Chancellor Rachel Reeves unveiled her first Budget before the House of Commons on Wednesday, less than an hour after the Office for Budget Responsibility (OBR) inadvertently published key documents revealing major tax increases.
The accidental release, a technical error acknowledged by the OBR, exposed the scale of the fiscal measures before Reeves formally addressed MPs, marking an unusually disrupted Budget afternoon and immediately framing the tone of parliamentary debate.
The government would raise taxes by £26bn in 2029-30, primarily through extended freezes to income tax thresholds and National Insurance bands.
Reeves began her speech with a pointed reference to the forecasts embedded in the prematurely uploaded report, declaring that she intended to “beat the forecasts again” and arguing that the projections reflected “the Tories’ legacy, not Britain’s destiny.”
The Chancellor attributed fiscal headwinds to post-Brexit disruption, the pandemic, and long-standing stagnation, while insisting the Budget marked a shift toward stability and reinforcement of public finances.
Income tax thresholds frozen to 2030-31 in ‘stealth tax’
At the heart of the Budget is the decision to extend the freeze on personal tax thresholds for a further three years.
This means the income tax allowance of £12,570, the higher-rate threshold of £50,270 and the additional-rate threshold of £125,140 will remain unchanged until April 2031.
Economists have described the measure as a form of fiscal drag, with wage growth and inflation expected to push more earners into higher tax brackets over time.
The OBR estimates the freeze will raise £7.6bn in 2029-30 alone.
Employer National Insurance thresholds will also remain static to the same date, a move expected to increase revenue by a further £8bn.
The Chancellor did, however, confirm a short-term freeze in fuel duty for five months, although staged increases are scheduled from 2026 onward.
Cash Isa tax-free allowance to be reduced for savers under 65
The annual tax-free savings limit for cash ISAs will be cut from £20,000 to £12,000 for those under the age of 65, the government confirmed, with the change due to take effect in April 2027.
Ministers argue the move is intended to encourage more people to invest rather than keep their money in cash, suggesting that channelling savings into stocks and shares could support economic growth, despite the higher risk attached.
However, there remains uncertainty over whether the lower allowance will meaningfully shift behaviour, with some analysts questioning if savers will naturally transition into investment-based ISAs simply because the tax advantage on cash options has narrowed.
Mansion tax and pension contribution reforms announced
Reeves confirmed a new annual council tax surcharge on homes valued above £2m, amounting to £2,500 for properties valued between £2m and £5m, and £7,500 above £5m.
Treasury projections suggest the measure will raise more than £400m by 2031 and apply to fewer than one per cent of homeowners, the majority concentrated in London and the South East.
The levy marks the closest the government has come to a targeted wealth tax in decades, an idea favoured by progressive MPs throughout the Budget lead-up.
The Chancellor also revealed changes to salary sacrifice pension contributions.
A new £2,000 annual cap on tax-advantaged pension sacrifice will take effect in 2029, with contributions beyond that limit taxed in line with standard employee payments.
Reeves described the move as a pragmatic adjustment aimed at fairness within the system.
Two-child benefit cap scrapped after years of pressure
In a shift with major social welfare implications, Reeves announced the end of the two-child benefit cap effective from April 2026.
The reform follows months of campaigning from backbench Labour MPs, poverty organisations and opposition parties.
According to the OBR, the policy change will raise payments for 560,000 families and lift an estimated 450,000 children out of poverty by 2029-30.
The cap, introduced in 2017, prevented families from claiming universal credit or tax credit for more than two children unless exempted by specific circumstances.
Three-year stamp duty exemption for new LSE listings
Britain will introduce a three-year stamp duty exemption for new London Stock Exchange listings, aiming to breathe life back into a market that has seen a steady flow of companies opt for New York instead in search of richer valuations and more abundant capital.
The measure, unveiled by UK finance minister Rachel Reeves as part of the Labour government’s second annual budget, is intended to make London a more competitive venue for public offerings and encourage firms to float domestically rather than abroad.
“Stamp duty on share transfers is one of the remaining areas in which London differs from competing listing venues,” said Esteve, a partner in White & Case’s capital markets group.
“By removing this additional tax for investors in newly listed companies, the stamp duty exemption would hopefully help stimulate demand, attract more global capital and support valuations.”
New EV tax, higher gambling duty and corporate adjustments
Electric vehicle users will face a new annual mileage-based tax from 2028, with electric cars charged 3p per mile and plug-in hybrids 1.5p.
Reeves said the move will fund doubled road maintenance budgets and expand charging infrastructure, arguing it establishes parity with petrol and diesel drivers who contribute through fuel duty.
A restructured gambling tax regime was also unveiled, including increases to Remote Gaming Duty from 21% to 40%, and higher duty on online betting from 15% to 25%.
Bingo Duty will be abolished entirely in April 2026. The Treasury estimates gambling reforms will raise over £1bn a year by 2031.
The Budget also increases tax on dividends, savings and property income by two percentage points, reduces capital gains tax relief for sales to employee ownership trusts, and lowers writing-down allowances within corporation tax.
Other measures, including administration and compliance changes, are expected to collect £2.3bn.
Analysts say tax burden among largest in a decade
Initial market reaction was measured.
Deutsche Bank economist Sanjay Raja noted the Budget represents the third-largest tax-raising package since 2010, pointing to the productivity downgrade revealed in the OBR’s document and the Chancellor’s decision to tighten fiscal conditions rather than accelerate stimulus.
“Nearly £30bn in taxes were announced, with the extension of the fiscal drag and tapering of pensions and employee salary sacrifice schemes making up the bulk of the tax-raising measures. Increases in property tax, gambling tax, and a tax on electric vehicles were also announced. But tax hikes were offset by spending rises elsewhere, which amounted to £12bn,” he said.
Raja said the final tax total came in lower than some expected due to stronger earnings and equity performance, which helped maintain fiscal headroom despite subdued growth assumptions.
The Chancellor framed the Budget as a foundation for long-term stability, though political debate is likely to intensify over rising household tax pressures heading into 2026.
The decision to freeze thresholds for almost seven more years is expected to become a central dividing line as living costs continue to shape public sentiment.
Opposition slams budget, demands Reeves’ resignation
Kemi Badenoch, leader of the opposition Conservative Party, sharply criticised Chancellor Rachel Reeves’ Autumn Budget, branding it a “total humiliation.”
Delivering her formal response to the Budget in the House of Commons, Badenoch accused the chancellor of failing in her role, labelling Reeves “utterly incompetent” and demanding her dismissal.
She argued that the Budget offered no substantial direction, instead presenting what she described as a “smorgasbord of misery” through a collection of minor tax increases rather than bold fiscal measures.
“Last year she put up taxes by £40 billion, the biggest tax raid in British history. She promised she wouldn’t be back for more, she swore it was a one-off. She told everyone that from now on, there would be stability and she would pay for everything with growth,” Badenoch said, addressing lawmakers in the House of Commons.
“Today, she has broken every single one of those promises. If she had any decency, she would resign.”
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