Brian Wheeler
Political reporter
Rachel Reeves said she was “asking ordinary people to pay a little bit more” after unveiling roughly £26bn of tax rises in a Budget that also ended the two-child benefit cap.
The chancellor extended a freeze on income tax and National Insurance thresholds for a further three years, a move the Office for Budget Responsibility (OBR) says will push millions into paying more tax. She said the biggest burden would fall on those “with the broadest shoulders” through higher taxes on property and savings, including a new recurring charge on homes worth over £2m.
Reeves described the package as the “right thing to do”, saying it funds measures to tackle the cost of living while avoiding “reckless borrowing” or a return to austerity. The OBR calculates the measures add up to about £26bn in tax rises in 2029-30 and will push the UK’s tax take to around 38% of national income by 2030-31. The watchdog also reduced its near‑term growth forecasts for the economy.
Key measures include:
– Freezing income tax and National Insurance thresholds in England, Wales and Northern Ireland until April 2031.
– A new annual property charge from April 2028: £2,500 for properties valued over £2m, rising to £7,500 for properties of £5m, payable in addition to council tax.
– A new per-mile tax on electric vehicles (3p per mile) and plug-in hybrids (1.5p per mile).
– Increasing duty on online betting from 15% to 25%.
– A £2,000-a-year cap on the amount workers can put into pensions via salary sacrifice schemes without paying National Insurance.
Rather than raise the headline rate of income tax, Reeves filled a funding gap with a series of smaller tax measures and the threshold freeze — a move she acknowledged last year would “hurt working people”. The OBR estimates almost one in four taxpayers will pay some income at the higher rate by 2031 because of threshold freezes.
Reeves insisted she had kept Labour’s manifesto promises not to raise VAT, income tax rates or National Insurance. She told MPs she was asking “everyone to make a contribution” while closing loopholes and asking wealthier households to pay more.
Minutes before her statement, the OBR accidentally published key forecasts online, prompting chaos. Reeves called the leak “deeply disappointing” and the OBR said a technical error was under investigation.
The Budget did include measures aimed at easing household costs: Reeves said she would scrap green levies on electricity bills, cutting around £150 from household bills, and announced freezes on prescription charges and some rail fares in England. She also pledged to abolish the two‑child benefit cap from next April — a policy tied to tax credits and universal credit that affects children born after 6 April 2017 — saying it would lift about 450,000 children out of poverty.
Reeves said debt would continue to fall as a share of national income and that the government’s buffer against economic shocks, or “headroom”, would double to £21.7bn.
The Budget prompted sharp criticism from opposition parties. Conservative leader Kemi Badenoch called it a “total humiliation” and urged Reeves to resign, accusing her of breaking promises not to return with more taxes. Liberal Democrat leader Sir Ed Davey said it failed to tackle the cost of living or grow the economy. Reform UK leader Nigel Farage described it as “an assault on aspiration and an assault on saving.” The Green Party said the measures “paper over the cracks” and do not tax extreme wealth fairly. The SNP said the Budget failed to deliver for Scotland, with ministers warning announced funding rises would not offset other costs.
Markets calmed after an initial sell‑off triggered by the early OBR release: government borrowing costs eased and the pound strengthened. The Institute for Fiscal Studies cautioned that the apparent increase in fiscal headroom depended on tax rises slated just before the next general election and should be viewed skeptically.
