Chancellor Rachel Reeves has outlined tax-raising measures worth £26bn by the end of the parliament, in an autumn budget overshadowed by the accidental early publication of key details by the Office for Budget Responsibility (OBR).

The new measures follow last year’s budget, which raised taxes by £40bn, and mark a further tightening of fiscal policy as the government seeks to stabilise the public finances. The additional revenue will come from a freeze in income tax thresholds, restrictions on salary sacrifice schemes and a series of smaller tax changes, together more than offsetting £11.3bn in extra planned spending.

The chancellor confirmed that she will freeze income tax thresholds until the 2030-31 financial year, admitting it would hit “working people”.

Reeves said: “The previous Conservative government froze personal tax thresholds from 2021 until 2028. And today I will maintain all income tax and equivalent national insurance thresholds at their current level for three further years from 2028, while ensuring that people only in receipt of the basic or new state pension do not have to pay small amounts of tax through Simple Assessment from April 2027.”

The chancellor added: “I know that maintaining these thresholds is a decision that will affect working people, I said that last year, and I won’t pretend otherwise now.

“I am asking everyone to make a contribution, but I can keep that contribution as low as possible because I will make further reforms to our tax system today to make it fairer, and to ensure the wealthiest contribute the most.”

Reeves also confirmed that the government will introduce a so-called mansion tax on high-value properties, a central plank of its revenue-raising strategy.

“From 2028, I am introducing the High Value Council Tax Surcharge in England, an annual £2,500 charge for properties worth more than £2m, rising to £7,500 for properties worth more than £5m.

“This will be collected alongside council tax, levied on owners and we will consult on options for support or deferral. This new surcharge will raise over £400m by 2031 and will be charged on fewer than the top 1% of properties.”

Tax rates on property, savings and dividend income will rise by two percentage points, Reeves said.

According to the OBR, the government’s tax take is set to climb to a record 38.3% of GDP by 2029-30, an increase of 0.8 percentage points compared with its March forecast, showing the scale of the fiscal consolidation under way.

Reeves also told MPs that the government would enter the coming years with £22bn of fiscal headroom, giving it limited room to manoeuvre without breaching its self-imposed debt rules.

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  • Budget headroom: how the figures are split

    Here’s a closer look at the budget headroom Reeves has left herself and how it all breaks down.

  • Unions react with praise — and some criticism — to Reeves’ budget

    There have been cautiously positive responses from some unions to the plans announced by Reeves today.

    Paul Nowak, general secretary of the Trade Union Congress, said: “The chancellor has delivered urgent relief to millions of hard-pressed households up and down the country and helped to rebuild our public services.”

    Meanwhile, Mike Clancy, Prospect general secretary, said: “This was always going to be a difficult budget given the challenging economic context, but the chancellor’s choice to avoid a return to austerity and protect public investment is fundamentally the right choice for Britain.

    “Working people are realistic that good public services require taxation, but having been asked to contribute more in this budget, they will expect the government to deliver on the promise of change on which they were elected.”

    Reeves also came under fire from others, however, particularly regarding pay and conditions for more vulnerable workers.

    Philippa Childs, the head of Bectu, said: “The government has once again largely overlooked self-employed and freelance workers.

    “Low pay is a very real issue for many of the highly skilled workers who prop up our creative industries, so the minimum wage increases are welcome. As is the rise in the state pension, which will benefit many creative workers, not least those who are self-employed and so ineligible for auto-enrolment.

    And Unite strongly criticised what it described as stealth taxes. “The chancellor has picked a side. Health workers, engineers, and tanker drivers will pay through stealth taxes, while city bankers and billionaires go largely unscathed,” a spokesperson said.

  • IFS highlights scale of government tax increases

    Good afternoon, Tola Onanuga here, taking over from my colleague Pedro. As more post-budget reaction rolls in, the Institute for Fiscal Studies has shared some eye-catching data about net tax increases. Its infographic drilled down into the figures to compare the hikes introduced in the current parliament with previous ones, dating back to 1970.

  • ‘A historic day for all the wrong reasons’, says Crowe tax expert

    Tax specialists at Crowe have offered a critical assessment of the chancellor’s budget, highlighting both the impact of frozen thresholds on taxpayers and the introduction of wealth taxes.

