𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Chancellor Rachel Reeves has set out tax increases costing the nation an extra £26 billion – bringing the total tax burden to its highest level ever since World War 2. But what does her Budget mean in practice for ordinary households? Despite the Chancellor’s claim that “those with the broadest shoulders” will be asked to pay, she has actually increased charges for people in every walk of life.

Here are some of the biggest changes:

Income tax

Rachel Reeves has extended a freeze in the thresholds for the basic rate of income tax and the higher rate of income tax. They were already frozen, at £12,570 and £50,270 respectively, until the 2027-28 financial year. She has now extended this for three years, to 2030-31.

This is actually worse than feared, as it had been reported the freeze would be increased for two more years, not three.

Because inflation tends to push up wages, this is actually an increase in income tax – even though the Chancellor promised not to put up income tax for working people.

In fact, we’ll pay an extra £13 billion between us because of the change. And 5.2 million additional individuals who previously avoided paying income tax – because they have very low incomes – will now be forced to pay. That includes pensioners.

The freeze also means that an extra 4.8 million people will have to pay the higher 40% rate, which was once reserved for people on the highest incomes incomes.

Pension contributions

The Chancellor is limiting a scheme called “salary sacrifice”, which allows working people to pay less National Insurance when they save money into a pension. Again, it allows her to increase taxes in a “stealthy” way, because it’s less obvious than simply announcing she is increasing the tax rate.

But the result will be that working people pay an extra £4.7 billion National Insurance in 2029-30.

Road pricing for electric cars

A new mileage-based charge on electric cars will be introduced in April 2028. In 2028-29, the charge will equal £0.03 per mile for battery electric cars and £0.015 per mile for plug-in hybrid cars, with the rate per mile increasing annually with inflation. The average driver of a battery electric car in 2028-29 driving 8,500 miles is therefore expected to be charged £255 in this year.

A new property tax

The Government has announced a new high value council tax surcharge. From April 2028, owners of properties identified as being valued at over £2 million by the Valuation Office (in 2026 prices) will be liable for a recurring annual charge – to be paid on top of council tax. There will be four price bands with the surcharge rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band, to £7,500 for a property valued in the highest band of £5 million or more.

Gambling taxes

Several changes to gambling duties have been announced, including higher taxes on online gambling. In total, the increases raise £1.1 billion by 2029-30.

Taxes on investments

Increasing tax rates on dividends, property and savings income by 2% will raise £2.1 billion.

Corporation tax

There will be a reduction to the writing down allowance main rate in corporation tax, which means businesses pay an extra £1.5 billion. This allowance allows companies to deduct a percentage of the cost of capital assets from their taxable profit each year.

Extra spending includes removing the two-child limit within Universal Credit from April 2026. The limit restricted the Universal Credit child element, which is currently £3,500 per year for second and subsequent children, to two children per family apart from children born prior to 6 April 2017 and those who meet certain exemption criteria.

Its removal costs £2.3 billion in 2026- 27 and £3.0 billion in 2029-30.

In 2029-30, because of the change, an estimated 560,000 families see an increase in Universal Credit averaging £5,310 per year. The Government estimates that this measure will reduce child poverty by 450,000 by 2029-30, relative to the level had the two-child limit remained in place.

Responding to the Budget, Conservative leader Kemi Badenoch told Rachel Reeves: “After this budget she will go down as the country’s worst ever Chancellor.

“Today she has announced a new tax raid of £26 billion. They’re all cheering.

“Household income is down. Spending policies in this budget increase borrowing in every year.

“That smorgasbord of misery we have just heard from her can be summed up in one sentence: Labour are hiking taxes to pay for welfare. This is a Budget for Benefit Street, paid for by working people.

“This Budget increases benefits for 560,000 families by an average of £5,000. They are hiking taxes on workers, pensioners, and savers, to pay for handouts to keep their backbenchers quiet.”