Isas, cars and pensions: how the Budget affects you and your money

Chancellor Rachel Reeves is announcing her budget, but the official forecaster released the details early.

These are the key measures and how they will affect you and your money.

The amount of income on which different types of income tax are paid will still not increase in line with rising prices.

On the other hand, the bands -known as tax thresholds – will remain frozen until 2031, that is, three years longer than previously planned.

This means that any type of pay rise could drag you into a higher tax bracket or see a larger proportion of your income taxed than you would otherwise expect.

Scotland has its own income tax rates.

You may not earn enough to pay income tax, so VAT, which is paid when purchasing goods and services, may affect you more and that has not changed.

Drivers of electric and hybrid vehicles will pay taxes for using the road from 2028.

Electric vehicle drivers will be charged per mile, in addition to other road taxes, in New road pricing.

Estimating the number of miles drivers travel is difficult.

But the fuel tax will remain frozen.

The chancellor confirmed increases in April for those in minimum wages.

Means:

• Eligible workers aged 21 and over on the National Living Wage will receive £12.71 per hour, up from £12.21
• If you are 18, 19 or 20 years old, the national minimum wage increases to £10.85 an hour, up from £10
• For those aged 16 or 17, the minimum wage will rise to £8 an hour, up from £7.55.

The separate apprentice rate which applies to eligible people under 19, or those over 19 in their first year of apprenticeship, will also increase to £8 per hour, from £7.55.

Anyone living in a home valued at £2 million or more in England will face a council tax surcharge from April 2028.

There will be four price bands and the surcharge will increase from £2,500 for a property valued in the £2 million to £2.5 million band, to £7,500 for a property valued in the highest band of £5 million or more.

While it is known as the mansion tax, it can also cover homes in expensive areas and will apply to around 100,000 properties, mainly in London and the south-east of England.

The measure will require the valuation of homes in the highest municipal tax bands (F, G and H) for the first time since 1991.

You can check your council tax bracket here if you are in England and Wales, Scotland and Northern Ireland.

Regulated train fares in England they will be frozen until March 2027, the first time they have remained unchanged in 30 years.

These fares include season passes covering most commuter routes, some off-peak return tickets on long-distance travel, and flexible tickets for travel in and around major cities.

The freeze only applies to journeys in England and also only applies to services run by train operating companies based in England.

Train operators are free to set prices for unregulated fares.

The bus fare cap of £3 for a single journey, which covers most bus journeys in England, is now in place until March 2027.

The amount of money that can be saved tax-free each year in a isa cash (Individual Savings Account) will be reduced from £20,000 to £12,000 a year for those under 65.

Ministers want people to invest more, which carries greater risk but could help boost growth, a key goal for the government.

There are questions about whether people would naturally put their money into stocks and shares Isas as a result of the less generous tax relief on cash Isas.

Around a quarter of Isa cash savers currently save more than £12,000 a year.

But many of them are retirees, and the chancellor said those over 65 will still be able to save up to £20,000 in cash.

Separately, the Save Help Schemewhich helps people on low incomes and on universal credit save money, will be expanded from 2028.

Currently, parents can only claim universal credit or tax credits for their first two children.

The chancellor says this two children cap It will be scrapped in April next year.

One third of private sector employees and one tenth of public sector workers use a salary sacrifice scheme for your pension savings.

These workers give up a part of their salary in exchange for their employer paying the amount equivalent to their pension. The benefit for both employee and employee is that they save on national insurance.

From April 2029 a limit of £2,000 a year on the amount that can be put towards pensions through this salary sacrifice arrangement will come into force.

Employees would still receive income tax relief on their pension contributions, but some argue the move will reduce incentives to save for pensions.

Some benefitsincluding all major disability benefits, such as personal independence payment, attendance allowance and disability living allowance, as well as carers’ allowance, will increase by 3.8% in April, in line with the price increase.

There will be a number of changes to universal credit in April, following announcements made earlier by the government.

He state pension in April it will increase by 4.8% in line with average salaries, which means:

• The new flat-rate state pension, for those who reached state pension age after April 2016, will rise to £241.30 a week, or £12,547.60 a year, an increase of £574.60.
• The old basic state pension, for those who reached state pension age before April 2016, will rise to £184.90 a week, or £9,614.80 a year, an increase of £439.40.

Generally, it takes 35 years of qualifying contributions to get a full state pension.

This brings the state pension closer to being subject to income tax, which is the cause of some debate. It will also revive discussions about the “fairness” of the so-called triple blockade.

In recent days, other measures included in the budget had already been clarified or announced. They included:

• UK soft drinks tax to be extended to dairy products in 2028, taking into account packaged smoothies and coffees which have a high sugar content. This can drive up prices or cause changes in ingredients.

• The cost of a single NHS prescription in England to be frozen at £9.90 for the second year in a row in April
• Disabled people who have a car through the Mobility scheme “Premium” vehicles such as BMW, Mercedes, Audi, Alfa Romeo and Lexus will no longer be permitted.
• Mayors in England could be given powers to collect a tax on overnight stayssometimes called the “tourist tax.” Mayors will decide the level of the position and how to spend the money in their areas, according to the plans that will be consulted.