Shortly after Chancellor Rachel Reeves delivered her first Budget in Parliament on October 30, the Treasury outlined three ways the announcement would put more money into the pockets of people in and out of work. Their key areas are the living wage, expanding the Help to Save scheme for those on certain means-tested benefits and reducing deductions to Universal Credit payments.
During the Autumn Budget, the Chancellor confirmed that the State Pension will rise by the earnings growth measure of the Triple Lock – 4.1 per cent – which will see those on the full, New State Pension receive an extra £471 during the 2025/26 financial year. Ms Reeves confirmed that working age and disability benefits will increase by 1.7 per cent, the September Consumer Price Index (CPI) inflation rate figure – the The Treasury also confirmed that Child Benefit and Tax Credits will rise by 1.7 per cent.
The UK Government also announced no changes to income tax rates, however, Scotland’s tax bands are set by the Scottish Government so we won’t know until the Scottish Budget next month if those are changing.
As promised in its election manifesto, Labour will not increase National Insurance or VAT, however, employer National Insurance will go up and could result in smaller pay rises next year.
Three ways the Budget will put more cash in your pocket
Savings boost from the UK Government for low earners
The Help to Save scheme has been extended and widened. The scheme offers people on Universal Credit a savings account where they can save a maximum of £50 a month for four years and receive a 50 per cent Government boost at the end of year two and year four. This helps people kickstart a lifelong savings habit and offers up to £1,200 over the four years.
The scheme was due to end in April 2025 but has been extended by two years until April 2027. Eligibility for the scheme will widen from April and will be open to all working Universal Credit claimants earning at least £1 a month. Find out more about Help to Save on GOV.UK here.
Increased National Living Wage
In her statement, the Chancellor announced that from April 1, 2025, the National Living Wage will increase from £11.44 to £12.21 an hour for employees aged 21 and over. That’s an increase of 6.7 per cent from 2024.
For 18 to 20 year olds, it will increase by £1.40 an hour, to £10.00 an hour. This is the first step towards the government’s plan to remove discriminatory age bands and deliver a genuine living wage that all adults can benefit from.
Capping how much Universal Credit can be taken for debt repayment
The Government is creating a new Fair Repayment Rate which caps deductions made through Universal Credit at 15 per cent of the standard allowance. Before this Budget, it was 25 per cent.
This means approximately 1.2 million households will keep more of their Universal Credit payment each month, with households expected to be better off by an average of over £420 a year.