Brian Wheeler
Political reporter
Chancellor Rachel Reeves said she was asking ‘ordinary people to pay a little bit more’ as she unveiled a Budget that relies on almost £26bn of tax increases while ending the two‑child benefit cap. The package includes a prolonged freeze on income tax and National Insurance thresholds that the Office for Budget Responsibility (OBR) warns will push millions of people into higher tax brackets.
Reeves argued the changes ask more of those ‘with the broadest shoulders’, introducing new and higher levies on property and savings. Among the headline measures is a recurring charge on high‑value homes, a per‑mile charge for low‑emission vehicles and a range of other targeted tax rises aimed at raising revenue without increasing headline income tax rates.
The OBR sums the measures at roughly £26bn by 2029–30 and forecasts the UK’s tax take will reach about 38% of national income by 2030–31. It also trimmed its near‑term economic growth projections.
Main measures in the Budget
– Income tax and National Insurance thresholds in England, Wales and Northern Ireland will be frozen until April 2031.
– From April 2028 a new annual property charge will apply: £2,500 on homes worth over £2m, rising to £7,500 for properties valued at £5m and above, collected in addition to council tax.
– Electric vehicles will face a 3p per mile charge and plug‑in hybrids 1.5p per mile.
– Online betting duty will rise from 15% to 25%.
– Salary sacrifice pension contributions will be capped at £2,000 a year for the purpose of National Insurance avoidance.
Rather than raise the headline income tax rate, Reeves filled a funding gap with multiple smaller measures and the thresholds freeze — a move she acknowledged last year would ‘hurt working people’. The OBR estimates that, because of the freeze, almost one in four taxpayers will pay some income at the higher rate by 2031.
Reeves told MPs she had kept Labour manifesto commitments not to raise VAT, income tax rates or National Insurance, and said she was asking ‘everyone to make a contribution’ while closing loopholes and asking wealthier households to pay more.
An accidental early release of OBR material minutes before the statement caused temporary turmoil. Reeves described the leak as ‘deeply disappointing’ and the OBR said the issue was being investigated as a technical error.
Support for households and welfare changes
The Budget does contain measures aimed at easing immediate pressures on households. Reeves pledged to remove green levies from electricity bills, which she estimated would save around £150 a year for the average household, and froze prescription charges and some rail fares in England. She also announced the abolition of the two‑child benefit cap from next April — reversing a policy affecting children born after 6 April 2017 — which she said would lift about 450,000 children out of poverty.
On public finances Reeves said debt would continue to fall as a share of national income and that the government’s financial buffer against shocks — its ‘headroom’ — would increase to £21.7bn.
Political and market reactions
The Budget drew strong criticism across the political spectrum. Conservative leader Kemi Badenoch called it a ‘total humiliation’ and demanded Reeves’ resignation for returning with more taxes. Liberal Democrat leader Sir Ed Davey said it failed to tackle the cost of living or deliver growth. Reform UK leader Nigel Farage described the measures as ‘an assault on aspiration and an assault on saving.’ The Green Party argued the changes merely ‘paper over the cracks’ and do not fairly tax extreme wealth, while the SNP warned the package failed to deliver for Scotland.
Markets steadied after an initial sell‑off triggered by the premature OBR release: government borrowing costs fell back and the pound strengthened. The Institute for Fiscal Studies cautioned that the apparent increase in fiscal headroom relied heavily on tax rises scheduled soon before the next general election and urged scepticism about the room for manoeuvre the Treasury claims.
The Budget sets out a route for the government to raise revenues without raising headline tax rates, but its reliance on threshold freezes and targeted levies means millions of people will face higher taxes as a result. How that trade‑off plays politically and economically will be watched closely in the months ahead.
