Budget 2025 brings significant changes that will affect homeowners, families, and anyone with a mortgage or housing aspirations. While there’s welcome news on energy bills and support for families with children, there are also new property taxes and frozen income thresholds that will impact household budgets.
From April 2028, if you own a home worth £2 million or more in England, you’ll pay a new annual surcharge on top of your existing council tax:
For most homeowners, this won’t apply, but it’s a significant shift in property taxation for those with high-value homes, particularly in London and the Southeast.
The budget doesn’t mandate nationwide council tax increases, but local authorities will have discretion to raise rates (typically up to 3%, or 5% including social care precept). Your local council will announce specific changes for 2026-27 in the coming months.
The freeze on income tax thresholds has been extended for another three years until April 2031. This means:
As wages rise with inflation and promotions, more of your income gets taxed at higher rates. This “fiscal drag” means even if you get a pay rise, you might not feel much better off after tax. By 2031, this freeze will have been in place for 11 years.
In 2029-30, three-quarters of the revenue from these frozen thresholds will come from the top 50% of households.
If you’re on a Plan 2 student loan, the repayment threshold (currently £27,295 in 2025-26) will be frozen at its 2026-27 level for three years until April 2030. This means if your income grows, more of it goes toward loan repayments.
This is the headline positive news for families with children.
The government is scrapping the two-child limit in Universal Credit. This means families can now claim the Child Element for all their children, not just the first two. This change will:
The Standard Allowance (the basic UC amount) will increase by over 6% in April 2026. This is part of reforms to rebalance the system and better incentivize work.
The government is expanding free school meals eligibility to all pupils in England whose parents receive Universal Credit. This will lift 100,000 children out of poverty and reduce food costs for eligible families.
Families with three or more children can now claim more for childcare costs through Universal Credit, with increased maximum amounts.
Over 2,000 new schools will join the free breakfast club scheme in 2026-27, helping families with the cost of morning childcare and food.
The average household in Great Britain will save around £150 on energy bills from April 2026 through:
Additionally, 6 million households will get a £150 Warm Home Discount this winter.
Prescription charges in England frozen at £9.90 for a single charge for one year from April 2026. Plus, free morning-after pill will be available in all pharmacies across England.
For pensioners, the State Pension will increase by 4.8% in April 2026 (Triple Lock commitment), meaning up to £575 extra per year depending on entitlement.
The Bank of England has cut interest rates five times during this Parliament. According to the budget:
Several budget measures may affect the housing market:
Positive factors:
Neutral/Negative factors:
The OBR forecasts private housing investment will grow:
This suggests confidence in housing as an investment, though growth rates moderate later in the forecast period.
If you have savings or investments outside tax-sheltered accounts (ISAs, pensions), you’ll face higher taxes:
From April 2027, savings income tax increases by 2 percentage points across all bands. Most taxpayers (90%+) pay no savings tax due to allowances, but if you have significant savings income, factor this in.
From April 2026, dividend tax rates increase by 2 percentage points:
Protection: Assets held in ISAs remain completely tax-free, with no changes to this treatment.
If you drive or are considering an electric vehicle, there’s a significant change coming in April 2028:
A new mileage-based charge will apply to electric and plug-in hybrid cars:
BUT – Also EV Incentives:
The government is trying to balance the need for tax revenue with keeping EVs attractive versus petrol/diesel cars.
For most homeowners and families, this budget brings targeted support (energy bills, transport costs, child poverty measures) while asking higher earners and high-value property owners to contribute more.
The frozen tax thresholds until 2031 mean everyone earning above the personal allowance will gradually pay more tax as a percentage of income, but for families with children, the removal of the two-child limit is genuinely transformative.
The property market should remain relatively stable, supported by lower interest rates and planning reforms, though the top end may cool slightly due to HVCTS.
Need help understanding how Budget 2025 affects your specific situation? Get in touch with Acorn Finance for personalized advice on mortgages, property, and family finances.