    Robert Marchant, partner and national head of tax at Crowe, described the budget as lacking cohesion: “The UK budget delivers a buffet of bite-sized changes. It was also a shame that the buffet was served so early it went cold. A historic day for all the wrong reasons. Today was a budget that was ‘all sides and no main course’ – with those sides being delivered before the diners had even entered the restaurant.”

    He also warned that efforts to reduce tax avoidance must be matched by improvements in HMRC’s customer service: “Almost every budget, we hear about a focus on reducing tax avoidance and enhancing HMRC’s tax collection powers. That’s laudable, but what about helping those taxpayers trying to engage with HMRC to understand and pay what they owe? In my experience, HMRC continue to have problems answering calls and responding to taxpayers on a timely basis.”

    Marchant further noted the revenue implications of frozen tax thresholds: “When is a tax threshold freeze not a tax rise? Recent OECD figures show that 45% of the salaries of top earners goes in tax, compared to an average across the OECD members of 29%. This will increase with today’s announcement that the thresholds are to be frozen for three more years.”

    Laurence Field, a partner at Crowe, commented on the implications of wealth-focused measures, including the so-called mansion tax: “Wealth taxes are here. The mansion tax is effectively a tax on accumulated wealth. Few tears will be shed for the asset rich and tax poor. We will wait to see what resources are available to make valuations of property and how often these valuations are reviewed.”

    Field also warned that extended freezes on personal allowances would hit ordinary taxpayers: “It’s a lost decade for taxpayers. Personal tax allowances for basic rate taxpayers were last raised in 2019. The extension of that freeze to 2030 means inflation will be doing the heavy lifting for revenue raising. We’ve had over 25% inflation since the pandemic and inflation rates are still nearly double the Bank of England target. Increases in national minimum wage are, of course, tax rises, as frozen thresholds mean that part of the pay rise goes straight to the Treasury.”

  • Investors brace for dividend tax rise as budget pushes up rates from 2026

    Investors are preparing for a tougher tax environment after the chancellor confirmed a two-percentage-point rise in the basic and higher dividend tax rates from April 2026, a move that has drawn criticism from market analysts despite the government’s stated ambition to encourage wider retail investment.

    Dan Coatsworth, head of markets at AJ Bell, said the policy risks are deterring savers from putting money into the markets:

    “For a government desperate to encourage more people to invest their money rather than hide in cash, raising taxes on dividends is an odd move to take. Dividends function as rewards to compensate investors for the risk of putting their money in the markets. Losing more of that reward to the taxman is deeply frustrating to the investor.”

    Coatsworth also warned that many savers are inadvertently exposing themselves to higher tax bills by holding investments in taxable accounts:

    “A lot of people opt for investment or dealing accounts, thinking their name implies a natural home for shares, funds or bonds. In doing so, they are making the mistake of using an account where capital gains and income are subject to tax once allowances are used up. Prioritising tax wrappers such as ISAs or pensions allows investors to keep the full amount of any gains or income.”

    Setting out the practical impact of the changes, he noted: “Currently, an investor can earn up to £500 in dividends outside of an ISA or pension in a tax year before they start paying tax on that income. At that point, basic rate taxpayers are charged 8.75%, higher rate taxpayers pay 33.75% and additional rate taxpayers pay 39.35%.”

    “For example, a basic rate taxpayer earning 4% yield on a £100,000 portfolio would receive £4,000 in dividends. The first £500 is free of tax, and they pay 8.75% on the remaining £3,500, equating to £306.25.”

    The rises next April will lift those rates to 10.75% for basic-rate taxpayers and 35.75% for higher-rate taxpayers, with the additional rate unchanged. Coatsworth explains the impact:

    “The dividend tax rates will rise next April to 10.75% at the basic rate and 35.75% at the higher rate, and no change to the additional rate. In the same example of a basic rate taxpayer earning 4% yield on a £100,000 portfolio, their tax bill would increase to £376.25.”

  • OBR chair apologises for ‘mistake’

    The head of the OBR (Office for Budget Responsibility) has apologised for a “mistake within the OBR” which led to the early publication of its Budget forecast as he started the watchdog’s presentation regarding its latest report.

    “The document was unintentionally uploaded onto our website too early,” Richard Hughes, chairman of the organisation said.

