On November 26th, Rachel Reeves, the UK Shadow Chancellor of the Exchequer, announced Labour’s official response to the government’s Autumn budget statement. Typically, there are two major fiscal releases: the Autumn Statement and the Spring Budget, which lay out the government’s plans for the economy.
Significant political drama surrounded this statement. Earlier in the year, Reeves hinted at tax hikes by conditioning the public for difficult choices. She then clarified on this position, with plans reported by the Financial Times saying there will be no income tax increases, halting fears of manifesto promise breaks.
Compounding the controversy, the Office for Budget Responsibility pre-released their reaction and data forecasts for the budget before it had been publicly released. This unconventional step meant that markets were reacting before the Shadow Chancellor had even spoken. Consequently, the yield on government 10-year bonds initially dropped by 4 basis points, This breach of protocol triggered political backlash, and within days, chair Richard Hughes resigned after being blamed for the budget leak.
How does this budget affect you? Reeves announced tax hikes, wage rises and more, which will directly impact current University students now and post-graduation.
In a targeted move to address the cost-of-living crisis, the Budget unveiled a £150 reduction in household energy bills, achieved by reallocating renewables subsidies from electricity bills to general taxation. This relief is particularly pertinent for students navigating the financial squeeze of rising utility costs in shared housing. Although many student houses are on fixed contracts, so may not be impacted.
In further good news for commuters, for the first time in 30 years, regulated rail fares will be frozen – a welcome relief for those relying on train travel. This will give students long-term predictability and ease the financial burden on those who commute regularly.
Perhaps most significantly, those aged 18-20 working part-time jobs that likely pay minimum wage, the good news is that you will be seeing an 8.5% wage rise from April 1st 2026, as the National minimum wage rises from £10.00 to £10.85. Crucially, this above-inflation rise will alleviate the burden of increasing costs of living, with food inflation expected to fall to 4.4% across 2026.
However, with one hand the government giveth and with the other they taketh away. With the Income tax personal allowance remaining frozen at £12,570 this means that lower earners facing income rises could be dragged into the basic 20% tax band sooner or see a greater proportion of their pay rise lost to existing tax. In economics, this is called fiscal drag, whereby taxable income is increased without tax rates rising. The Budget applies this mechanism directly to graduates: student loan repayment thresholds will be frozen at the 2026/27 level for three years. While this stability might be presented as a benefit, it is, in reality, the opposite – you will start paying back your loan at a lower salary than the threshold would have otherwise been, placing a greater financial burden on you earlier in your career.
Moving to university funding, the international levy will require providers to pay a flat fee of £925 per international student per year from the 1st of August 2028. This is a direct transfer of funds as the levy is being used to fund the reintroduction of targeted maintenance grants to alleviate the financial burden of university for disadvantaged students as part of the government’s plan. Although in practice, Universities may pass on this cost as higher tuition fees.
Further complicating the housing market, the basic and higher rates of tax on property will rise by two percentage points. Most students aren’t homeowners, so how does this affect you? Landlords on student properties will face a rise in costs, which they are likely to translate into higher rents.
Finally, the soft drinks levy will be extended from January 2028 to cover more products, including sugary milk-based drinks such as milkshakes and iced coffees. The Labour government is justifying this measure with the fact that changes could cut 17 million calories a day from the nation’s daily intake, which would help take pressure off the NHS by preventing cancer, heart disease and stroke. The measure has a mixed public response, with classic nanny state vs free market arguments being thrown around. The tax will only apply to products in cans, cartons, and other packaging, but not over-the-counter café drinks, so your TLC iced lattes are safe.
Ultimately, this budget provided a mixed bag for students. Your trips home won’t immediately bankrupt you, and if you have a job, the bump in minimum wage will be very welcome. You can also rest easy knowing your TLC iced lattes are safe from the new milkshake tax.
However, the benevolent treasury will ensure you feel the subtle squeeze of fiscal drag. While the worst effects are reserved for new graduates, the mechanism of frozen thresholds can affect any student earning above the Personal Allowance right now.
So, as you budget for next term, remember to look forward to your next payslip, but be warned: the government is always watching and waiting for you to cross that next tax threshold.