Budget 2025

What does it mean in North-West Norfolk?

As was feared Rachel Reeves’ second Budget has not brought much joy to Northwest Norfolk. In an area with a high proportion of retirees and a working population who normally begin the day by unlocking the car door, it seems unlikely the Budget will be met with much enthusiasm.

Rather than risking the wrath of her backbenchers, the Chancellor tried to avoid breaking her manifesto pledges too obviously, though the freezing of personal allowances until 2030/31 is a significant tax increase whichever way you look at it. It has been estimated that it will bring almost 800,000 lower earners into tax for the first time and over 900,000 middle earners into the 40% band. The limitation of salary sacrifice pensions will simply accelerate this movement.

We will now also see new tax rules for rental, dividend and interest income, which will attract a 2% surcharge. After returning the Inheritance Taxes rules to something close to the position in the 1980’s in her first Budget, Reeves now seems determined to create something which looks very much like the hated “Investment Income Surcharge” which was abolished in 1984. This change will hit a number of pensioners who rely on savings and rental income to boost their pensions in retirement (and ultimately to fund their care costs). Some might see this new tax as being a development of the previous removal of the winter fuel allowance, and part of a concerted attempt to take more money from pensioners who are perhaps an easier target than benefit claimants, at least in the eyes of Reeves’ back benchers. An alternative view is that it is a continuation of the attack on the private landlord, another political bete noire in some eyes.

As widely publicised before the Budget there will be an increase in the living wage and minimum wage of between 4.1% and 8.5%. As many have commentated, the effect of these minima is already causing youth unemployment to rise. There is also a wider economic impact, since increases in the minimum wage level tends to push up all scales, encouraging inflation.

The rural sector is also punished to some extent by increased costs on the motorist. Whilst rail prices have been frozen, a phasing out of the fuel duty discount from next September and a pay per mile tax on electric cars will be particularly hard on those who need to drive to work.

There are some small shreds of good news – as expected, the annual contribution limit to a cash ISA is being reduced by £8000, but only for those under 65, and one of the anomalies from the “family farm tax” (which, remember, applies to all businesses, not just farms) is being removed by enabling the £1m allowance to be transferred between spouses, in line with other similar reliefs -an indication perhaps of how poorly thought out the change has been from the outset

Finally, we have the council tax surcharge for properties in bands F, G and H. At present this will affect very few people locally, since it will not be a flat rate charge. Instead, there will be a “targeted valuation exercise” to identify properties over £2m, which will then attract an additional charge (payable by homeowners rather than occupiers) of between £2500 and £7500 per annum. There will be a consultation on details, reliefs, and exemptions. The fear must be that this might be the thin end of the “wealth tax” wedge – once a tax is established in principle there is always a temptation to extend it in future.

This Budget was born in confusion with a stream of leaks, announcements and recantations culminating in a leak by the Governments own Office for Budgetary Responsibility shortly before the Budget itself. Reeves has backed away from the difficult decisions on welfare and has instead made our existing labyrinthine tax system just that little bit more complex, especially if you are a pensioner.

If you require any tax advice, please contact either Kate or Nic at Kathryn Gigg Chartered Accountants, Hunstanton on 01485 534800 or kate@kathryngigg.co,uk and nic.tarry@kathryngigg.co.uk

N.B. Article written November 2025

© Kathryn Gigg Chartered Accountants 2025

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