Rachel Reeves‘s second Budget was revealed ahead of time by the unexpected early publication of the Budget watchdog’s analysis, which lays out a series of tax rises Ms Reeves will introduce to fill a black hole in the public finances.
The Office for Budget Responsibility (OBR) also revealed Ms Reeves will introduce a series of measures aimed at helping people who are currently struggling with living costs, including a long-expected end to the two-child limit on benefits.
Here, we look at the tax rises and cost-of-living measures in today’s Budget:
Economic growth
The OBR has increased its forecast for economic growth this year from 1 per cent to 1.5 per cent but downgraded its forecasts for the following four years.
Income tax thresholds
The Chancellor will extend a freeze of income tax thresholds until 2030, a move previously described as a ‘stealth’ tax rise.
This will drag more people into paying the tax for the first time, and others into paying a higher rate as wages rise.
The OBR said the freeze in tax thresholds would result in 780,000 more basic-rate, 920,000 more higher-rate and 4,000 more additional-rate income tax payers in 2029/30, and estimated it will raise around £7.6billion in 2029/30.
Chancellor Rachel Reeves delivers her Budget in the House of Commons this afternoon
Pensions and salary sacrifices
Ms Reeves will limit the amount of money people can put into their private pension pot, through a scheme called a salary sacrifice, before it incurs tax.
Anything above the new £2,000 cap will incur national insurance contributions from 2029, a move which has been estimated to raise £4.7 billion in 2029/30 and £2.6 billion in 2030/31. At the moment, there is no limit.
Property taxes
A council tax surcharge will be introduced on properties worth more than £2 million, in a so-called ‘mansion tax’.
‘There will be four price bands with the surcharge rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band, to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year,’ the OBR said.
It is set to raise £0.4 billion in 2029/30.
Electric vehicles tax
Drivers of electric vehicles (EVs) will have to pay 3p per mile they drive under a new tax introduced by the Chancellor.
The move is in part to make up for falling revenues from fuel duty, as more motorists move towards using EVs.
Chancellor Rachel Reeves delivers her Budget in the House of Commons this afternoon
Fuel duty
Fuel duty is to be increased for the first time in 16 years.
The 5p per litre cut in duty introduced by the Conservative government in March 2022 will only be extended until September 2026.
It will be ‘reversed through a staggered approach’, the OBR said.
From April 2027, the Government has stated that fuel duty rates will be increased annually by the RPI measure of inflation, the document said.
Fuel duty has not risen since April 2010.
Two-child benefit cap scrapped
The two-child cap prevents parents from claiming universal credit or tax credits for more than their first two children.
The cap, introduced by the Conservative government in 2017, has been widely criticised by Labour MPs and anti-poverty advocate groups, who have said lifting it is one of the main levers ministers could take to alleviate poverty.
The move is estimated to cost £3 billion by 2029/30, according to the OBR.
Rail fares frozen
Rail costs were frozen in the Budget, saving commuters on pricier routes more than £300 a year.
It is one of a series of measures aimed at easing the cost of living despite the increased tax burden many people and businesses are likely to face.
Cash Isa limit cut
The annual cash ISA limit will be reduced from £20,000 to £12,000 a year for those aged under 65.
The overall allowance for under-65s will still be £20,000, but only £12,000 of it can be used for cash savings.
People aged over 65 will be able to put their full £20,000 allowance into cash Isas.
Gambling tax
MPs were told the tax on remote gaming will rise from 21 per cent to 40 per cent, and on online betting from 15 per cent to 25 per cent, while there are no changes for in-person gambling or horse-racing, and bingo duty is being abolished.
