What does the Chancellor’s 2025 Autumn Budget Statement mean for families?

In her Budget Statement on 26 November 2025 Chancellor Rachel Reeves stated that the government is making the necessary choices tackle inflation, cut NHS waiting lists and cut the UK’s debt and borrowing. Since the last Budget in March 2025 in the rate of inflation had risen, however the Office for Budget Responsibility (OBR) has announced that the current CPI rate is dropping again and is currently 3.6% and expected drop further to 3.5% in the coming year and then fall close to the 2% target in the 2027.

Households and families are hoping to see some easing of the cost of living pressures through falls in interest rates and alongside the rise in the National Living and Minimum Wage. The scrapping of the two child cap and the rise in benefits rates are also welcome announcements.

Key points from the 2025 Autumn Budget

Here are some of the key points from the Autumn Budget at a glance:

• Freezing the Income Tax thresholds: this means that some people will be start paying tax and more people will pay higher rates of income tax as their pay rises
• Freezing the rates of Income Tax, National Insurance Contributions and VAT
• Universal Credit: the two-child cap will be scrapped
• Universal Credit Childcare Element increased for each additional child
• Mileage Tax for Electric vehicles and a Tax on houses worth more than £2 million
• Motability reform: luxury vehicles will no longer available through this scheme

Read the full detail on the Autumn Budget on the Government’s website here.

Also announced:

• National Living and Minimum Wage increasing by at least 4.1% depending on age,
• State Pension increasing by 4.8%
• Universal Credit Standard allowance increasing by 6.1%
• Other Universal Credit elements and other working age benefits increase by 3.8%

There will be no change in the rates of income tax and a continued freeze in the tax-free personal allowance and the thresholds at which earners start to pay basic and higher rates of income tax until 2031. This means that more people will be paying tax and more will be paying tax at a higher rate as their incomes rise across the years.

Note: The announcement on income tax changes applies in England, Wales and Northern Ireland only. Scotland has different taxation rules to the rest of the UK. The Scottish government will set out its tax and spending plans for 2026-27 in its Budget Statement on 13 January 2026.

Universal Credit changes:

Removing the two-child limit from April 2026 will bring almost 450,000 children across the UK into support through Universal Credit, including 17,600 in Northern Ireland.

Increasing the maximum amount for childcare costs – 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 which is only for two children.

Uprating the Universal Credit Standard Allowance by over 6%, this higher increase in the Standard Allowance than other elements of Universal Credit was announced in the last Budget, directly benefitting every household in receipt of Universal Credit. The government is uprating all other elements of Universal Credit and other benefits in line with inflation – an increase of 3.8% from April 2026.

No change in support for Tax-Free Childcare

There is no increase to the maximum amount of financial support given through Tax-Free Childcare. This remains capped at £2,000 per child, despite the continued rise in childcare costs. Currently Tax-Free Childcare pays 20% of registered childcare costs up to a maximum of £2,000 per year, per child, Employers For Childcare, other parents’ groups and politicians in Northern Ireland have been calling for an increase in both the percentage of childcare costs supported and the removal of the £2,000 cap, to better reflect the increased childcare costs that families are now having to pay.

However, the lower earnings threshold for Tax-Free Childcare will be rising from April 2026 as this is set at the equivalent of 16 hours at the National Living Wage, for those over 21 this will be rising to £203.36 per week equivalent to approx. £2,644 per quarter or £10,575 per year.

Northern Ireland

As a result of the Autumn Budget announcements, Northern Ireland, through the Barnett Consequential, will receive £370 million for the NI Executive to spend on public services. It is up to the Executive to decide when and how this money will be allocated across the government departments, but we would wish to see a significant portion ring-fenced to support the delivery of financial support for families and the childcare sector, and longer-term investment in childcare infrastructure through the new Early Learning and Childcare Strategy. We would expect the changes related to Universal Credit and other social security benefits to be replicated in Northern Ireland by NI Executive and implemented by the Department for Communities from April 2026.

We are here to help you

We know it can be difficult to work out what financial support is available for your family and to interpret what changes announced in the Budget mean for you. We want to make sure all families are receiving everything they are entitled to. For free, impartial and confidential advice, contact our Family Benefits Advice Service on fbas@employersforchildcare.org.