A new government, and a new Chancellor with Rachel Reeves delivering the first budget by a female in UK history and Labour’s first for 14 years. There was also much speculation in the media in the run up to the Budget with Capital Gains Tax, Inheritance Tax and National Insurance featuring in the headlines.
The Budget can often bring feelings of uncertainty with changes having the potential to impact your ability to save and plan for the future. Below we have summarised the announcements we think are relevant to you when managing your money and planning for the future.
Individual Savings Accounts (ISAs)
The annual allowance for Adult ISAs will remain at £20,000, Junior ISAs (JISAs) and Child Trust Funds at £9,000 and Lifetime ISAs at £4,000 until 5 April 2030 with confirmation that plans for a British ISA have been scrapped.
There were no changes to allow family members other than parents or guardians to open a Junior ISA. Scottish Friendly would like to see this change to help remove the barriers that prevent many from saving or investing for loved ones.
Capital Gains Tax (CGT)
With the Chancellor announcing that CGT on shares is set to increase it’s good to know that ISAs and JISAs alongside pensions continue to shield your investment returns from capital gains tax.
Inheritance Tax (IHT)
Currently most people will not pay inheritance tax as the value of their estate is unlikely to exceed the tax-free allowance threshold of £325,000. The Budget confirmed that the current threshold remains, however unused pension funds and death benefits payable from a pension will contribute to the value of estates from 6 April 2027.
Personal Tax Allowances and Income Tax
There will be no increase in the basic, higher or additional rates of income tax, National Insurance contributions (NICs) or VAT. The decision to not extend the current freeze from April 2028 will allow personal tax thresholds to update in line with inflation which can prevent people being dragged into higher tax bands as wages rise.
Scotland has different income tax rates and personal allowances so will have to wait until the Scottish Budget is announced in December to find out if the Scottish Government plans to follow suit.
Fuel Duty
Despite rumours that the fuel duty would rise by 7 pence-per-litre, drivers will be relieved that fuel duty will remain frozen for another 12 months and the temporary 5 pence-per-litre discount will be extended to March 2026. An additional boost sees the previously planned inflationary increase to the cost not taking place.
Minimum Wage Increases
There will be a welcome change to the minimum wage from April 2025 with an increase from £11.44 per hour to £12.21. For a full-time employee on the National Living Wage that represents an increase of £1,400 to annual earnings.
There is also a planned increase for 18-20 year olds from £8.60 per hour to £10.00.
Pensions
The Government is maintaining the State Pension Triple Lock. The State Pension will increase by 4.1% in 2025-26, in line with earnings growth. This will mean that over 12 million pensioners will receive a welcome boost of just over £470 per year.
Keep in mind that stock market investments can go down as well as up, so you could get back less than you've paid in.
Tax-free means your investment will grow free from tax, except for any tax we pay on your behalf (such as on dividends from UK shares). Tax treatment depends on individual circumstances and tax rules could change in the future.
Scottish Friendly doesn’t provide advice. If you’re seeking advice, you should contact a financial adviser. Advisers may charge for providing such advice and should confirm any cost beforehand.
