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NewsBudget Summary 2025

What are the key elements of this years' Budget for FEA members?

Budget 2025: Matters of Interest

The Chancellor of the Exchequer delivered her second Budget on Wednesday 26th November. Subtitled Strong Foundations, Secure Future this budget will raise taxes by £26bn and the Chancellor outlined the government’s planned tax rises and spending priorities across all sectors of the UK economy in her Budget speech. In an unprecedented move (reported as a technical mistake) the Office of Budget Responsibility (OBR) published their analysis of the Budget before the Chancellor gave her speech.

Key areas for FEA members

  • The British Business Bank’s first strategic plan sets out how the BBB will catalyse investment into Industrial Strategy sectors and increase capital deployment from £1.5bn to £2.5bn a year (Page 100).
  • The Government will legislate in the Finance Bill 2025-26 to introduce the Carbon Border Adjustment Mechanism (CBAM) from 1 January 2027. The inclusion of indirect emissions within scope of the CBAM will be delayed until 2029 at the earliest (Page 117).
  • The Government will freeze the Carbon Price Support rates in Great Britain at a level equivalent to £18 per tonne of CO2 in 2027-28 (Page 109).
  • The Government announced its intention to consult on major reforms to modernise and simplify the product safety framework which will seek to rebalance the playing field between physical store and online marketplaces (Page 102).
  • The Government will maintain tariff-free imports until 31 December 2026 to avoid unnecessary costs for businesses while a review of possible further extension takes place. This measure will extend tariff suspensions on goods ranging from aluminium frames used by UK manufacturers to ingredients used by UK food producers. The Government has today opened an application window for businesses to apply for new suspensions (Page 102).
  • The Government is removing the customs duty relief on goods imported into the UK valued at £135 or less, making them subject to customs duty from March 2029 at the latest, and consulting on implementing a new set of customs arrangements for these goods (Page 113).
  • The Government will pilot a targeted advance assurance service from spring 2026, enabling small and medium-sized enterprises to gain clarity on key aspects of their R&D tax relief claims before submitting to HMRC. The Government will publish a summary of responses to the advance clearance consultation (Page 117).
  • The Government will increase the generosity of the British Industry Supercharger from April 2026 and will introduce the British Industrial Competitiveness Scheme from April 2027. These will be funded by bearing down on levies and other energy system costs, such as proposals under consultation to change the indexation of legacy renewables schemes (Page 101).
  • The Government will launch the Local Growth Fund for the Mayoral Strategic Authorities of Greater Manchester, North East, West Midlands, South Yorkshire, West Yorkshire, Liverpool City Region, Greater Lincolnshire, Tees Valley, Hull & East Yorkshire, York & North Yorkshire and East Midlands. These strategic authorities will each receive a share of the £902m over four years to invest in growth-driving interventions, including local infrastructure, business, and employment support and skills programmes (Page 103).
  • The Government is making available more than £1.5bn for additional employment and skills support, and the Growth and Skills Levy, over the spending review period. Further details will be announced shortly (Page 97-98).
  • The Government will increase the National Living Wage by 4.1 percent to £12.71 per hour, from 1 April 2026. The National Minimum Wage for 18–20-year-olds will also increase by 8.5 percent to £10.85 per hour and for 16–17-year-olds and apprentices by 6.0 percent to £8.00 per hour. The accommodation offset will increase by 4.1 percent to £11.10 per day (Page 97).
  • With the Youth Guarantee the Government will guarantee a six-month paid work placement for every eligible 18–21-year-old who has been on Universal Credit and looking for work for 18 months. This will cover 100 percent of employment costs for 25 hours a week at the relevant minimum wage, and additional wraparound support (Page 98).

General Budget Overview

UK Growth and Inflation

  • Office for Budget Responsibility (OBR) predicts the UK economy will grow by 1.5% this year, upgraded from a 1% forecast in March
  • Inflation predicted to average 3.5% this year, before falling to 2.5% next year, and returning to the government's 2% target in 2027

Personal taxation and investment

  • National Insurance (NI) and income tax thresholds frozen for extra three years beyond 2028, dragging more people into higher bands over time
  • The ISA cash allowance has been cut to £12,000.  Previously, people could save up to £20,000 tax-free, either in a cash ISA or a stocks-and-shares ISA. From April 2027 the ISA the full £20,000 remains but £8000 will be exclusively for investment.  Over 65s will retain the full cash allowance of £20,000.

Wages, benefits and pensions

  • Legal minimum wage for over-21s to rise 4.1% in April, from £12.21 to £12.71 per hour
  • Rate for 18 to 20-year-olds to go up 8.5%, from £10 to £10.85 per hour, as part of a plan to establish a single rate for all adults
  • Basic and new state pension payments to go up by 4.8% from April, more than the current rate of inflation, under the "triple lock" policy

Transport

  • Fuel duty frozen for five months after April, followed by a staged increase from September 2026
  • A new mileage-based tax for electric vehicles and plug-in hybrid cars to be introduced from 2028
  • Regulated rail fares for journeys in England frozen next year for the first time since 1996 (there have been periods when prices rose by less than inflation)

Devolved Governments

  • £13bn of flexible funding for seven mayors to invest in skills, business support and infrastructure
  • £370m for Northern Ireland executive, £505m for the Welsh government and £820m for the Scottish government

Further detail

Education

  • Student loan repayments threshold frozen for three years

Housing and Property

  • High value council tax surcharge in England: £2,500 annual charge for properties over £2m and £7,500 properties over £5m, collected alongside council tax
  • Increase basic and higher tax rate tax on property savings and dividend income by two percentage points as well as additional tax rate

Inheritance Tax

  • Inheritance tax change to allow transfer of 100% relief allowance between spouses

Wages, benefits and pensions

  • Cap limiting households on universal or child tax credit from receiving payments for a third or subsequent child to be scrapped from April
  • Help to Save scheme, which offers people on universal credit a bonus on savings, extended and expanded beyond 2027

Health and Social Care

  • £4.9bn invested back into NHS after local government cuts, including axing police and crime commissioners
  • £300m of investment in NHS technology and 250 new neighbourhood health centres
  • Infected blood compensation exempted from inheritance tax

Hospitality and Leisure

  • Permanent lower tax rates for more than 750,000 retail, hospitality and leisure properties with £4.3bn in funding
  • Tax on sugary drinks extended to pre-packaged milkshakes and lattes from 2028, reversing an exemption when the tax was introduced in 2018
  • Remote gaming duty raised to 40%
  • Duty on online betting increasing to 25%

Transport and Energy

  • Premium cars to be excluded from Motability scheme, which allows people on certain disability benefits to lease vehicles more cheaply
  • £150 cuts from average household energy bill from April

 

 

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