Single
Graduate first job
Josh graduated two years ago from an English university and is back home in London. He earns £28,500, out of which he pays £3,186 in income tax and £1,274 in national insurance (NI) contributions a year. This results in take-home pay of £2,003 a month or £24,040 a year. Despite an outcry, the salary threshold for repaying his plan 2 student loan will remain frozen at £29,385 for three years from next April, so any pay rise is likely to trigger payments. Graduates must repay 9% of earnings over the threshold.
Single
Average earner
Layla earns the UK’s typical (median) wage of £41,000 as a nurse. She pays £5,684 in income tax and £2,274 in NI contributions. This results in take-home pay of £2,753 a month or £33,041 a year.
Traditionally income tax bands keep pace with inflation, but they have been frozen until 2031. This means a greater proportion of pay is taxed than would otherwise be expected.
With no changes to the “big three” – income tax, NI and VAT – her finances will look much the same in 2027.
She qualifies for the £100 energy payment for English households in council tax bands A-D (council tax is devolved). Her energy bill will also be reduced by the decision to abolish standing charges on gas bills and the extension to the VAT cut on electricity to July.
Couple, two children
Two incomes, one working part-time
Simon is an accountant earning £65,000, and Maria earns £28,000 as a part-time teacher. Some of their child benefit is clawed back through the high-income child benefit charge, which is a tax penalty that kicks in at £60,000. As a result the couple have combined take-home pay of £6,141 a month or £73,690 a year.
With no big tax changes this budget has not transformed their finances. Like other Britons they benefit from the energy bill shake up and their band D home qualifies for the £100 payment.
Couple
Two incomes, saving to buy a house
Tom and Martha work as teachers in London, earning £45,000 and £50,000 respectively. They have combined take-home pay of £6,287 a month or £75,439 a year. They rent a flat and are desperate to get on the property ladder. With a combined income of £95,000 they are eligible for the Your First Home scheme to help first-time buyers purchase a new-build home in England with a deposit of as little as 2.5%. Applications open in February, but only those with a total annual household income of £110,000 or less outside London, or £140,000 or less within London will qualify.
Affluent couple, one child
Both working, one high earner
Lawyer Lucy earns £98,000 and civil servant Robert £48,000. The couple have combined take-home pay of £8,790 a month or £105,477 a year after tax. At this level, all the family’s child benefit entitlement is clawed back. Any pay rise for Lucy has big tax implications as she is close to the £100k “cliff edge”. For every £2 of income over that, you lose £1 of the £12,570 annual tax-free personal allowance so any earnings between £100,000 and £125,140 are effectively taxed at 60%.
Their suburban home is in council tax band G so they miss out on the £100 energy payment. On the plus side, the keen savers will benefit from the cancelling of a plan to cut to the annual cash Isa allowance for under-65s from £20,000 to £12,000 a year from April.
Low-income family
The Cooper family have three children and live in a rented property in Leicestershire, paying £995 a month. Paul works 35 hours a week in a distribution centre and is paid the ”national living wage” (NLW) for older workers, which is currently £12.71 an hour. His partner Hannah is not working. After tax, NI and his pension contribution, his take-home pay is £1604 a month. This is topped up with a monthly universal credit (UC) and child benefit payment totalling £1,989 a month. They will benefit from the 2027 rise in the NLW to £13.21 per hour and will also receive the £100 energy payment.
Driver
Self-employed courier
Maxine drives 25,000 miles a year delivering parcels and earns £40,000 on a self-employed basis. Earlier this year the government upped the tax-free mileage allowance for people who drive for work from 45p to 55p for each of the first 10,000 miles which equates to a £200 saving for a basic-rate taxpayer. After tax – and that relief – she has take-home pay of £2,939 a month or £35,273 a year. From April 2027 the government is increasing the tax deductible rate above 10,000 miles from 25p to 35p a mile which will result in an additional £300 tax saving. The 5p increase in fuel duty which was to have kicked in next year has also been delayed again.
Single pensioner
Sole income is state pension
When the new state pension increases in April next year it will reach £13,036, exceeding the £12,570 annual personal tax allowance. Peter’s only income is the new state pension and it looked as if he might owe £93 of income tax. However, to remove this liability the government is creating the new “pension tax allowance” which will be applied automatically.
Affluent pensioner couple
Bob and Margaret have a combined income of £60,000 from their state pensions and interest on savings. After paying tax of £4,572 they have a combined income of £4,619 a month or £55,428 a year.
The big news for them is the tax rate on their savings income is increasing by 4 percentage points to 24% in April. Their additional state pension income will also be subject to tax. As a result of both changes their net income will fall by £1,101 a year.
The couple is yet to access Bob’s private pension. From April any money left unspent in a defined contribution (AKA money purchase) pension after death will be included in inheritance calculations for the first time, so he is planning to withdraw some of the cash.
Business owner
Mo has been running his successful chain of florists for 30 years and wants to retire. He hopes to sell his business, crystallising a £1m gain that will attract capital gains tax. He is eligible for business asset disposal relief which reduces the rate from 24% to 18% on his £1m. However, from April the chancellor has cut this allowance to £500,000 which would increase his CGT bill by £30,000 to approximately £210,000.
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Illustrations by Simon Maskell
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Tax and national insurance calculations provided by accountants Blick Rothenberg
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Benefits calculations by Turn2Us
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Scotland’s income tax rates and thresholds are set by the Scottish parliament.