Autumn Budget 2025

Chancellor Rachel Reeves MP’s long-awaited budget has key reforms aimed at improving life chances for all children 

After so many weeks of speculation, the Chancellor Rachel Reeves MP finally delivered her Autumn Budget yesterday, November 26th. 

The Chancellor said the Budget takes the fair and necessary choices to deliver on the government’s promise of change, primarily:
– Cutting the cost of living 
– Cutting NHS waiting lists in England 
– Cutting debt and borrowing.

It has been historically rare for children to feature strongly in budget announcements, however this year there were several commitments that centred on delivery of The Best Start in Life.

The biggest and arguably most impactful change announced was the abolition of the two-child benefit limit, which will take effect from April 2026. This has been universally welcomed across children’s charities who see it as the single most important measure for addressing child poverty. 

‘’Scrapping this unjust policy is the single most powerful step to reduce child poverty in a generation … this is a moment of hope…’  Moazzam Malik, CEO of Save the Children UK.

Although many of the poorest families will still be subject to the benefits cap and many charities are calling for that to be addressed in the imminent child poverty strategy.

In terms of childcare and early education there was a welcome commitment to a review of the existing childcare system, with the objective of simplifying it for providers and families and making it easier for more children to access the right childcare. There were also pledges to increase access to childcare for more claimants of Universal Credit.[1] 

There were other child focussed announcements:

For children with special educational needs (SEND) there was a restatement of the promise for substantial reforms to the current system to deliver sustainable and effective improvements through the Schools White Paper which is due early in 2026.

There was also an announcement that future funding for SEND will be managed within the overall government DEL (Department Expenditure Limit). So, the government will not expect local authorities to fund future special educational needs costs from general funds.[2]

[1] The maximum amount that can be reimbursed for childcare costs for eligible Universal Credit claimants will increase by £736.06 for each additional child above the current maximum cap for two children.  https://assets.publishing.service.gov.uk/media/6926eb102a37784b16ecf525/E03444720_Budget_2025_Web_Accessible.pdf

[2] Section 5.7 https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html#policy-decisions

The provision of £5 million of new funding to state-funded secondary schools in England in 2026-27 to increase book supplies to support the National Year of Reading.

Funding to refurbish and improve up to 200 primary school playgrounds in England.

An investment £2.4 billion into children’s social care between 2026 and 2029, to support early intervention, child protection and family help.

Bringing in income

As with all budgets there were of course measures announced that are aimed at bringing money into The Treasury to support the government’s intentions.

In terms of personal taxation, National Insurance (NI) and income tax thresholds will be frozen for an extra three years beyond 2028. There will be a reduction in the tax-free ISA allowance from £20,000 a year to £12,000 for under-65s, and basic and higher income tax rates on property, savings and dividend income will increase by 2 percentage points.

In addition, the amount people can sacrifice from their salary to avoid paying NI on pension contributions will be capped at £2,000 a year from 2029 and properties in England worth more than £2m will be revalued with a possible additional council tax surcharge of between £2,500-£7,500 being added.

Cost of living 

While there were measures designed to help with everyday costs, including for those that run childcare business’s (for example, further extension of 5p cut in fuel duty, reforms to improve the apprenticeship system and a freezing of regulated rail fares in England). Other measures that will offer economic benefits for some may prove challenging for childminder and nursery bosses.

The most obvious of these are the increases to the minimum statutory wage rates.[2] While the rise in the national living wage will be welcome for many in the low-paid childcare sector, there will be concerns about how the increase will be funded on the ground. Many in the sector are stating that any future settlements around funding rates will need to accommodate this extra cost to avoid childcare businesses suffering further losses like those experienced by the NI increase earlier this year.

Further reading:
1. Budget 2025: Strong Foundations, Secure Future
2. Budget 2025 Factsheet: Cutting the cost of living

[3]From 1 April 2026, the NLW will rise by 4.1% to £12.71 per hour for eligible workers aged 21 and over. This will increase the gross annual earnings of a full-time worker on the NLW by £900.
The NMW rate for 18–20-year-olds will also increase by 8.5% to £10.85 per hour, narrowing the gap with the NLW. 
The NMW for 16–17-year-olds and those on apprenticeships will increase by 6% to £8 per hour.