In a highly anticipated announcement, Chancellor Rachel Reeves has delivered her Budget to the House of Commons, outlining a range of tax increases and spending policies that will reshape the UK’s economic landscape over the coming years.
The key highlights include a freeze on income tax thresholds, leading to an estimated 920,000 additional higher-rate taxpayers by 2029-30. Electric vehicle drivers will face a new pay-per-mile tax from 2028-29, costing the average driver £255 annually to start with. Fuel duty will also rise in line with inflation from 2027, adding further pressure on motorists.
Pension contributions above a £2,000 threshold will no longer be exempt from National Insurance from 2029, while owners of properties worth £2 million or more will face a new “high value council tax surcharge” from 2028. Savings and dividend tax rates are set to increase, and the capital gains tax relief for company owners selling to employee-owned trusts will be slashed from 100% to 50%.
On the spending side, welfare expenditure is expected to climb £16 billion higher by the end of the decade, driven by policy changes and higher-than-anticipated unemployment. The government has also announced measures to crack down on the “tax gap”, aiming to raise an additional £2.3 billion by 2029-30.
The economic forecast paints a mixed picture, with growth projected to average 1.5% per year until the end of the decade – a 0.3 percentage point downgrade from March. Borrowing is expected to fall, but debt as a share of GDP is set to reach 96% by the end of the decade, up from the current 95%.
Overall, the Chancellor’s Budget represents a significant shift in the government’s fiscal approach, with taxpayers and businesses set to shoulder a greater burden in the years ahead.