families who say it punishes children, not costs. Introduced by George Osborne, the rule means low-income parents can only claim Universal Credit or tax support for their first two children, leaving many bigger households struggling when a third child arrives. Around 1.6 million children are estimated to be growing up in families who miss out on thousands in support each year, money that could have helped with essentials like food, school uniforms, and heating. Chancellor Rachel Reeves has hinted that change is coming, with options including smaller, gradual payments for each extra child or offering lower support to all families instead. For parents juggling rising bills, it could mean a little more breathing space, but not the full safety net many once relied on.