Rachel Reeves’ £40bn tax windfall will affect the financial wellbeing of millions of households for years to come.

The impact of the Chancellor’s raid will be felt across all age groups, from young workers to retirees. Here’s how last week’s fall budget could affect you and your finances.

Smash-and-grab: Rachel Reeves’ £40bn tax windfall will affect the financial wellbeing of millions of households for years to come

Young professionals, tenants and first-time buyers

First-time buyers could face paying thousands of dollars extra in stamp duty after Rachel Reeves lowered key thresholds.

Next April, the threshold at which first-time buyers start paying stamp duty will increase from £425,000 to £300,000.

Those who rent are also likely to feel the pain. Experts warn that an increase in stamp duty for those buying a second home could mean there will be fewer properties available to rent in the future.

This could worsen an existing housing shortage in the rental market that has led to dramatic rent increases in recent years – the average rent has increased by 40% since June 2020, according to rental agency HomeLet.

In the workplace, anyone starting their career on the minimum wage will benefit from a 6.7 per cent increase, with the national minimum wage rising to £12.21 an hour from April. The minimum wage for 18-20 year olds will increase by £1.40 an hour.

However, the impact will unfortunately be more than mitigated by the economic impact of the National Insurance increases decided by the Chancellor on employers, experts warn. This could result in fewer jobs, promotion opportunities and salary increases.

Sarah Coles, head of personal finance at stockbroking firm Hargreaves Lansdown, says: “The impact of increased National Insurance contributions for employers will flow through to business finances and is likely to result in smaller pay rises in the future. »

She recommends that workers build an emergency safety net by setting aside money through automatic withdrawal from a savings account each payday. As a general rule, you should set aside between three and six months of your regular salary as a rainy day fund.

Families – income tax, family allowances and mortgages

Workers will continue to lose out because of a stealth tax grab on their income.

Reeves said the freeze on income tax thresholds would continue as planned until 2028.

This means that already strained household budgets will be further reduced, due to an effect known as the “fiscal drag”, which occurs when wages rise but tax thresholds do not.

The taxman therefore receives a greater proportion of your income than would otherwise be the case.

Due to the freeze until 2028, four million more workers will be forced to pay an additional tax rate (45 percent), bringing the total number to more than 40 million for the first time, according to official forecasts .

Rachael Griffin, tax and financial planning expert at Quilter, said: “By choosing to maintain the freeze, the Government has ensured that the tax burden will continue to rise for millions of people, despite promising otherwise. »

Savings rates analyst Rachel Springall of Moneyfacts says one of the consequences will be that families will find it harder to put money aside for their children. “If things are already tight, how can people save? she said.

Buried in the budget was more bad news for families.

Reeves abandoned her plan to assess child benefit on household income – instead of the income of the highest earner – as she warned it would cost too much.

This means that the current system, which penalizes single-income families, will remain unchanged.

And those with young children might be disappointed. Alongside Reeves’ budget came the latest forecast from the Office for Budget Responsibility (OBR), which warned that plans to offer working parents 30 hours of free childcare per week could fail. He said: “There is a risk of shortages of funded places and staff for the September 2025 expansion, which will be the largest yet.”

Parents whose children attend private schools will be hit after the Chancellor implemented plans to levy 20 per cent VAT on school fees from January 1. The impact of this measure on the tuition fees paid by parents will depend on the decision of each school.

There are fears mortgage rates could rise once again following the Chancellor’s £162bn borrowing spree, with the OBR predicting they could rise by almost a percentage point to 4, 5 percent over the next three years.

Retirees and inheritance

Pensioners could be forced to rethink their inheritance plans, after the Chancellor imposed a new inheritance tax on pension funds.

Pension funds left to family members will be passed on to net inheritance tax (IHT) from April 2027. In its first three years, this tax bite is expected to hit 8% of estates. In contrast, only 4 per cent of estates are currently subject to IHT, which is charged at 40 per cent.

Karen Barrett, chief executive and founder of financial advice firm Unbiased, said Reeves’ attack on pensions means estate planning already done needs to be revisited.

She says: “If your estate planning is based on the current IHT rules, it’s a good idea to review it and consider making changes with the help of a financial adviser. »

Former pensions minister Baroness Altmann warned that by making pensions subject to IHT, Reeves could inadvertently increase pensioner poverty by giving pensioners “a clear incentive” to raid their pension funds, potentially leaving you short later.

“People may ask why not take all the money you have saved and spend it? » she said.

In good news, the Chancellor has confirmed that the State Pension will increase in line with average earnings, an increase of 4.1 per cent next April. Anyone who reaches state pension age after April 2016 will see their weekly income rise by £9.05 to £230.25 per week, an increase of £472 per year.

Older pensioners on the basic state pension will receive an increase of £6.95 to £176.45 a week, an increase of £363 a year from today.