UK Budget - Critical Info

➡️ UK Budget for 2026 - Autumn Statement 2025

Before the election the Labour Party told us that their manifesto was fully costed and would not see taxes rise on “working people”. It then discovered a “£22bn black hole” (into which it poured further public funds) and struggled to tell us what a “working person” is whilst Prime Minister, Sir Kier Starmer, had warned us all that things were bad, but would get worse. Today we found out by how much. Tax rises of £40bn is the headline figure. This is the second biggest tax raising Budget on record according to the IFS.  £1,400 per household.

This was the introduction to my Budget summary last year. Days later the Chancellor assured the Treasury Select Committee “we’re not going to repeat a Budget like this again”. That promise, like many others, evidently met economic reality and didn’t fare well.

So far under Reeves, compared to the forecast the Chancellor inherited, in 2028/29: - Spending is up £99.3bn -Taxes are up £56.2bn -Borrowing is up £43.1bn. This spending increase is ten times what was promised pre-election and today we found out who will be paying for it. Two million taxpayers. Paying an additional £26bn in tax. And despite, or perhaps because of, these massive tax and spending increases, growth forecasts were cut.

In yet another, unprecedented, leak, the OBR even leaked the economic effect of the Budget before Reeves stood up:

“Uk’s office for budget responsibility outlook: real GDP is forecast to grow by 1.5 per cent on average over the forecast, 0.3 percentage points slower than we projected in March, due to lower underlying productivity growth”.

The OBR expects inflation to reach 3.5% for this year - that's slightly higher than the forecaster estimated in March when it predicted a 3.2%. It has also lifted next year's forecast from 2.1% to 2.5%. The OBR maintains its 2% estimate for 2027 and the following two years.

The leak confirmed £15bn in Personal taxes (freezing thresholds/NI on salary-sacrificed pension contributions 4.7bn). Other tax changes raise a further £11 billion by 2029-30. These include a new mileage-based charge on electric and plug-in hybrid cars from April 2028 at around half the fuel duty rate paid by drivers of petrol cars (raising £1.4 billion), reduction to writing down allowances in corporation tax (£1.5 billion), reforms to gambling taxation (£1.1 billion), changes to capital gains tax reliefs on employee ownership trusts (£0.9 billion), Tax administration, compliance and debt collection measures (£2.3 billion).

The OBR says the tax £26bn of tax increases will bring "the tax take to an all-time high of 38 per cent of GDP in 2030-31".

Major Tax Changes

The chancellor has frozen income tax thresholds for an additional three years, despite saying last year that to do so would "hurt working people". The chancellor has frozen income tax thresholds for an additional three years, despite saying last year that to do so would "hurt working people". The OBR report also says that the freeze will result in 780,000 more basic-rate, 920,000 more higher-rate, and 4,000 more additional-rate income taxpayers in 2029/30.

The OBR report also says that the freeze will result in 780,000 more basic-rate, 920,000 more higher-rate, and 4,000 more additional-rate income taxpayers in 2029/30.

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Headline changes and the OBR’s estimate of the tax yield are:

An increase in dividend rates will apply from April 2026, raising £2.1 billion, seeing dividend tax rates rise to 10.75 and 35.75 per cent respectively.

From April 2027, a 2% increase to the basic, higher and additional rates of saving income tax, including rental income, will see them increase to 22, 42 and 47 per cent respectively. This is estimated to yield £0.4 billion a year on average from 2028-29.

The Chancellor also reduced to the writing down allowance (WDA) main rate from 18 to 14 per cent from April 2026, alongside a new 40 per cent first-year allowance from January 2026. This is expected to raise £1.5 billion in 2029-30. This measure changes the capital allowance rates, for both corporation tax paying companies and unincorporated businesses in the self-assessment regime, on expenditure that does not claim full expensing.

A council tax surcharge on properties worth over £2m, is estimated to raise £0.4bn. From April 2028, owners of properties identified as being valued at over £2 million by the Valuation Office (in 2026 prices) will be liable for a recurring annual charge which will be additional to existing council tax liability. There will be four price bands with the surcharge rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band, to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year.

CGT relief on disposals to employee ownership trusts (EOT) will be reduced from 100 per cent to 50 per cent from November 2025. EOTs are a corporate ownership structure whereby a controlling interest in a company is held by the trustees. Previously, company owners who made a qualifying disposal of shares to the trustees of an EOT benefited from 100 per cent relief of CGT, but under this measure, 50 per cent of gains will be treated as chargeable gains and subject to CGT. We estimate this will raise £0.9 billion a year on average from 2027-28 onwards.

Salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from National Insurance, the OBR document confirms.

This will come into force from April 2029, the OBR says. The forecaster estimates this will raise £4.7bn in 2029-30 and £2.6bn in 2030-3.

Reforms to the Individual Savings Accounts (Isa) system which see the full £20,000 allowance retained, but £8,000 of this will now be designated exclusively for “investment purposes”. Over 65s will retain the full cash allowance of £20,000.

Fuel duty to be frozen until September 2026 but a new mileage-based charge on electric (£0.03 per mile) and plug-in hybrid (£0.015 per mile) cars will be introduced from April 2028 at around half the fuel duty rate paid by drivers of petrol cars (raising £1.4bn).

Remote gaming duty raised to 40%

Duty on online betting increased to 25%

Welfare measures, with a combined cost of £9 billion in 2029-30, include the reversals to previously announced cuts to winter fuel payments and health-related benefits (costing £7 billion in 2029-30), and the removal of the two-child limit within universal credit (costing £3 billion by 2029-30) which increases benefits for 560,000 families by an average of £5,310.Total welfare spending will hit £406 billion a year by 2030, or more than 11% of GDP. It was 0.8% of GDP in 2007-08.