Budget freezes tax thresholds for movers
Planning a Move? How the 2025 Budget Impacts Your Wallet
Chancellor Rachel Reeves has recently unveiled the 2025 Budget, bringing forth several key changes that could significantly affect your personal finances. For individuals and families contemplating a move in the coming years, understanding these new measures is crucial for effective budgeting and long-term financial planning.Key Budget Measures and Your Move
The Budget introduces various adjustments to taxes, savings, and essential living costs, directly impacting anyone planning a relocation.Income Tax Thresholds Frozen Longer
Good news if you’re eyeing a pay rise, but less so for your tax bill. The thresholds at which different rates of income tax apply will remain frozen until 2031, three years longer than previously planned. This means that as wages increase with inflation, more of your income could be subject to higher tax rates, potentially reducing the disposable income available for mortgage payments, rent, or moving expenses. It’s wise to factor this into your affordability calculations for a new home.
New Council Tax Surcharge for High-Value Homes
From April 2028, homeowners in England with properties valued at £2 million or more will face an additional council tax surcharge. This 'mansion tax' will range from £2,500 for homes in the £2m-£2.5m band, up to £7,500 for properties valued at £5m or more. This change primarily affects about 100,000 properties, largely concentrated in London and the South East. If you're considering moving to a high-value area, or upgrading to a larger property, this new levy will be a significant ongoing cost to consider.
This initiative necessitates the first revaluation of properties in council tax bands F, G, and H since 1991, aiming to capture higher-end homes within this new taxing structure.
| Property Value Band | Annual Surcharge (from April 2028) |
|---|---|
| £2m to £2.5m | £2,500 |
| £2.5m to £3m | £3,500 |
| £3m to £5m | £5,000 |
| £5m or more | £7,500 |
Increased Costs for Electric Vehicle Drivers
If your move involves relying on an electric vehicle (EV) or hybrid, prepare for new road charges from 2028. EV drivers will be taxed per mile, in addition to other existing road taxes. This new road pricing system is complex to calculate but will add to the running costs of electric vehicles. Conversely, fuel duty will see a five-month freeze from April, followed by a staged increase from September 2026. These changes could influence your vehicle choice or budget for transport when relocating.
Energy Bills Set to Fall
The Chancellor has announced that some levies currently applied to energy bills will be cut. This measure is projected to lower bills for millions of households by approximately £150 a year, beginning with the removal of a scheme designed to tackle fuel poverty and reduce carbon emissions. This reduction could offer a small but welcome relief to your household budget when settling into a new home.
Cash ISA Savings Restricted for Under 65s
The annual tax-free savings limit in a Cash Individual Savings Account (ISA) will be reduced from £20,000 to £12,000 for those under 65. This change aims to encourage greater investment in stocks and shares. While pensioners (over 65s) will retain the £20,000 limit, younger movers saving for a house deposit or other significant moving costs will need to adjust their savings strategies. Additionally, savings income tax rates will increase by two percentage points from April 2027.
Support for Bigger Families and State Pensioners
A significant change for families is the scrapping of the two-child cap on Universal Credit and tax credits, effective next April. This means parents with three or more children will receive more in benefits, potentially increasing their budget for housing and improving their options when considering a family move. Furthermore, most benefits, including main disability benefits, and the state pension will see increases in April. The state pension will rise by 4.8% in line with average wages, offering enhanced financial stability for retirees considering a move.
What to Watch Next
Beyond the major financial impacts, other measures include a freeze on regulated rail fares in England until March 2027, which could benefit commuters relocating within England. The £3 bus fare cap also remains in place until March 2027. Local authorities, via their mayors, might gain powers to introduce a 'tourist tax' on overnight stays, which could influence short-term accommodation costs if you need temporary housing during your move. The extension of the Help to Save scheme is also beneficial for low-income earners on universal credit, aiding their saving efforts.
Frequently Asked Questions
- Will I pay more income tax if I get a pay raise?
Yes, with the income tax thresholds frozen until 2031, any pay rise could push you into a higher tax bracket or increase the proportion of your income subject to tax. - When will EV drivers start paying road tax?
Electric vehicle and hybrid car drivers will begin to be taxed for using the road from 2028, with charges based on miles driven. - How does the new council tax surcharge affect moving?
If you're buying a property in England valued at £2 million or more, you will face an additional council tax surcharge from April 2028, ranging from £2,500 to £7,500 annually. - Will my energy bills be higher or lower?
Energy bills are projected to fall by about £150 a year due to the removal of certain levies, offering a slight reduction in household costs. - What are the new limits for Cash ISAs?
For those under 65, the tax-free limit for Cash ISAs will be reduced from £20,000 to £12,000 per year. Over 65s retain the £20,000 limit.
Budget freezes tax thresholds for movers
