Chancellor Rachel Reeves has delivered a blockbuster Budget - Labour's first since 2010 - with promises to "fix the foundations" of the economy while raising taxes by £40 billion.

The minimum wage will be going up by more than inflation and state pensioners are also set for a boost. However, there are serious concerns that an increase in National Insurance contributions paid by employers will have detrimental knock-on effects on employment and wages.

The cost of a pint is going down and there will be no additional tax at the fuel pumps, but family wealth held in pensions is set to come under inheritance tax. 

Workers

The Chancellor has announced an inflation-busting 6.7% increase to the national minimum wage taking it to £12.21 an hour from April 2025, while the wage for 18- to 20-year-olds will rise by £1.40 per hour. This compares to national wage growth of 4.9% in the three months to July.

Employers will pay an additional 1.2 percentage points in National Insurance from April 2025, taking the total rate to 15%. The secondary threshold – the level at which employers start paying National Insurance on each employee’s salary – is being slashed from £9,100 per year to £5,000.

These changes are expected to raise £25bn per year by the end of the forecast period, but experts have warned that employees will likely bear the brunt of this.

“While a tax on employers, the likelihood is that the burden of an increase in NI contributions will be passed onto the employee," said Dan Scholey of data and payments firm Moneyhub.

"Whether passed on directly through lower wages or smaller, less frequent pay rises, or indirectly by reducing benefits such as pension contribution matching, this will have a knock on impact on consumers’ ability to save for retirement."

Drivers

In welcome news for drivers Ms Reeves has extended the freeze on fuel duty and will maintain the temporary 5p cut for a further year, saying it would be wrong choice to do otherwise.

“I have concluded that in these difficult circumstances, while the cost of living remains high and with a backdrop of global uncertainty, increasing fuel duty next year would be the wrong choice for working people," she said.

“It would mean fuel duty rising by 7p per litre. So, I have today decided to freeze fuel duty next year and I will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year.”

State Pensioners

As expected, the state pension will rise by more than 4% in April thanks to the triple lock.

The increase will see the weekly benefit reach £230.30 for the full new flat-rate state pension with £460 extra a year. However, the threshold on the level at which income tax kicks in is set to remain frozen until 2028.

“Today’s news spells good news for pensioners who can look forward to a 4.1% increase in their state pension from next year," said Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.

"However, the rise will be largely wiped out by the government’s decision to restrict the winter fuel payment to pensioners on pension credit. With fuel bills on the rise, the loss of up to £300 will be sorely felt and many face a tough winter ahead."

Drinkers

The cost of a pint will drop by 1p but the price of wine and spirits is set to rise.

The Chancellor will be increasing rates on non-draught drinks in line with the Retail Price Index (RPI) figure for September this year - which was 2.7% - from the beginning of February 2025.

Draught duty on alcoholic drinks below 8.5% will be cut by 1.7% which the Chancellor says will see “a penny off a pint in the pub”. Ms Reeves said this is because "nearly two-thirds of alcoholic drinks sold in pubs are served on draught". 

Families

The biggest news from today's Budget was a surprise move to bring unspent pensions within the scope of inheritance tax from April 2027. At the same time, thresholds for estates will remain frozen until 2030 meaning that more are likely to be drawn into paying the tax.

“We believe the decision to bring pensions back into estates from April 2027 will increase the number of estates liable for inheritance tax by almost a quarter," said Faye Church, senior director at Rathbones Group. "Nearly a third (30%) of adults questioned in our pre-Budget research say this decision could deter them from contributing to pensions.

“Pensions used to be exempt from IHT, allowing people to pass them on unfettered, so it’s important for individuals to revisit their IHT plans now that the goalposts have been shifted.”