In recent days, the U.K. Chancellor Rachel Reeves presented the 2025 Budget, which included significant policy changes that are likely to have profound effects on individuals under the age of 25. The Budget addresses several key areas, ranging from minimum wage adjustments to new regulations affecting both students and young professionals. Below, we outline nine pivotal ways this upcoming Budget could impact young people.
The first major change is the increase in minimum wages. Starting in April, individuals aged 18 to 20 will see their hourly pay rise by 85p, reaching £10.85 per hour, while those under 18 and apprentices will see an increase of 45p to £8 per hour. This pay hike is expected to benefit approximately 2.7 million workers, according to Reeves. However, it’s important to note that some businesses have expressed concerns that these increases may result in higher prices for consumers and may also lead to a slowdown in hiring practices. Think tanks, like the Resolution Foundation, warn that the increased wage for younger workers could inadvertently make their employment prospects dimmer.
Secondly, the Budget includes a freeze on the repayment threshold for student loans. From the academic year 2027-28, the repayment threshold will remain static at £28,470 for those whose loans were taken out after September 2012. For students who begin courses in 2023, this threshold has already been reduced to £25,000. This freeze restricts a graduate’s ability to make repayments based on inflation, effectively increasing their burden over time. The chancellor has also initiated the introduction of a new international student levy, which would levy universities £925 per foreign student annually starting in August 2028. Funds raised from this levy will support maintenance grants for disadvantaged students.
Thirdly, private renters may experience an upward pressure on rental prices despite Reeves’ efforts to address fairness in the housing taxation system. As part of her Budget, she proposed a 2% increase in the tax rate on rental income. Although this aims to alleviate the tax burden on earned income versus unearned income from properties, it raises concerns that landlords may exit the rental market altogether, resulting in a decline in housing supply and escalating rent costs.
In a more proactive measure, the Chancellor has earmarked £1.5 billion over the next five years to assist 16 to 24-year-olds in finding work or training opportunities. With £820 million allocated specifically for guaranteeing paid work placements for those who have been unemployed, out of education, or training for a lengthy period, this package stands to make a significant difference in youth employment rates. While there is some contention regarding the efficacy of these placements, the government hopes to reduce unemployment within this age bracket.
Moreover, some consumer prices may rise due to changes in taxation policies. Specifically, the elimination of the “de minimis” loophole will result in some online shopping becoming more expensive from 2029. This loophole, which has enabled overseas retailers to send goods under a value of £135 without customs duties, may lead to increased prices from popular brands.
Further levies are also expected to be imposed on sugary drinks under what is being referred to as the “milkshake tax”. The added tax will come into effect in 2028, impacting pre-packaged beverages with a high sugar content, which includes many popular choices among young consumers.
For aspiring homeowners, an assurance of help for first-time buyers was outlined in the budget. Chancellor Reeves hinted at simplifying the existing framework for saving towards initial property purchases while suggesting a consultation on replacing the current Lifetime Isa scheme. This is especially crucial for young individuals aiming to enter the housing market.
Additionally, good news for public transport users: rail fares in England are set to be frozen until March 2027, marking an unprecedented movement toward curbing fare increases in almost three decades. The bus fare cap is also set to hold steady at £3 for single journeys.
Finally, it’s vital for young professionals to take note of the income tax implications of the Budget. Following the freeze on income tax thresholds—set to remain until 2031—many individuals might find their earnings subject to higher taxation earlier than anticipated. Those entering the workforce with less than £12,570 will be taxed, and inflationary adjustments that would have kept thresholds dynamic have now been halted.
In summary, Rachel Reeves’ Budget is multifaceted, aimed at addressing some urgent issues affecting youth, particularly those navigating the complexities of work, education, and financial independence. For young individuals, this Budget heralds both opportunities for financial support and potential challenges in an evolving economic landscape.
