Chancellor Rachel Reeves has unveiled her second Budget to the nation, outlining a comprehensive package of tax increases designed to address a significant shortfall in the country's finances. The announcement was momentarily upstaged when the Office for Budget Responsibility (OBR) released its official assessment prematurely, drawing intense scrutiny from MPs awaiting details of the Government's fiscal strategy.
Key Tax Measures and Financial Reforms
The Budget introduces widespread changes to the UK's tax landscape. Alcohol duty will rise in line with inflation, averaging a 4.5% increase that will push up prices in pubs, bars and retailers. Tobacco products face an even steeper hike of 6.5%, reflecting inflation plus an additional two percentage points imposed by the Treasury.
In a move affecting millions of workers, income tax thresholds will remain frozen until 2030, a policy previously characterised as a stealth tax rise. The Chancellor defended this measure as asking "everyone to make a contribution," though the OBR projects it will create 780,000 new basic-rate taxpayers and 920,000 additional higher-rate payers by 2029/30, generating approximately £7.6 billion in revenue that year.
Pension savings will also see significant reform with the introduction of a £2,000 cap on private pension contributions via salary sacrifice before National Insurance applies. Contributions exceeding this limit will be subject to NI payments from 2029, a change expected to raise £4.7 billion in 2029-30.
Property, Business and New Charges
Wealthier homeowners will face a new 'high-value council tax surcharge' on properties valued above £2 million. The levy operates across four bands, starting at £2,500 for homes worth between £2m and £2.5m and rising to £7,500 for properties priced over £5m, forecast to raise £0.4 billion in 2029-30.
In a landmark shift for transportation policy, electric vehicle owners will be charged 3p per mile from next year, with the rate expected to increase annually with inflation. Ministers say this will help offset declining fuel duty revenues as the transition to EVs accelerates.
Business rates will see a dramatic rebalancing, with permanently lower rates for over 750,000 retail, hospitality and leisure firms – the "lowest rates since 1991" according to the Chancellor. This will be funded by higher charges on properties valued above £500,000, particularly affecting large distribution warehouses used by major online retailers.
Support for Households and Anti-Poverty Measures
In a significant welfare reform, the Chancellor confirmed the abolition of the two-child benefit limit from April, a move she stated would "lift 450,000 children out of poverty." The controversial cap, introduced by the Conservatives in 2017, has long faced criticism from Labour MPs and anti-poverty campaigners. The OBR estimates scrapping the restriction will cost around £3 billion by 2029/30.
Households will also benefit from a £150 reduction in typical annual energy bills next year, achieved by scrapping the Energy Company Obligation (ECO) scheme which the Chancellor argued had added £1.7 billion annually to bills.
Other notable changes include a sharp increase in remote gaming duty from 21% to 40% next year, aimed at curbing participation in gambling formats linked with "the highest levels of harm," while bingo duty will be abolished entirely from April. The annual cash ISA limit will fall from £20,000 to £12,000 to encourage more savers toward stocks and shares ISAs for long-term wealth building.
Ms Reeves told MPs the overall package sought to balance fiscal responsibility with targeted help for families under strain, ensuring "those with the broadest shoulders contribute more" while creating economic stability.
