Chancellor Rachel Reeves has stood up to deliver her long awaited Autumn Budget for 2025, against a backdrop of the Office of Budget Responsibility report accidentally leaking just ahead of it.
The OBR report revealed the key measures from the Budget, their cost and their expected revenue.
Among them were a continued freeze on tax thresholds, a salary sacrifice raid, a council tax surcharge of homes worth £2million or more, extra tax for savers, pay-per-mile charging for EVs and a continued fuel duty freeze.
How the Budget will affect you – essential reading
– Cash Isa allowance slashed to £12,000 for under 65s
– Rachel Reeves hikes savings interest tax – and hits investors too
– Budget salary sacrifice blow to pension savers, what will it cost YOU?
– State pension will rise 4.8% to £12,548 a year next April, Chancellor confirms
– M+ exclusive What Reeves’ devastating pensions raid means for you
– Fuel duty frozen and 5p cut extended as Chancellor spares drivers for now
– Pension tax-free cash SAVED (for now) in the Budget
– Britain faces five years of stagnating living standards as inflation and tax bite
– Green levies on energy bills scrapped but Reeves opts against cutting VAT
– Reeves to extend scheme which boosts savings on low incomes
– Mansion tax: Council tax surcharge to hit homes worth more than £2M
The Budget at-a-glance
Rachel Reeves says she will more than double her headroom against her fiscal rules to £21.7billion.
The OBR upgraded GDP forecasts for this year, but downgraded growth expectations from 2026 onwards.
The British economy is expected to grow by 1.5 per cent this year, up from 1 per cent previously. Growth will slow to 1.4 per cent in 2026, down from previous forecasts of 1.9 per cent.
For the next three years, the OBR downgraded growth forecasts from 1.8 to 1.5 per cent, from 1.7 to 1.5 per cent, and from 1.8 to 1.5 per cent.
Consumer price inflation is set to average 2.5 per cent in 2026, up from previous forecasts of 2.1 per cent and well ahead of the Bank of England’s 2 per cent target.
Income tax thresholds will be held at their current level for three years. The OBR says this will result in around 780,000 more basic-rate, 920,000 more higher-rate, and 4,000 more additional-rate tax payers by 2029 than in the March forecast.
Increase in basic and higher rate of tax on property, dividends and savings income by 2 percentage points. Chancellor claims 98 per cent of Britons will not pay tax on their savings.
Mansion tax to be collected alongside council tax, raising £400million by 2031. Properties worth more than £2million will face annual fee of £2,500. An annual levy of £7,500 will be owed for home worth £5million and up.
The annual cash Isa allowance will be reduced to £12,000 for savers under 65.
The lifetime Isa is to be scrapped, while income tax relief on venture capital trust investments has been reduced to 20 per cent.
The Chancellor has announced a surprise 2 percentage point increase to the rates of tax savers pay on their savings interest from April 2027. The savings income tax hike will bring the level of savings tax paid over the levels of income tax which are currently paid on savings interest.
Certain green levies added to electricity bills will be scrapped and moved into general taxation.
The ‘Help to Save’ scheme, which was set to end in 2027, will be made permanent from 2028 by the Chancellor in the Budget.
The Chancellor claimed she’ll find £4.9billion of additional savings by 2029 to help pay for it, including efforts to reclaim benefits paid to those who were not legally entitled to them.
Pensions: Tax-free lump sum saved. People over the age of 55 can still withdraw 25 per cent of their pension tax-free up to a £268,275 cap.
However, the Chancellor has launched a stealth attack on ‘salary sacrifice’ company pensions, with a new £2,000 cap on the pension contributions that can be made with tax breaks.
Electric cars will play an excise duty for the first time. Fuel duty will remain frozen for a 16th consecutive year and the ‘temporary’ 5p cut to the tax on petrol and diesel will be extended.
‘Premium’ cars have been excluded from Motability scheme for disabled people.
Training for under-25 apprentices will be ‘free’ for small- and medium-sized businesses. The Chancellor has also set aside another £820million over three years for the ‘youth guarantee’ announced last year.
The two child benefit cap will be scrap, while the Government is also freezing prescription charges and rail fares.
Labour is increasing the amount of time someone must live and work in Britain before getting access to a state pension.
Sin taxes: Duty on tobacco products to rise, duty on alcohol to rise in-line with inflation, and sweeping changes to gambling taxes.
From the OBR report
The OBR report stated on Rachel Reeves’ Budget measures:
‘Over the medium term, the cost of these measures is more than offset by a wide-ranging set of changes to tax policy which raise receipts and lower borrowing by £0.7 billion in 2026-27 rising to £26.1 billion by 2029-30.
‘As a share of GDP, the policies in this Budget deliver the third-largest medium-term tax increase since the OBR was established in 2010, after the March 2021 and the October 2024 Budgets.’
Tax policies comprise:
A set of personal tax changes which increase receipts by £14.9 billion in 2029-30, including:
• freezing personal tax and employer National Insurance contributions (NICs) thresholds for three years from 2028-29, which raises £8.0 billion;
• charging NICs on salary-sacrificed pensions contributions, raising £4.7 billion; and
• increasing the tax rates on dividends, property and savings income by 2 percentage points, raising £2.1 billion.
Other tax changes increase receipts by £11.2 billion in 2029-30. These include:
• a reduction to the writing down allowance main rate in corporation tax, which raises £1.5 billion;
• a new mileage-based charge on battery electric and plug-in hybrid cars from April 2028, raising £1.4 billion;
• reforms to the taxation of gambling, which raises £1.1 billion
reduced capital gains tax relief on disposals to employee ownership trusts, which raises £0.9 billion;
• a high value council tax surcharge on properties worth over £2 million, raising £0.4 billion;
• tax administration, compliance and debt collection measures, which raise £2.3 billion;
• these tax rises are partially offset by a freeze to fuel duty for a further five months followed by staged increases from September 2026, costing £2.4 billion next year and £0.9 billion each year thereafter;
and
• a range of other tax measures, including the introduction of the Sizewell C regulated asset base (RAB) levy, collectively raise a further £4.4 billion.
