Chancellor Rachel Reeves unveils £26bn tax rises including mansion tax on homes over £2m, scrapping the two-child benefit limit, rail fare freeze and minimum wage hike
Rachel Reeves has revealed £26billion a year in tax hikes during a Budget that was disclosed just moments before its official release.
The Chancellor unveiled that the two-child benefit cap will be scrapped following years of pressure from anti-poverty activists and the NHS could be in for a boost.
In a controversial move, she verified that income tax thresholds will remain frozen – a decision that will impact over 1.5million workers.
The gambling sector will face new charges, though fuel duty will stay frozen until next year, Reeves announced.
The Chancellor addressed a boisterous House of Commons, declaring: “These are my choices. The right choices for a fairer, a stronger and more secure Britain.”, reports the Mirror.
Two child benefit limit scrapped
In a landmark decision, the Chancellor has ditched the heartless two-child benefit cap, which campaigners have slammed for keeping youngsters trapped in hardship.
The Conservative policy, rolled out in 2017, capped child tax credits and Universal Credit to just the first two offspring in households.
OBR papers reveal the move will hit the Treasury with a bill of roughly £3billion by 2029-30 – yet the administration reckons it will pull 450,000 children out of poverty.
Labour backbenchers and ex-PM Gordon Brown have spent years pressuring Keir Starmer and his inner circle to ditch this controversial measure, which has sparked major rifts within the party previously.
The Chancellor also revealed today that benefits will rise in step with inflation come April.
Gambling industry hit with new duties
The Chancellor revealed schemes to generate £1.1billion through overhauls to betting levies.
Starting April 2026, remote gaming duty will surge from 21% to 40%. Starting from April 2027, a fresh general betting duty rate for online gambling will kick in at 25%.
However, self-service betting machines, spread betting, pool wagers and horse racing will remain exempt.
These new measures are projected to generate £1.1billion by 2029-30, according to Ms Reeves’ calculations. The chamber erupted in applause when she revealed plans to abolish Bingo Duty entirely.
Rail fare freeze
The Chancellor unveiled the first railway fare freeze in three decades.
This move is anticipated to save current rail users £600million in 2026/27, spanning over a billion train trips. Speaking to The Mirror at the weekend, Transport Secretary Heidi Alexander said: “Fares have gone up pretty much every year in the last 30 years, and I think that’s something that’s really angered the public.
“If you look at the way in which Conservative ministers ran the railways, they allowed the private sector to cream off profits whilst delivering an unreliable service.”
Controversial income tax freeze
Income tax thresholds will remain frozen for a further two years, stretching until 2030.
This contentious policy means additional workers will be pushed into higher tax bands as their salaries rise.
The Office for Budget Responsibility (OBR) stated: “Overall, the changes to income tax covering the freezes at the basic, higher and additional rates are forecast to yield a total of £56billion in 2030-31, of which £12billion is from the freezes announced at this Budget.”
The OBR predicts that an additional 780,000 individuals will pay the basic rate, while 920,000 will pay the higher rate and 4,000 will be affected by the additional rate.
Boost for pensioners
Millions of pensioners are set to receive a boost of around £550 per year as the state pension increases from April next year.
Ms Reeves confirmed at the Budget that it will rise in line with average earnings growth – which was 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 between May to July, inflation in September, or 2.5%.
The current state pension rate stands at £230.25 per week. Expect this to increase to just over £240 per week from April.
Minimum wage hike
The Chancellor confirmed pay rises for approximately 2.7 million workers from next April ahead of her highly anticipated Budget.
From April, the National Living Wage will see a significant increase to £12.71 per hour for workers over 21-years-old, resulting in an estimated annual boost of £900 for approximately 2.4 million of the lowest paid. The National Minimum Wage for those aged 18 to 20 will also see a rise of 8.5% to £10.85 per hour.
National Insurance on salary-sacrificed pension contributions
The Chancellor has confirmed that the Government will be imposing national insurance contributions (NICs) on salary-sacrificed pensions contributions, expected to generate £4.7billion annually.
From April 2029, contributions exceeding a £2,000 threshold will no longer be exempt, meaning that salary-sacrificed contributions will be treated as regular employee pension contributions.
However, the OBR has issued a warning that some employers may seek ways to circumvent this measure, making the yields more unpredictable.
‘Milkshake tax’
In an effort to combat obesity and safeguard children’s health, the tax on sugary drinks will be expanded.
The threshold for the Soft Drinks Industry Levy will be lowered from 5g to 4.5g of sugar per 100ml, meaning more beverages will be affected unless manufacturers reduce sugar levels. For the first time, milkshakes and pre-packaged coffees will also be included as an exemption on milk-based drinks is anticipated to be scrapped.
These changes are scheduled to take effect from January 2028, giving manufacturers ample notice to decrease the sugar content in their drinks or face the new charge.
ISA limit cut
Rachel Reeves has finally confirmed that the cash ISA limit is being reduced – but only for younger savers.
In her Autumn Budget, the Chancellor announced that the annual cash ISA limit will be cut to £12,000 from April 2027. However, the overall £20,000 ISA limit remains, meaning you could save £12,000 into a cash ISA and £8,000 into a stocks and shares ISA.
The new cap won’t affect those over 65, who will still be able to save up to £20,000 each tax year into a cash ISA. Currently, you can save up to £20,000 every tax year across any ISA accounts you may have.
An ISA is a type of savings account where all interest earned is tax-free. Alongside the reduction in the cash ISA rate, it’s been confirmed that the rate of tax paid on savings interest for other accounts will increase from April 2027.
A new tax on overnight stays in hotels and other holiday accommodation, including Airbnbs, has been introduced. This is expected to add an extra £2 per night – but the exact amount will be at the discretion of local leaders.
The funds raised will go to regional Mayors or local authorities to spend in their area.
NHS boost
In a boost for NHS technology, Ms Reeves pledged to “renew” the NHS as she confirmed a £300 million investment in the health service’s technology.
Addressing the Commons, she announced: “Today I’m announcing a £300 million investment in technology to improve patient service and 250 new neighbourhood health centres, expanding more services into communities so that people can receive treatment outside of hospitals and get better, faster care where they live with over 100 to be delivered by 2030 including in Birmingham, Truro and Southall.
“The Labour Party founded our NHS and we are renewing our NHS.”
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