At a Glance
The November 2025 UK Budget has introduced a number of significant changes affecting income, benefits and everyday costs. Tax thresholds are now frozen until 2031, the two-child benefit cap ends in 2026 and new pension and EV charges begin later in the decade.
November 2025 UK Budget Updates
On 26th November 2025, Chancellor Rachel Reeves unveiled a sweeping budget that will broadly affect many areas of UK personal finance, from take-home pay and pension savings, to how you drive your car.
Designed to raise billions, these changes may reshape household budgets and long-term planning.
For some, the scrapping of the two-child benefit cap brings relief and support. And whilst many will celebrate a rise in minimum wage, freezes on tax thresholds will affect take-home pay over time.
In this blog, we’ll discuss how the November 2025 UK budget could affect your wallet and perspective on saving and spending.
If you’re already juggling cost-of-living pressures while trying to plan for the future, it’s worth unpacking what some of these updates really mean.
The Minimum Wage Increase
One of the biggest updates set to affect millions of workers across the country is an increase in the UK’s minimum wage.
From April 2026 the National Living Wage (NLW) will increase by the following:
- Over 21s - from £12.21 to £12.71 per hour (+4.1%)
- 18-20 year olds - from £10.00 to £10.85 per hour (+8.5%)
- 16-17 year olds - from £7.55 to £8.00 per hour (+6%)
- Apprentices - from £7.55 to £8.00 per hour (+6%)
This increase is a direct response to help workers deal with the rising cost of living, offering much-needed financial relief to struggling households.
This will increase the spending of those who need it and help ease the overall economic pressures on low-income earners.
Tax Threshold Freeze Extended
The government has extended the freeze on income tax thresholds for another three years from 2028, taking it to 2031. This means the threshold at which you move into higher tax brackets will not rise with inflation.
As wages increase over time, more of your income can slip into a higher tax band, even if you’re not actually earning more in real terms. This is known as fiscal drag. What this means is that your take-home paycheck may not stretch as far and you could end up paying more tax without feeling any richer.
It's important to remember, however, that income tax is only charged on the portion of your earnings that exceeds the relevant threshold, not on your entire salary.
While the Chancellor acknowledged that this decision will affect working people, she said these changes to the tax system are meant to ensure that the wealthiest contribute the most.
Two-Child Benefit Cap is Scrapped
From April 2026, the government will remove the two-child benefit cap, a rule that previously limited support to the first two children in most families.
Scrapping this cap means families with three or more children will once again receive financial help for every child, easing the pressure on low-income households.
For parents, this change could make day-to-day costs like food, clothing and childcare more manageable. It’s one of the most significant support measures in the November 2025 UK budget, aimed at reducing child poverty for an estimated 450,000 children and giving families a fairer level of financial stability.
Pension Contributions and National Insurance
Previously, employees were able to make an annual pension contribution through a salary sacrifice scheme that was exempt from the National Insurance Contributions.
From April 2029, only up to £2,000 of your annual pension contributions will be exempt from National Insurance contributions. Anything after that will have NI charged in the usual way.
This doesn’t stop you from saving into a pension, but it reduces the tax advantage for higher contributions.
New Mileage Tax on Electric Cars and Hybrids
From April 2028, drivers of electric cars will start paying a new mileage-based tax of 3p for every mile driven. Plug-in hybrid owners will pay 1.5p per mile.
This marks a major shift, as electric vehicles have previously avoided many traditional motoring taxes. The government says the new system ensures road funding stays fair, as more people switch from petrol and diesel.
For EV drivers, it means factoring in an extra running cost, especially if you cover longer distances. While the tax is small per mile, it can add up over a year, so budgeting ahead is necessary.
Higher Taxes on Gambling, Savings and Investments
The November 2025 UK budget also raises taxes on areas outside your usual earnings. Remote gaming duty will jump from 21% to 40% and online betting tax will rise from 15% to 25%.
While these charges will only affect operators, some costs could be passed on to consumers through smaller returns or fewer promotions. Savers and investors may also feel the squeeze, as the overall tax environment becomes tighter.
These increases are part of the government’s plan to raise revenue from non-salary income. It’s worth being aware that activities like gambling may come with higher costs in the future.
Cost of Living Relief by Expected Energy Bill Cut
According to the Chancellor, a measure designed to provide immediate relief to household budgets is the removal of certain levies currently placed on energy bills.
By cutting the scheme, which was originally designed to tackle fuel poverty, the government anticipates that energy bills will fall for millions of households by an average of £150 a year, starting from April 2026. This structural change is intended to directly and immediately reduce household running costs.
Other Key UK Budget Updates You Should Know
Alongside the major changes, the 2025 budget introduced other smaller but important updates.
- Fuel duty has been frozen again, keeping petrol and diesel prices steady for now.
- ISA rules are being streamlined to encourage more investment, and there are new incentives for green industries and infrastructure projects.
- The government also outlined plans to reduce public spending in certain areas to help balance the books.
While these updates may not affect everyone directly, they form part of the broader picture of how the government aims to balance support with long-term revenue needs for households across the UK.
Conclusion
The November 2025 UK budget brings a mix of support and new pressures, from benefit changes that help families, to tax freezes and future charges that may quietly tighten monthly budgets.
With so much shifting at once, it’s natural to feel uncertain about how far your income will stretch in the coming months and years.
As the new rules roll out, at Salad, our focus will remain on supporting the people who keep the UK running, ensuring they have access to fair credit options when they need it most.
As one of the largest CDFI consumer lenders in the UK, we recognise that credit scores do not always reflect a person’s full financial situation. That’s why we initially use an Open Banking-based assessment instead of your credit score to evaluate your current financial circumstances.
Applying for one of our new loans doesn’t impact your credit score. We use Open Banking in our initial assessment. If successful, we report your loan to the CRAs (Credit Reference Agencies). Your credit score is not used in our initial lending decision and won’t hold you back from being eligible.
To learn more about how our personal loans work, click here and to read more blogs like this one, visit our blog page.
