Here The Mirror looks at what could be announced at the Chancellor Rachel Reeves’s major Budget on Wednesday after months of speculation over possible tax hikes
Chancellor Rachel Reeves will tomorrow deliver her long-awaited Budget after months of speculation over tax hikes.
Ms Reeves will unveil her plans at the despatch box in the Commons from around 12.30pm on Wednesday where she is expected to fill an estimated £20billion blackhole in the public finances alongside measures on the cost of living and fixing the NHS.
At a meeting of Labour MPs on Monday evening, the Chancellor laid out her three priorities. Ms Reeves said: “Cutting the cost of living, cutting NHS waiting lists and cutting the cost of debt.”
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She told MPs: “We’ve increased the national living wage and the national minimum wage. We’ve protected the triple lock, increasing it last year and increasing it again from next April. We have properly funded free childcare commitments. We’re rolling out free breakfast clubs at primary schools for all children and extending free school meals to an additional half a million children.
But she added: “I know that there is more to do, which is why we have already announced a freeze in prescription charges and rail fares. But there is more we can – and will – do.”
Here The Mirror looks at what could be announced on Wednesday and plans that have already been unveiled in recent weeks.
Income tax, VAT and national insurance
Labour’s election winning manifesto promised no hikes on VAT, national insurance, or income tax for working people. But the government had been considering ripping up the promise on income tax with the first hike in almost 50 years.
The plans were dropped after the government received better than expected forecasts reduced the size of the black hole in the public finances.
The government has, however, refused to rule out extending the freeze on income tax thresholds for another two years, which had been due to end in 2028. The move – often branded a stealth tax – means more people are dragged into paying a higher rate of tax as their incomes rise.
Minimum wage boost
Expect the Budget to include a boost to the minimum wage for millions of workers. Currently workers over the age of 21 recieve around £12.21 under the minimum wage while those between 18 and 20 receive £10.
In the summer the government said its estimate was for the wage to increase to between £12.55 to £12.86. The Chancellor is said to be looking at increasing the amount to around £12.70 from April 2026, which would be a rise of around 4%.
Rail fares to be frozen
Millions of commuters across the UK are set to save after the first freeze on rail fares for 30 years it plans already announced by the government. The freeze will made official at the Budget, saving existing rail passengers £600 million in 2026/27, across more than a billion train journeys.
With ticket prices soaring by 60% under the Tories, passengers can now enjoy not paying a penny more on season tickets, peak returns for commuters and off-peak returns between major cities.
Two-child benefit limit
The government is expected to axe the two-child benefit limit in full at the Budget.
Charities campaigning against poverty and Labour MPs have long called for the end of the two-child benefit limit – one of the most severe austerity-era policies. It restricts child tax credits and universal credit to the first two children in a family.
Cabinet ministers including Ms Reeves have dropped hints it will be scrapped – costing around £3billion. The Chancellor said a fortnight ago it was not right that a “child is penalised because they are in a bigger family” as she vowed to cut the number of kids in poverty.
Gambling taxes
The Treasury has been looking at hikes to gambling taxes. Ex-Prime Minister Gordon Brown has suggested it could raise billions to fund the move to scrap the two-child benefit limit and lift hundreds of thousands of kids out of poverty.
Betting firms are subject to different levies. The biggest earner for the Treasury is the remote gaming duty, largely levied on the profits from online operations, which generates £1billion a year. The IPPR recommends more than doubling it from 21% to 50% to collect another £800million.
Sugar tax
The tax on sugary drinks will be widened to drive down obesity and protect children’s health, the Mirror understands. Health Secretary Wes Streeting is preparing to announce plans to lower the threshold for the Soft Drinks Industry Levy from 5g to 4.5g of sugar per 100ml, meaning more beverages will be affected unless manufacturers slash sugar levels.
Milkshakes and pre-packaged coffees will also be included for the first time as an exemption on milk-based drinks is expected to be ditched. The changes are set to kick in from January 2028 – putting manufacturers on notice to reduce the sugar content in their drinks or face the new charge.
