Welsh Budget 2025-26: what does it mean for your money?

In its draft Budget for the 2025-26 tax year, the Welsh government pledged to invest additional money in transport and social housing, but proposed no changes to income tax or council tax. 

Finance minister Mark Drakeford hailed his government's Budget as a fiscal plan 'for a brighter future' that will 'put Wales firmly back on the path of growth'.

Here, Which? takes a closer look at the plans announced in Senedd Cymru on 10 December and how they may affect Welsh taxpayers.

No income tax changes in 2025-26

The Welsh government has confirmed income tax thresholds and rates will stay the same during the next financial year.

This means Welsh taxpayers will continue to pay the same rates as people working in England and Northern Ireland.

This table shows the Welsh income tax rates for 2025-26:

Income tax is partially devolved to Wales and, as a result, the Welsh government has the power to raise or cut the three income tax rates (basic, higher and additional).

All other aspects of the tax remain the responsibility of the UK government, and HM Revenue and Customs administers income tax in Wales. 

• Find out more: income tax in Wales

Land Transaction Tax (LTT) for additional properties to rise

Land Transaction Tax (LTT) replaced Stamp Duty Land Tax in Wales in 2018. 

Changes to LTT rates for home movers were introduced in 2022, raising the threshold at which people start paying the tax on residential properties from £180,000 to £225,000. 

The Welsh government confirmed that there will be no change to LTT in 2025-26 for people who are buying their first or only home. 

However, the LTT surcharge for those buying additional properties will increase by 1 percentage point, rising from 4% to 5% with immediate effect. 

• Find out more: Land Transaction Tax – stamp duty in Wales

No cap or freeze on council tax

Wales does not have a council tax cap, but the Welsh government does have some powers to limit excessive increases in the budget requirement of local authorities. 

However, these powers have never been used, and there was no mention of a cap or freeze on council tax rates in the draft Budget for 2025-26. 

Drakeford did, however, pledge £253m to support local authorities – a funding uplift of 4.3%.

• Find out more: what is council tax?

Social housing boost

The Welsh government will spend an extra £81m to build more homes for social rent, which it says will help reduce homelessness.

A further £26.25m of capital has been made available to continue to support loans to Registered Social Landlords (RSL).

There will also be £5.5m of capital for housing adaptations via the independent living programme.

Investment in transport

A number of changes were unveiled to improve Wales' roads and public transport network:

• £181.6m to improve rail services
• £9m investment in bus services
• £25m for pothole repairs on 'A' roads and £5m to help councils fix local roads

Extra for childcare and education

The Welsh government will provide £14m for families whose children have additional learning needs.

There will also be an investment of £93.5m to maintain the universal provision of free school meals in primary schools.

An extra £20m will be provided to fund an increase in the hourly rate offered to childcare providers. This will help support the country's Childcare Offer, which allows parents and guardians of three-year-old and four-year-old children to claim up to 30 hours of free childcare each week for up to 48 weeks of the year. 

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What happens next?

The plans will be debated in Senedd Cymru (the Welsh Parliament) on 4 February 2025, before a final Budget is published on 25 February.

It will then go to a vote one last time on 4 March before coming into law.