Chancellor Rachel Reeves has unveiled a sweeping budget that will affect workers, pensioners, and high earners alike, Times UK reported. The Office for Budget Responsibility (OBR) apologised for inadvertently leaking the full budget before Reeves’ official address to Parliament, an unprecedented disclosure.
Among the key measures, income tax thresholds have been frozen until 2030–31, pushing more taxpayers into higher rates as wages rise. The national living wage will increase by 4.1 per cent to £12.71 an hour, while the rate for those aged 18 to 20 rises by 8.5 per cent to £10.85. Pension contributions made through salary sacrifice schemes above £2,000 will no longer be exempt from national insurance from April 2029, expected to raise £4.7 billion.
Reeves introduced a new mansion tax on homes valued above £2 million from 2028, projected to generate £400 million, and scrapped the two-child benefit cap from 2026, costing around £3 billion. The budget also includes cuts to green levies on energy bills, reducing household costs by an estimated £150 a year, while rail fares will be frozen for a year.
Savings and dividends will face higher tax rates, and electric vehicle drivers will be charged 3p per mile from 2028. Alcohol duty will rise with inflation, and vaping liquids will face a flat-rate excise of £2.20 per 10ml from October 2026. Remote gambling duties are set to increase to 40 per cent, while a new 25 per cent duty will apply to online sports betting.
The Resolution Foundation warned that frozen income tax thresholds would cost the average worker on £35,000 around £1,400 by 2031, with nearly one million more taxpayers entering the 40 per cent higher-rate band. The think tank described the move as the UK’s “biggest stealth tax rise,” estimating £67 billion would be raised by the end of the decade.
Small shops and pubs are expected to face higher property taxes despite Reeves’ pledge to lower rates for 750,000 retail, hospitality, and leisure properties. Analysts said the scrapping of discounts and revaluations will reduce support and increase bills sharply for smaller businesses.
Reeves defended her budget in interviews, acknowledging that working people would pay “a bit more” but emphasizing that the government had taken steps to limit the impact and cut household bills. She also left the door open for further tax rises in the future, citing global economic challenges and fiscal pressures.
The budget prompted mixed reactions, with critics calling it “tone deaf” and overly focused on taxation at the expense of growth, while supporters highlighted investments in child poverty, regional funding, and infrastructure. UK borrowing costs dipped slightly, the pound weakened marginally, and markets showed little movement as investors assessed the impact of the measures.