    “We’ve initiated an investigation into how and why it happened. That investigation will report into our oversight board, the Treasury and to the Treasury Committee and I will abide by their recommendations.”

    When asked whether he would resign over the issue if asked to, he said: “I will abide by their recommendations.

    “I will always serve so long as I have the confidence of the chancellor and the Treasury Committee.

    “We take it very seriously, which is why we have initiated an investigation and why it will report to the Treasury and Treasury Committee.”

    Rachel Reeves does not think the chairman of the Office for Budget Responsibility (OBR) should resign after a blunder saw the watchdog’s analysis of the Budget released early.

    “The chancellor has confidence in Richard Hughes,” a spokesperson for No said.

  • Budget tax rises in a chart

    Chancellor Rachel Reeves has outlined tax-raising measures worth £26bn by the end of the parliament.

  • UK growth forecasts lowered from next year

    The UK economy is expected to grow at a slower rate than previously expected from next year, the government’s official forecaster has said.

  • ‘Families left with mountain still to climb,’ says Joseph Rowntree Foundation

    Alfie Stirling, director of Insight and Policy at the Joseph Rowntree Foundation, offered a cautious welcome to the chancellor’s budget, arguing that while families would see some relief, the government still faced a major test on living standards.

    Stirling said: “With families facing the worst parliament on record for living standards, the chancellor needed to act on the cost of living at this budget. The true test of this budget, and ultimately this government, will be whether families who have been overlooked in recent years start to feel genuinely better off. This budget starts to give families some relief, but it still leaves them with a mountain to climb.”

    He praised several measures as significant steps forward: “The chancellor made a number of bold and important interventions: lowering energy bills, holding down transport costs and increasing the minimum wage will help families with life’s day-to-day costs. Scrapping the two-child limit in Universal Credit is a crucial and effective step towards meeting the Government’s manifesto commitment to reduce child poverty and give more children the best start in life. Delivering the biggest fall in child poverty over the course of a parliament wouldn’t be possible without it.”

    However, Stirling stressed that the budget fell short of what is required to repair the UK’s social safety net and address persistent inequalities:

    “But there is more to do. Housing costs and bills are still too high, our safety nets are too frail, and the cost to workers of caring for their loved ones is too great. Pushing harder in all these areas is now critical. It will mean going further to close inequalities in our tax system that cost revenue and make it unfair. The Government’s and families’ prospects depend on the Chancellor’s ability to deliver the change that’s urgently needed.”

  • ‘Budget delivers a triple hit for wealth creators and asset owners,’ says private wealth specialist

    Will Ford, partner at the private wealth team at Womble Bond Dickinson, sees this autumn budget hitting almost everyone. He wrote:

  • Lifetime ISA to be scrapped in favour of new first time buyer ISA, says Quilter

    Rachael Griffin, tax and financial planning expert at Quilter, has welcomed the changes announced by the chancellor around the Lifetime ISA. She said:

  • ‘Worries remain over the elevated prices of new EVs’, warn Close Brothers Motor Finance

    John Cassidy, sales managing director at Close Brothers Motor Finance, said the government needs to deliver more incentives to encourage drivers to switch to electric vehicles in the long run.

    “While with one hand the chancellor has imposed a pay-per-mile tax on electric vehicle (EV) drivers, with the other she has acknowledged the need for further support for the uptake of electric vehicles, and has continued the Electric Car Grant scheme. The scheme has been given a boost – continuing to offer up to £3,750 off EVs priced under £37,000 until 2029/30, though worries remain over the elevated prices of new EVs, the amount of options covered by the grant and whether this is not enough carrot against too much stick.

    “Amidst a backdrop of tax increases, this serves as both a reminder of the importance of the zero emission vehicle (ZEV) mandate to the government, but also the pressure it is putting on car manufacturers and consumers. While the uptake of EVs is improving, the fast-approaching 2030 ban on the sale of internal combustion engines (ICE) may require more incentives to really kick start progress and provide a more promising outlook for the industry.”

