The Autumn Budget 2025 - What it means for Gloucestershire’s VCSE sector
Earlier today (26 November 2025), the Chancellor, Rachel Reeves, delivered the Autumn Budget, presenting it as a plan to cut NHS waiting lists, reduce national debt, and ease the cost of living. Below is our analysis of the key implications for Gloucestershire households and the local VCSE sector.
Budget context
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Inflation is forecast to average 3.5% this year (which is well above the Bank of England’s 2% target) though it is expected to fall below 2.5% in 2026.
Government debt has reached its highest level since the early 1960s. With borrowing funding roughly 10% of public spending, around £1 in every £12 currently goes toward debt interest.
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The government has set targets for its day-to-day budget and net financial debt by 2029/30; these are its fiscal rules. These targets are currently being met, but only by a narrow margin, leaving the Chancellor very limited room for additional public spending.
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The Chancellor’s ability to raise money through increasing taxes is limited by Labour’s 2024 manifesto pledge on taxation which said it “will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”
However, with public spending pressures rising, the Chancellor is instead relying on a series of smaller tax adjustments to raise revenue without altering headline rates.
Key announcements
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Income tax and National Insurance rates remain unchanged.
Income-tax thresholds (personal allowance £12,570) have been extended to remain frozen through the 2030–31 financial year (i.e. until April 2031), pushing more earners into paying tax and higher tax bands as wages rise.
Basic and higher rates of tax on dividends, property and savings income will increase by 2 percentage points from April 2026 (e.g. the basic dividend rate moves from 8.75% to 10.75%) However, most people do not save enough to fall into paying income tax on their savings.
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The cap limiting households on universal credit or child tax credit from receiving payments for a third or subsequent child will be scrapped from April 2026.
National Living Wage will rise by 4.1% to £12.71/hour from April 2026 (for a worker on a full-time, 37 hours per week contract, this equates to a salary of £24,454 per annum).
National Minimum Wage for 18–20-year-olds will increase from £10.00 to £10.85 (for a worker on a full-time, 37 hours per week contract, this equates to a salary of £20,875 per annum).
State pensions will rise by 4.8% in April.
Some other benefits, including all the main disability benefits, such as personal independence payments, attendance allowance and disability living allowance and carers’ allowance will rise by 3.8% in April.
Employees (and their employers) paying into their pension under salary sacrifice schemes will pay National Insurance on contributions above £2,000 per year from 2029.
The Help to Save scheme, which offers people on universal credit a bonus on savings, will be extended beyond 2027 and expanded.
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Levies placed on household energy bills will be scrapped, which should lower bills by around £150 per year from April 2026.
Fuel duty will be frozen at its current rate until September 2026.
There will be a new mileage-based tax for electric vehicles and plug-in hybrids from 2028.
Rail fares will be frozen next year.
Premium cars will be excluded from the Motability scheme.
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Government departments’ spending plans were set until 2028/29 in the June 2025 Spending Review. (Policy Digest: Spending Review June 2025) These plans have not changed.
In addition, 250 new health ‘one stop shops’ will bring GPs, nurses, dentists and pharmacists together under one roof to best meet the needs of the community, starting in the most deprived areas. The centres will be part of a new Neighbourhood Health Service that moves outpatient care out of hospitals and closer to people’s homes.
Impact on Gloucestershire households
The budget offers some gains for low-income households. The two-child benefit cap has meant that many families have been restricted from claiming additional benefits for more than two children. This will be removed from April 2026. The Institute for Fiscal Studies has stated that this is one of the most cost-effective options for achieving a quick reduction in child poverty. The typical gain for families with 3 or more children will be £3,455 per additional child per year. However, not every family will benefit equally, as some may be limited by other benefit rules, such as the cap on total benefits.
Help with energy bills, the rises in the national living wage, state pension and benefits will result in some financial gain but this may be outweighed by rising housing costs and stubbornly high prices. With property taxes increasing by 2%, landlords are likely to pass at least some of the cost on to tenants. With average private rent in the South West of England £1,214 per month (https://www.ons.gov.uk/visualisations/housingpriceslocal/E07000081/ ) this will hit the pockets of some of Gloucestershire’s least well-off residents.
Impact on Gloucestershire’s VCSE sector
The VCSE sector continues to face the combined pressure of rising running costs and increasing demand, fuelled by household debt and reductions in public services.
Over time, the removal of the two-child benefit cap may result in some reduction of demand on some VCSE organisations (e.g. those providing food or family support), but this will not come into effect until April.
Many of the financial pressures experienced by the VCSE sector stem from employee costs. The rise in the national living wage, coupled with the extended freeze on tax thresholds, is likely to put pressure on salaries at all organisational levels. As the Gloucestershire VCSE workforce is estimated to exceed 7,000 employees (One Gloucestershire People Strategy 2023), this places a substantial additional financial burden on the sector as a whole at a time when some charities are already drawing on their reserves in order to fund running costs. (State of the Sector Report 2025)
Meanwhile, those VCSE organisations that rely on donations are likely to continue to see reduced income due to tighter household budgets.
The introduction of neighbourhood health centres reflects the government’s strategic commitment to bring healthcare closer to communities and in the medium-long-term this will support joint VCSE-public sector working to tackle health inequalities.
References
Autumn Budget 2025: Background briefing - House of Commons Library (https://commonslibrary.parliament.uk/research-briefings/cbp-10400/ )
Transcript of OBR Briefing, 26th November 2025 (https://obr.uk/docs/dlm_uploads/Presentation_speech_November_2025_updated2-213213.pdf )
Chancellor to double down on drive to cut NHS waiting times and rollout of new Neighbourhood Health Centres (https://www.gov.uk/government/news/chancellor-to-double-down-on-drive-to-cut-nhs-waiting-times-and-rollout-of-new-neighbourhood-health-centres )
Changes to departmental spending at the upcoming Budget, Institute for Fiscal Studies (https://ifs.org.uk/articles/changes-departmental-spending-upcoming-budget )