The Autumn Budget began in an unusual way when the Office for Budget Responsibility (OBR) leaked its report a full 20 minutes before the Chancellor’s speech.
Although the Budget clearly protected vulnerable households from the rising cost of living, it also raised taxes for everyone else, with wealthier individuals facing the largest increases.
Against this backdrop, the Budget delivers a frontloaded increase in spending of £9 billion and backloaded increase in taxes of £26 billion.
The OBR predicted the tax take would increase to a record high of 38.3 per cent of GDP by 2029-30, a rise of 0.8% on an earlier March forecast.
Here are the key points from Rachel Reeves’ second Budget:
Mansion tax to be introduced on £2 million homes
A high value council tax surcharge of between £2,500 to £7,500 is proposed on properties worth over £2m, following a revaluation of homes in bands F, G and H.
From April 2028, homeowners will have to pay a recurring annual charge on top of their current council tax.
Fewer than one per cent of properties in England are expected to be above the £2 million threshold.
The move increases concerns of a freeze in activity at the higher end of the market, affecting deals further down a chain. Rightmove data shows sales agreed for £2 million-plus homes are already down 13 per cent year-on-year.
Tax on savings & property income to rise
From April 2027 an additional two per cent income tax will apply to savings and property income. The rates will increase to 22 per cent, 42 per cent or 47 per cent.
This rise will heap further pressure on individual landlords already contending with tighter regulations and the removal of various tax exemptions.
Dividend tax hike
From April 2026, a two per cent-point increase to the basic and higher rates of tax on dividends, raising them to 10.75 per cent and 35.75 per cent respectively. The additional rate will remain unchanged at 39.35 per cent.
Tax thresholds frozen for longer
The income tax personal allowance, the higher-rate threshold and additional-rate threshold are frozen at £12,570, £50,270 and £125,140 respectively, until 2030-31.
As a result, the proportion of taxpayers paying either higher or additional rate tax will have increased from 15 per cent in 2021-22 to 24 per cent in 2030-31.
National insurance thresholds for employees and self-employed will also be frozen for a further three years from April 2028 to April 2031.
Inheritance tax thresholds will be frozen for a further year to April 2031.
Cash ISA allowance cut to £12,000 for under-65s only
The tax-free ISA allowance will remain at £20,000 for investments in stocks & shares products but a cap of £12,000 will apply to cash ISAs from April 2027.
Over 65s will retain the full cash ISA allowance.
Lifetime ISA to be scrapped
The government will publish a consultation in early 2026 on the implementation of a ‘simpler’ product to support first time buyers to buy a home.
Once available, this new product will replace the Lifetime ISA.
Pledge to re-engineer EIS & VCT schemes
The Chancellor spoke to re-engineering Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes, so they don’t just back early-stage ideas but stay with companies as they grow.
The government will increase the annual limit that can be invested into companies via VCT and EIS to £10m, and £20m for so-called ‘knowledge intensive companies’ (KICs), as well as increasing the lifetime company investment limit to £24m, and £40m for KICs.
Income Tax relief on VCTs reduces from 30 per cent to 20 per cent from April 2026, whilst EIS stays at 30 per cent.
£2,000 salary sacrifice cap confirmed
Reeves capped the NICs exemption for salary-sacrificed pension contributions at £2,000, with employee contributions above that taxed in the same way as other earnings. This is due to come in from April 2029.
All employer pension contributions will continue to be free of NICs. There could be opportunities to bring forward employee pension contributions before the change.
Employees who choose to sacrifice salary to receive tax free childcare or child benefit can keep doing so.
State pension to increase by 4.8 per cent
Those on the full new state pension will see their weekly payments go up from £230.25 to £241.30 (£12,547 a year) under the triple lock mechanism – a rise of more than £550 per year.
The full basic state pension weekly amount will go up from £176.45 to £184.91 (£9,615 a year) – an increase of just under £440 a year.
Agricultural property relief & business property relief
The £1m allowance for the 100 per cent rate of agricultural property relief and business property relief will be transferable between spouses and civil partners bringing this into line with other IHT reliefs.
New tax to be levied on electric vehicle drivers
A new tax on electric vehicles (EVs) will apply, with EV drivers charged 3p per mile, on top of other road taxes from April 2028.
The chancellor eased the pain slightly by extending the UK’s new electric car grant until 2030.
The grant currently subsidises the price of a new EV by between £1,500 and £3,750 depending on the model.
Other measures
- From April 2026, workers over 21 will see a 4.1 per cent increase to their minimum wage, bringing it to £12.71 an hour and those aged 18 to 20 will see an 8.5 per cent increase to £10.85.
- Fuel duty frozen for five months after April 2026, followed by a staged increase from September 2026.
- Regulated rail fares for journeys in England frozen next year for the first time since 1996.
- Tax on sugary drinks extended to pre-packaged milkshakes and lattes from 2028, reversing an exemption when the tax was introduced in 2018.
- The two-child benefit cap is scrapped from April 2026.
- A stamp duty holiday for companies newly listing on the London Stock Exchange will be in place for three years.
- The gambling industry is going to be taxed more, to raise more than £1bn. Remote gaming duty will rise to 40 per cent from 21 per cent while online betting tax will rise from 15 per cent to 25 per cent.