  • ‘Restricting salary sacrifice is least worst outcome for pensions,’ says Royal London

    Royal London’s director of Policy Jamie Jenkins, said the salary sacrifice scheme changes is the least worst outcome for pensions. He wrote:

  • Cash savers face 2% tax rise, warns AJ Bell

    Laura Suter, director of personal finance at AJ Bell, said savers will be being hit with tax rise on cash interest. She wrote:

  • CGT relief on business sales to be cut

    Capital Gains Tax relief on business sales made to employee ownership trusts will be reduced from 100% to 50%, Chancellor Rachel Reeves has announced.

    She told the Commons: “The coalition government introduced 100% relief from Capital Gains Tax on business sales made to employee ownership trusts, creating a route for gains to go completely untaxed when businesses are sold.

    “I will reduce this relief to 50%, retaining a strong incentive for employee-owned companies, and as we work towards doubling the size of the cooperative economy, the Department for Business and Trade will launch a call for evidence on how we can better support co-ops to grow.”

  • Tax rates on property, savings and dividend income to rise

    Tax rates on property, savings and dividend income will rise by two percentage points, chancellor Rachel Reeves said.

    She told the Commons: “Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary because no National Insurance is charged on property, dividend or savings income.

    “It’s not fair that the tax system treats different types of income so differently and so I will increase the basic and higher rate of tax on property, savings and dividend income by two percentage points, and the additional rate of tax on property and savings income by two percentage points.

    “Even after these reforms, 90% of taxpayers will still pay no tax at all on their savings.”

  • Government to scrap two-child benefit cap from April

    Rachel Reeves announced the government will abolish the two-child benefit cap from April.

    She told MPs: “The biggest barrier to equal opportunity is child poverty … I don’t intend to preside over a status quo that punishes children for the circumstances of their birth and demands that we all pay three times over for it.”

    She added: “There is one policy that pushes kids into poverty more than any other: It was introduced by the party opposite. They said it would save money and that it would bring about ‘behavioural change’ – disincentivising poorer families from having more children.

    “Well, even on its own terms, it has failed. The welfare bill has continued to rise and there has been no difference to the size of families. But what it has done is push hundreds of thousands of children into poverty since it was introduced. They said they were punishing parents’ choices, but it’s kids who have paid the price for the policies of a party which opted for cynical gimmicks over real savings in the welfare system.”

  • Salary sacrifice into pensions to be capped at £2,000

    The chancellor said: “Salary sacrifice for pensions, which was intended to be a small part of our pensions system, is forecast to almost treble in cost from £2.8bn in 2017 to £8bn by 2030 with the greatest benefit going to higher earners, or to those in the financial services sector putting their bonuses into pensions tax-free, while those on the minimum wage or whose employers don’t offer salary sacrifice don’t benefit at all.

    “This is not sustainable for the public finances, putting pressure on the tax everyone else pays, and so I am introducing a £2,000 cap on salary sacrifice into a pension, with contributions above that taxed in the same way as other employee pension contributions.

    “That is a pragmatic step so that people, especially on low and middle incomes can continue to use salary sacrifice for their pension without paying any more tax than they do now. And to give individuals and employers time to adjust to these new arrangements, these changes will come into effect in 2029.”

  • Mansion tax confirmed

    Rachel Reeves has confirmed that the UK government will introduce a so-called mansion tax on high-value properties, forming a central plank of its revenue-raising strategy.

    “From 2028, I am introducing the High Value Council Tax Surcharge in England, an annual £2,500 charge for properties worth more than £2m, rising to £7,500 for properties worth more than £5m.

    “This will be collected alongside Council Tax, levied on owners and we will consult on options for support or deferral. This new surcharge will raise over £400m by 2031 and will be charged on fewer than the top 1 per cent of properties.”

    The measure marks a shift in how high-value homes are treated within the tax system, with the Treasury seeking to tap into wealth concentrated at the top end of the property market.

    Reeves also confirmed parallel rises in taxes on unearned income, stating that the basic and higher rates on property, savings and dividend income will increase by two percentage points, while the additional rate of tax on property will rise by the same margin.

  • Reeves confirms income tax threshold freeze

    The chancellor has confirmed that she will freeze income tax thresholds until the 2030-31 financial year, admitting it would hit “working people”.

    Reeves said: “To break the cycle of austerity we need a fair and sustainable tax system. One that generates reliable revenues to fund the public services we all use and supports investment to grow our economy. That does mean that today I am asking everyone to make a contribution.