NHS prescriptions freeze
Rachel Reeves will extend the freeze on NHS prescription charges in next week’s Budget. Announcing the move, the Chancellor said “no one should put their health at risk” because they can not afford medication.
It means the cost of a single prescription will remain at £9.90, which the Treasury said would save the public around £12million next year. It is an extension of a freeze on charges announced in April – the first in three years. The Mirror first revealed the plan last as Keir Starmer and the Chancellor prepare to unveil more measures to combat the cost of living on November 26.
‘Mansion tax’ on high value homes
A new levy could be applied to some of the most valuable homes in what has been billed by some as a “mansion tax” to raise hundreds of millions. The move would reportedly revalue some of the most valuable properties across council tax bands F, G and H and hit 100,000 of them with a new surcharge, with the threshold starting at £2million.
Energy bills
Keir Starmer has said his key priority is slashing the cost of living for struggling Brits. Among options being considered are measures to cut the costs of household energy bills.
The Treasury has been looking at eliminating VAT – which stands at 5% on energy bills – to zero. This has been estimated to cost over £2billion, but saving consumers on average around £80-per-year. There have also been suggestions the government could cut other levies on energy bills.
State pension boost
Millions of pensioners will recieve a boost of around £550-per-year as the state pension increases from April next year.
Ms Reeves will confirm at the Budget it will go up in line with average earnings growth – which stood at 4.8% in September. Under the triple lock guarantee, the state pension increases every April in line with whichever is the highest of earnings growth in between May to July, inflation in September, or 2.5%.
The current state pension rate stands at £230.25-per-week. Expect this to rise to just over £240-per-week from April.
Salary sacrifice
The Chancellor is said to be looking at introducing a new £2,000 yearly cap on how much money can save into your pension through salary sacrifice schemes. Salary sacrifice allows you to give up some of your salary for a non-cash benefit, such as pension contributions. As this exchange happens before tax and National Insurance are calculated, both the employee and employer typically save on National Insurance.
There is currently no cap on how much you can save into your pension through salary sacrifice, although there is an overall annual allowance of £60,000 for how much you can pay into your retirement pot before you pay tax.
Analysts have warned that capping salary sacrifice pensions runs the risk of savers having less in their pots when they retire, or some workplaces closing their schemes altogether.
Cigarettes and alcohol
Expect the cost of cigarettes to go up if the Chancellor makes changes to tobacco duty, which is a tax charged to companies making or importing cigarettes in the UK.
When tobacco duty is increased, the cost is filtered down to customers through higher prices in stores. In the last Budget, tobacco duty was raised in line with RPI inflation plus 2%, with an additional, one-off increase of 10% above RPI for hand-rolling tobacco.
The average price of a pack of cigarettes is around £16 varies massively depending on the brand. Most alcohol duty rates increased by RPI at 3.6% this February, in line with RPI inflation.
At the same time, a new system taxing wines and spirits based on their strength was also introduced. However, duty on draught products – or pints pulled in pubs – was reduced by 1.7%. The Wine and Spirit Trade Association has warned consumers could be hit with further increases if Ms Reeves puts up alcohol duty by RPI at an estimated 4.5%.
Tourist taxes
Mayors across England have previously called on the Treasury to allow them to introduce tourist taxes to help fund cash-strapped public services. Different forms of tourist taxes already exist in European holiday hotspots including Spain and France.
The government has previously said there are “no plans” for a tourist tax in England. But there is speculation the Chancellor could use the Budget to announce new powers for local leaders to introduce taxes for overnight stays.
Fuel duty and electric cars
The levy on petrol and diesel used to rise in line with inflation but was frozen in 2011. A temporary 5p cut was also introduced in 2022-23 but has been maintained. In total, fuel duty is set to bring in £24.4billion for the Treasury this year. Any rise – ending over a decade of freezes – would be politically difficult.
But there has been speculation drivers of electric vehicles could face a new levy with a pay-per-mile charge from 2028. Reports have suggested this could be charged at 3p per mile on top of other road taxes.