Rachel Reeves has presented her Budget, revealing tax increases totaling £26 million that will impact numerous workers. Reeves emphasized the importance of everyone contributing, with a focus on fair tax reforms to ensure the wealthiest individuals make the largest contributions.
Accidentally leaked by the Office for Budget Responsibility (OBR) before her speech in the House of Commons, the Budget also includes significant changes for savers and the removal of the two-child benefit cap. A Mirror Budget calculator, created by Blick Rothenberg, is available for individuals to assess how these changes will affect their finances.
Tax thresholds will remain frozen for an additional three years, resulting in increased tax payments for many workers as their incomes rise, known as “fiscal drag.” This process, often referred to as a stealth tax, allows the government to collect more revenue without adjusting tax rates.
The Chancellor confirmed that the income tax personal allowance will be frozen until April 2031, with the basic, higher, and additional tax rates unchanged. Additionally, the minimum wage will see increases, benefiting 2.7 million young and older workers.
Savers will face changes as the cash ISA limit is reduced from £20,000 to £12,000 from April 2027, while the tax rates on savings interest will rise for different taxpayer brackets. The state pension will also increase, with adjustments to salary sacrifice schemes affecting pension savings.
The Budget introduces several cost-saving measures, such as freezing NHS prescription charges and rail fares, although council tax for expensive homes will rise. Fuel duty cuts will continue until August 2026, with potential price increases afterward. Electric vehicle drivers will face new taxes, while tobacco and alcohol duties will also increase.
The Lifetime ISA may undergo reforms, with discussions on potential replacements for first-time homebuyers. Martin Lewis has advocated for changes to the Lifetime ISA rules, including raising the property threshold.