    “The previous Conservative government froze personal tax thresholds from 2021 until 2028. And today I will maintain all income tax and equivalent National Insurance thresholds at their current level for three further years from 2028, while ensuring that people only in receipt of the basic or new state pension do not have to pay small amounts of tax through Simple Assessment from April 2027.”

    The chancellor added: “I know that maintaining these thresholds is a decision that will affect working people I said that last year and I won’t pretend otherwise now.

    “I am asking everyone to make a contribution, but I can keep that contribution as low as possible because I will make further reforms to our tax system today to make it fairer, and to ensure the wealthiest contribute the most.”

    James Norton, head of retirement and investments at Vanguard Europe, said: “The continued freeze on income tax thresholds means more people will now be in higher tax bands. This makes it more important than ever to make the most of your ISA and pension allowances. These shelter your investments from income, dividend and capital gains tax.

    “For those in retirement, consider the best way to draw your income. Most people will be best served by taking money out of cash savings and general investment accounts first. This means you can leave money to grow tax free for longer within ISAs and pensions. Then when accessing your pension, make sure you’re only drawing the income you truly need, taking too much can lead to an unnecessary tax bill.”

Here’s everything you need to know following the chancellor’s speech to the Commons:

The chancellor has confirmed that the freeze on income tax thresholds will be extended for an additional three years beyond 2028, in a move described by analysts as a “stealth tax”.

By keeping thresholds unchanged, income tax will not rise in line with inflation, pushing more taxpayers into higher bands when pay increases. The freeze will apply to the 2028-29, 2029-30, and 2030-31 financial years.

The OBR estimates that the measure will create around 920,000 additional higher-rate taxpayers, while generating £8.3bn in revenue each year.

The chancellor added: “I know that maintaining these thresholds is a decision that will affect working people I said that last year and I won’t pretend otherwise now.”

From April 2029, salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from National Insurance contributions.

Under the new rules, contributions exceeding this limit will be subject to both employer and employee NICs, 15% and 8% respectively on earnings up to £50,270, and 2% on income above that level.

The OBR estimates that the measure will raise £4.7bn in 2029-30 and £2.6bn in 2030-31, forming part of the government’s broader strategy to increase revenue from unearned and deferred income.

The chancellor said: “Salary sacrifice for pensions, which was intended to be a small part of our pensions system, is forecast to almost treble in cost from £2.8bn in 2017 to £8bn by 2030 with the greatest benefit going to higher earners, or to those in the financial services sector putting their bonuses into pensions tax-free, while those on the minimum wage or whose employers don’t offer salary sacrifice don’t benefit at all.

“This is not sustainable for the public finances, putting pressure on the tax everyone else pays, and so I am introducing a £2,000 cap on salary sacrifice into a pension, with contributions above that taxed in the same way as other employee pension contributions.

The amount you can save tax-free in a cash ISA will be slashed from £20,000 to £12,000, from April 2027, unless you are aged over 65.

Reeves announced that £8,000 of the £20,000 tax-free ISA allowance must be invested in stocks and shares, capping the annual cash ISA allowance at £12,000, except for those who are over 65.

James Norton, head of retirement and investments at Vanguard Europe, said: “Cash savings remain an important part of a sound financial plan. Research recommends holding £2,000 along with three months’ worth of expenses in cash, to cover emergencies.

“Investing, however, gives you the best chance of achieving long-term financial goals, like retirement. Over the last ten years, had you invested £5,000 a year in a stocks & shares ISA, for example, your pot would now be worth £107,000 compared with £57,000 in a cash ISA.

The new tax will hit owners of properties over £2m from April 2028. It will be introduced as a council tax surcharge and is expected to raise £400m a year by the end of the decade.

“From 2028, I am introducing the High Value Council Tax Surcharge in England, an annual £2,500 charge for properties worth more than £2m, rising to £7,500 for properties worth more than £5m,” Reeves said.

“This will be collected alongside Council Tax, levied on owners and we will consult on options for support or deferral. This new surcharge will raise over £400m by 2031 and will be charged on fewer than the top 1 per cent of properties.”

The measure marks a shift in how high-value homes are treated within the tax system, with the Treasury seeking to tap into wealth concentrated at the top end of the property market.

