ACAT Budget Special 2025

Introduction

The main items in the Chancellor’s Autumn budget statement yesterday (26 November) had been “leaked” and speculated over for several weeks. The result is that for most people, there are very few surprises.

Pleas from church groups and the faith sector generally appear to have been ignored.

The Listed Places of Worship Scheme is still scheduled to close in March 2026, with no additional support for the charitable sector to counter reduced donations, as evidenced by the CAF 2025 Giving Report.

For the moment, we must be thankful that Gift Aid has gone untouched.

However, it could be argued that against the background of the general increased cost of living, those who are less well-off and/or with young families have been provided with some relief.

Summary view

1. Taxation
   • The income thresholds above which tax becomes payable will remain frozen until 2031.
   • Workers whose pay has broadly kept pace with inflation could find themselves paying more tax as they are brought into a higher tax band.
     1. Note this also has implications for Gift Aid: some church members may newly qualify to use Gift Aid, while others who enter the higher-rate band could claim back the difference between the higher-rate tax they pay and the basic-rate relief received by the charity. This is something worth keeping congregations aware of over the coming years.
   • Freezing the basic personal allowance of £12,750 but increasing the basic state pension by 4.8% will bring it closer to being subject to tax.
2. Pensions & Taxation & Savings
   • In April, the state pension will rise by 4.8% to £12,547.60 for those on the new flat-rate state pension, who reached state pension age after April 2016 and £9,614.80 for those on the old basic state pension.
   • A £2,000-a-year cap on the amount that can be put into pensions through salary sacrifice arrangements will be in place from April 2029. More can be put in, but it will be taxed.
   • From April 2027, the annual amount in a tax-free cash ISA savings is reduced for those under 65 to £12,000, with the remaining £8,000 annual allowance available for investments.
   • Basic and higher income tax rates on property, savings and dividend income to increase by 2 per cent.
   • From April 2027, new separate property tax rates will apply, with the basic rate rising to 22%, the higher rate to 42%, and the additional rate to 47%
   • Help to Save scheme, which offers people on universal credit a bonus on savings, extended and expanded beyond 2027
3. Wages, Benefits
   • The Cap limiting households on universal or child tax credit from receiving payments for a third or subsequent child is to be scrapped from April 2026.
   • The Legal minimum wage for those aged over 21 will rise by 4.1% in April, from £12.21 to £12.71 per hour.
   • Wages for 18 to 20-year-olds will increase by 8.5%, from £10 to £10.85 per hour.
   • Carer’s allowance will rise by 3.8% in April.
4. Other Measures
   • Tax on fizzy drinks will be extended to milk-based products in 2028, including pre-packaged milkshakes and coffees that are high in sugar. This will almost certainly increase the prices of these items to the consumer.
   • For the second year, NHS prescription charges in England will be frozen at £9.90 for a single item.
   • Disabled people who have a car through the Motability scheme will no longer be allowed “premium” vehicles such as BMWs, Mercedes, Audi, Alfa Romeo and Lexus.
   • Regulated rail fares in England will be frozen until March 2027.
   • Some green levies on energy bills will be removed, lowering bills for millions of households by an average of £150 a year.
   • 5p “temporary” cut in fuel duty on petrol and diesel extended, until September 2026, before it rises again over a six-month period.
   • A new mileage-based tax for electric vehicles and plug-in hybrid cars to be introduced from 2028

Summary Conclusions

• Whilst the Chancellor may claim to have avoided austerity cuts in public services and increased national borrowing, nevertheless, few of our church members are likely to see a significant increase in their standard of living, if at all.
• For those lower-paid workers, the minimum wage increase will be welcomed but could result in a tax increase as the personal allowance remains frozen, although with regulated rail fares frozen, travelling to work on public transport should not cost any more.
• The removal of the two-child benefit cap will help those with larger younger families, as will the lowering of some energy bills.
• However, with inflation expected to be approximately 3% in 2026, balancing personal budgets for the lower-paid and those pensioners reliant on the state pension is still likely to be a challenge.
• Churches are likely to see membership giving levelling out at best and falling at worst. For treasurers and governing bodies, the challenge will be to find sources of grant funding for major repairs and maintenance in addition to those priority outreach and ministry projects.
• It may also be that those church members who are better off financially are challenged to increase their regular giving in line with inflation.
  • As noted above, with the tax thresholds frozen, it also has implications for Gift Aid: some church members may newly qualify to use Gift Aid, while others who enter the higher-rate band could claim back the difference between the higher-rate tax they pay and the basic-rate relief received by the charity. This is something worth keeping congregations aware of over the coming years.

As always, we prayerfully leave matters in God’s hands, trusting that he will provide support for those who need it and inspire those who are able to do more.