  • Properties valued from £2m to £2.5m will pay £2,500

  • Properties valued from £2.5m to £3.5m will pay £3,500

  • Properties valued from £3.5m to £5m will pay £5,000

  • Properties valued at more than £5m will pay £7,500

Properties will be assessed based on 2026 valuations provided by the government’s Valuations Office Agency.

While council tax bands are not going to change, the government will look at properties in the three highest bands of F, G, and H to see if they are valued above £2m.

Property income tax will rise by two percentage points from April 2027, to 22%, 42% and 47% for the basic, higher and additional rates.

The chancellor will abolish the two-child benefit cap, a move that will add roughly £3.5bn to the annual welfare bill. The cap currently restricts low-income families from claiming welfare support for more than two children and has been one of the most contentious elements of the benefits system since its introduction.

She told MPs: “The biggest barrier to equal opportunity is child poverty … I don’t intend to preside over a status quo that punishes children for the circumstances of their birth and demands that we all pay three times over for it.”

She added: “There is one policy that pushes kids into poverty more than any other: It was introduced by the party opposite. They said it would save money and that it would bring about ‘behavioural change’ — disincentivising poorer families from having more children.”

Drivers of battery electric vehicles will be subject to a new 3p-per-mile tax from the 2028-29 financial year, Chancellor Rachel Reeves has confirmed. The charge will apply in addition to existing road taxes, costing the average driver around £255 in its first year.

The pay-per-mile levy will increase with inflation and is projected to raise £1.1bn initially, climbing to £1.9bn by 2030-31.

The government is offering some mitigation for EV owners, however, by raising the threshold for the expensive car supplement, an additional Vehicle Excise Duty charge, from £40,000 to £50,000 for electric vehicles from April 2026.

Fuel duty will remain at the current rate of 52.95 pence per litre for both petrol and diesel for an additional five months, Reeves has confirmed. This includes an extension of the 5p temporary cut, which is scheduled to be reversed in September 2026.

From April 2027, fuel duty will then rise annually in line with RPI inflation, marking a return to index-linked increases.

The Office for Budget Responsibility estimates that the measure will cost motorists £2.4bn next year and around £900m annually thereafter, reflecting the fiscal impact of extended relief followed by inflation-driven rises.

Investors are preparing for a tougher tax environment after the chancellor confirmed a two-percentage-point rise in the basic and higher dividend tax rates from April 2026, a move that has drawn criticism from market analysts despite the government’s stated ambition to encourage wider retail investment.

Dan Coatsworth, head of markets at AJ Bell, said the policy risks are deterring savers from putting money into the markets:

“For a government desperate to encourage more people to invest their money rather than hide in cash, raising taxes on dividends is an odd move to take. Dividends function as rewards to compensate investors for the risk of putting their money in the markets. Losing more of that reward to the taxman is deeply frustrating to the investor.”

Setting out the practical impact of the changes, he noted: “Currently, an investor can earn up to £500 in dividends outside of an ISA or pension in a tax year before they start paying tax on that income. At that point, basic rate taxpayers are charged 8.75%, higher rate taxpayers pay 33.75% and additional rate taxpayers pay 39.35%.”

“For example, a basic rate taxpayer earning 4% yield on a £100,000 portfolio would receive £4,000 in dividends. The first £500 is free of tax, and they pay 8.75% on the remaining £3,500, equating to £306.25.”

The rates will rise next April to 10.75% for basic-rate taxpayers and 35.75% for higher-rate taxpayers, with the additional rate remaining unchanged.

Savings income tax will rise by two percentage points from April 2027, to 22%, 42% and 47% for the basic, higher and additional rates.

“Savers are being hit with another whopping tax increase on their savings interest,” said Laura Suter, director of personal finance with AJ Bell.

The government will increase taxes on gambling as part of its latest Budget measures. From April 2026, the rate of remote gaming duty will increase from 21% to 40%, while bingo duty will be abolished.

A new general betting duty for remote betting, set at 25%, will take effect from April 2027, though self-service betting terminals, spread betting, pool bets, and horse racing will be exempt.

Casino gaming duty bands will remain frozen in 2026-27, before increasing in line with RPI inflation in subsequent years.

The tax changes are expected to raise around £1.1bn by 2029-30, representing a significant fiscal contribution from the gambling and betting sector.

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